Ford finally said goodbye to two of their automotive brands on 26^th March 2008, the Indian conglomerate TATA took control of the two luxury British car brands in a deal estimated to be around $2.3Billion. Jaguar and Land Rover were the cornerstones of Ford’s premier automotive group, however due to tough economic conditions Ford has been forced to sell. Ford have owned Jaguar for nearly 20 years now and in that time they have struggled to turn Jaguar around, mainly due to changes in consumer demand and a general decline in the luxury car market in some regions of the world. Meanwhile Land Rover was actually a profitable business and has been so since Ford bought the company from BMW in 2000.  Ford had developed numerous joint business and engineering processes between Jaguar and Land Rover and for this reason trying to split and sell the brands independently would have been an expensive and lengthy process. In addition, both brands use a similar set of suppliers in the UK where Jaguar and Land Rover cars are manufactured and so rather than try to develop new supply chain strategies for both companies it was felt that both companies should be sold as a going concern to one buyer.  So who exactly are TATA and how have they got into the position of being able to buy two famous British car brands such as Jaguar and Land Rover? 

TATA is a multinational conglomerate based in Mumbai, India and they are the largest private company in India.  TATA has interests in steel, cars, information technology, communications, power, tea and hotels.  TATA bought the former British Steel company called Corus a few years ago and their TATA motors division is the largest domestic car manufacturer in India.  TATA Motors was established in 1945 when the company began making trains.  In 2004 TATA bought Daewoo’s truck manufacturing unit.  In January this year TATA announced the NANO, the world’s cheapest car at $2500 which is intended to be sold in the Indian market.  Given that most of the population of India is using two or three wheeled vehicles, a low cost four wheel vehicle will be quite a revelation and hence why TATA feel that they have to make the NANO cheap enough for this market.  If TATA can bring the car to market for this price then they stand to corner a lucrative part of the Indian automotive market.  In addition, the NANO has been designed for sale in other markets as well.   

In addition to the NANO, TATA have also funded the development of the world’s first vehicle to run on air.  This offers the ultimate zero emission vehicle which in this day and age could again bring TATA significant revenue opportunities, if they can bring the engine to market at a reasonable price.  Both the NANO car and the development of the air engine car were announced over the last couple of months during a time when TATA were preparing a bid to take over Land Rover and Jaguar.  From a marketing perspective the NANO car has propelled TATA onto the world’s automotive stage and many of the OEMs are now revisiting their own car strategies to see if they can also develop their own low cost NANO vehicle.  On the same day that TATA announced their acquisition of Jaguar and Land Rover, BMW announced plans to launch a successor to their Isetta micro car.  TATA has not been the only one to demonstrate their engineering prowess recently, Jaguar has been busy launching the new XF saloon to rave reviews from the world’s motoring press. Land Rover recently launched the LRX concept vehicle for a new ‘baby’ Land Rover which will incorporate hybrid engine technology. So TATA have got the attention of the world’s automotive industry but what will they do with Jaguar and Land Rover now?

Given that many companies around the world are lowering costs by outsourcing parts of their business operations to specialist offshore companies based in India, you would think that TATA would be looking to move production of Jaguar and Land Rover vehicles to India to significantly reduce costs and boost the profit of every car produced.  However this won’t happen any time soon, Jaguar and Land Rover employ 16,000 highly skilled personnel between them, they have state of the art production and engineering facilities in the UK and most importantly they have an extensive supply chain infrastructure which is primarily based in the UK as well.  TATA have committed to retain the ‘Britishness’ of the Jaguar and Land Rover brands and they will also invest significantly in their respective manufacturing infrastructures.   In addition, TATA have committed to retain all workers from both Jaguar and Land Rover and they have signed a deal with Ford to continue sourcing engines and other key components from them over the next few years.   However further down the line there could be an opportunity for Jaguar and Land Rover to set up an engineering facility in India, this could be to leverage the highly qualified engineers in the country and to possibly provide valuable engineering experience to help bring the NANO car and air powered vehicle to showroom reality. 

TATA are no strangers to the UK manufacturing industry as they have an engineering research facility at Warwick University.  Interestingly Jaguar and Land Rover also had a research facility at this University, as do Corus.  So you can see that, possibly, TATA have been sowing the seeds to have a larger presence in the automotive industry for a few years now.  Corus of course are owned by TATA and they provide the raw steel from which some of the Jaguar and Land Rover vehicles are manufactured. In addition, having  a presence at this particular university has helped TATA to understand the dynamics of the many automotive suppliers that are based in the West Midlands region of the UK where Jaguar and Land Rover are based.   This is an extremely interesting way for an Indian company to learn about how UK based suppliers operate and interact with major OEMs.  There could of course be opportunities for parts or sub-assemblies for Jaguar and Land Rover vehicles to be manufactured in India, but the infrastructure for manufacturing components for luxury cars would have to be significantly improved from where it is today. 

Once the dust settles on this acquisition I will take a closer look at the future supply chain strategies for TATA and how they could leverage the experience of Jaguar and Land Rover in developing their automotive supplier infrastructure in India.