TATA MOTORS JAGUAR DEAL Part 2

When Tata Motors launched the Nano it was probably the most globally high-profile move by an Indian auto company. We examined some implications then. We now look at some implications of another equally high-profile event - the Jaguar-Land Rover takeover.

While the Nano was good for brand Tata, getting it noticed all over the world, the acquisition of Jaguar and Land Rover puts it firmly in the map of the Who’s Who of auto brands. The acquisition of these brands by Tata can work wonders for the brand image of Tata Motors as the company that owns two of the biggest names in luxury automobiles. But how does this fit into the overall strategy for Tata as it does not even have a pretense of a presence in the luxury segment even in its home market? The Tatas’ most expensive vehicles on Indian roads are its commercial trucks.

Here are a few thoughts. Not necessarily echoing the sentiments expressed by
Tata in public but our analysis of how this acquisition could be made to fit into Tata’s overall strategy.

Toyota is the gold standard that aspiring auto-makers look to. Synonymous with Japanese quality, Toyota got to its premier position in the world auto stakes by a combination of production efficiency, high quality and delivering unsurpassed value to the customer. Toyota fans call a Honda, “a fake Toyota”, seemingly referring to Honda following in Toyota’s footprints and achieving similar status in terms of quality and value. Similarly while a growing company like Hyundai benchmarks its cars against Toyota competitors, a relatively “old-world” company like Volkswagen re-designed its production process based on inputs from Toyota engineers.

Still Toyota did not move beyond its economy and hence cheap image in the Western world till the introduction of its luxury brand, the Lexus. The strategy was such a success that other Japanese auto makers quickly jumped onto the bandwagon. The Lexus strategy had a curious side-effect on the overall Toyota bouquet of products. Unlike how the European companies built their luxury cars, Toyota continued to use the production line using strict quality control to drive efficiency. As a result the luxury cars did not cost significantly more than the regular line-up. While this revolutionized the luxury car market, it also worked wonders for its non-luxury line-up as the superior styling and finish of the luxury models began to rub-off on the rest of the portfolio.

Still Toyota took 3 decades to move from economy to luxury cars. Tata Motors has only taken baby steps towards becoming a global automaker. But the newly-acquired the availability of true luxury brands within the stable allows the company to learn what it takes to give its cars the aspirational value they need to succeed in the Western markets.

In addition to taking design lessons, Tata Motors can also benefit from the world-class R&D facilities, and an established global marketing network. Also while the Jaguar-Land Rover brand image will work wonders for Tata Motors’ own image, there is a danger that it would dilute the value of the British brands. So if the Tatas make it clear that they will treat the new companies as prized possessions that they will take pains to nourish and grow, while also using them as a huge opportunity to learn, then that should allay fears of brand dilution, while keeping the existing jobs and helping the Tatas as they build up their portfolio of vehicles to fill the gap between the SUVs and the luxury vehicles, in terms of both products and aspirational value.

While this acquisition can fail miserably if the Tatas run the companies and the brands to the ground, the potential benefits are huge. Jaguar and Land Rover will eventually get a prized position atop Tata’s new global portfolio of vehicles, while the Tatas use JLR as an important stepping stone to achieving the position of a truly global automaker.
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