1.1 Background of Tata Motors Group
Figure 1: Logo of Tata Motors (Glass, Lewis & Co, 2016)
Founded in 1945, the Tata Motors is India’s largest automobile company and was formerly known as TELCO (Tata Engineering and Locomotive Company). It has grown rapidly since it was founded by Jamsetji Tata in 1868 (Tata Motors, 2018). The Tata Motors is more focus on producing and selling the commercial vehicles, passenger vehicles, midsize car and also utility vehicle segments to the customers.
The Tata Motors vision is “As a High-Performance Organisation, we are, by FY 2019, among the top 3 in a Global CV and Domestic PV, achieving sustainable financial performance and delivering exciting innovations” and the mission is “We innovate, with passion, mobility solutions to enhance quality of life” (Tata Motors, 2016).
In addition, the company also offered its commercial vehicles and passenger vehicles in others countries such as in Europe, Asia Pacific, Latin America, Africa, the Middle East, Australia and Russia (refer to figure 2). In 1948, the Tata Motors introduced the first steam roller in collaboration with Marshall Sons (UK). In 1954, the company also has a joint venture with Daimler-Benz and then started to manufacture medium commercial vehicles. After that, in 1971, the company was ranked as the first automobile manufacturer that able to produce direct injection engines independently in India. The first commercial vehicle that introduced by the Tata Motors is the Tata 407 (Schuster & Holtbrugge, 2011).
Furthermore, the Tata Motors also started introduced their products in different passenger car segments in the market. Based on the annual report in 2009-10, the Tata Motors domestic sales of heavy vehicle and buses was increased by 36.5% to a total of 155, 161.The sales of light commercial vehicles also grew by 44.2 % to 218, 681, and sales of passenger cars grew by 25.3% to 260, 020 (Schuster & Holtbrugge, 2011). After a few years, the company commercial vehicles domestic sales was increased at 40, 447 units, a growth of 62% compared to 24,998 units in December 2016. And, the passenger vehicles sales was increased at 14, 180 units, which growth of 31% over last year in December 2016 (Tata Motors, 2018).
Figure 2: Tata Motors Worldwide (Tata Motors, 2018)
1.2 Background of Jaguar Land Rover
Figure 3: Logo of Jaguar Land Rover (Sur, 2016)
The Jaguar Land Rover (JLR) is Britain’s largest automotive manufacturer in the UK. The Jaguar is more focus on producing and selling a range of luxury saloons, sports cars and luxury performance SUVs and Land Rover, which encompasses a portfolio of the premium all-terrain vehicle (Jaguar Land Rover, 2014). Tata Motors acquired Jaguar Land Rover in 2008.
In addition, the Jaguar range of products comprises the new XE sports saloons, XJ saloons, XF and XF Sportbrake, F-TYPE Coupe and Convertible two-seater sports cars. The Land Rover’s vehicles comprise the Land Rover Discovery, Discovery Sport, Defender, Range Rover Sport, Range Rover and Range Rover Evoque (Jaguar Land Rover, 2015).
The Jaguar Land Rover vision is “We are entering the largest, fastest industrial revolution ever, driven by decarbonisation, air quality, digitization, connectivity, automation, and technology. Against this backdrop, we see endless exciting opportunities to create a world in which we will live safer, better, more connected and mobile lives” (Jaguar Land Rover, 2017). Moreover, the company mission is “We want to deliver more great products, faster than we have ever done before, we want to be leaders in the field of environmental innovation and we want to be sure our customers always come first ” (Jaguar Land Rover, 2018).
Figure 4: Global Footprint Fiscal 2016/17 (Jaguar Land Rover, 2017)
Based on figure 4, the Jaguar Land Rover has four principles automotive manufacturing facilities in the United Kingdom such as at Solihull, Castle Bromwich, Halewood, Gaydon, Whitley and the Engine Manufacturing Centre at Wolverhampton. The Jaguar Land Rover also owns a joint venture manufacturing plant under its China Joint Venture, in Changshu, near Shanghai. Besides that, the company also has vehicles manufacturing in several countries such as Nitra in Slovakia, Rio de Janelro in Brazil, Graz in Australia and Pune, in India (Jaguar Land Rover, 2017).
Based on the annual report in 2013-14, the Jaguar Land Rover revenues was increased by 23% to a total of 19.4 billion on retail sales of 434, 311 units. The EBITDA also grew by 45% to a total of 3.4 billion, and profit before tax grew by 49% to 2.5 billion (Jaguar Land Rover, 2014). After a few years, the company revenues was increased at 24.3 billion in 2016-17, up from the 22.3 billion in 2015-16 on retail sales of 604, 009 units. The EBITDA was increased by 14.1% to a total of 3.0 billion, and profit before tax grew by 15.7% to 1.3 billion (Jaguar Land Rover, 2017).
2.1 Mechanism that Tata Motor used to acquire the Jaguar Land Rover
Historically, the Ford Motor Company (Ford) acquired Jaguar Land Rover (JLR) for an amount of USD 2.5 billion for Jaguar in 1989 and USD 2.6 billion for Land Rover in 2000 (Rahman, 2015). According to Ford’s annual report in 1988-89, the company find it difficult to enter into the global car markets, and therefore this acquisition of Jaguar and Land Rover enable Ford Motor Company to achieve their goals, which to enter the luxury segments of the automotive market (Ford, 1989). However, this acquisition was failed and the Ford Motor Company sales were declined (refer to figure 5). Therefore, to recover their losses, Ford sold Jaguar Land Rover to Tata Motors in June 2008.
Figure 5: Sales growth rates of Jaguar and Land Rover under Ford Ownership (Rahman, 2015)
Based on the analysis, the Tata Motors acquired Jaguar Land Rover (JLR) for an amount of $23.3 billion from the Ford Motor Company in June 2008. The Tata Motors also secured a $3 billion loan form Citigroup and JPMorgan in order to finance the acquisition. The deal price included the ownership of Jaguar and Land Rover or perpetual royalty-free licenses of all necessary intellectual property rights, manufacturing plants, two advanced design centers in the UK, and a worldwide network of national sales companies (Tata Motors, 2018).
Last but not least, the rationale for this acquisition is that the Tata Motors wanted to enter the luxury cars and premium sports utility vehicle (SUV) segments to complete its product portfolio, such as commercial vehicles, low-end passenger car and relatively inexpensive utility vehicles. Moreover, the Tata Motors also hoped to benefit from Jaguar Land Rover strong product pipeline, manufacturing expertise, design capabilities and an extremely loyal global dealership network (Pathak, 2016).