Tata Motors plans big overseas push4 min read . Updated: 12 Sep 2010, 10:05 PM IST
Tata Motors plans big overseas push
Tata Motors plans big overseas push
Mumbai: India’s largest auto maker by revenue, Tata Motors Ltd, is in the process of setting up subsidiaries in key overseas markets, seeking to increase its presence and lend greater focus to its operations abroad, said three people familiar with the plan.
The ventures will address specific regions—Latin America, South-East Asia and the Commonwealth of Independent States that consists of former Soviet republics, said the people who declined to be named.
The fully owned overseas units will be modelled on the national sales companies of Tata Motors’ UK subsidiary Jaguar Land Rover. The sales companies, spread across countries in western Europe, and North and South America, among others, act as the official importers of Jaguar and Land Rover models.
Apart from distributing the vehicles to dealerships in the regions they oversee, these firms are also responsible for spare parts supply and post-sales services.
“The new (overseas) companies will mirror the national sales companies and look after marketing, sales and distribution," said one of the three persons cited above.
Tata Motors is attempting to boost the share of exports as a percentage of revenue. In fiscal 2009-10, exports made up just 4.77% of revenue, with unit sales expanding by 1.7% year-on-year to 340,109, including commercial vehicles and cars.
Since 2003, when Tata Motors purchased South Korea’s Daewoo Commercial Vehicle Co., the Indian auto maker has been striving to boost overseas revenue and lower its dependence on the domestic economy. In 2008, it acquired Ford Motor Co.’s luxury Jaguar Land Rover unit, underlining its international ambitions.
Tata Motors is likely to announce the formation of the overseas subsidiaries in the next three months, said a second person with knowledge of the matter.
The move will help in building a stronger brand image for Tata Motors in key markets and in a way they will replicate the structure that multinational auto makers such as General Motors Corp. and Ford Motor follow, with local units reporting to regional headquarters.
General Motors India Pvt. Ltd and Ford India Pvt. Ltd, for instance, report to the regional headquarters for the Asia Pacific region in Shanghai, which in turn reports to headquarters in the US.
The new ventures will help Tata Motors in enhancing management bandwidth in overseas markets and help it better read the pulse of the current and potential markets, according to Vineet Hetamasaria, senior vice-president of research at brokerage Pincmoney, a subsidiary of Pioneer Investcorp.
Tata Motors’ international business has been hit by a slump in demand as economies struggle to recover from the global financial crisis of 2008 and the recession that followed. Despite higher unit sales, the value of exports declined to ₹ 1,921 crore in fiscal 2009-10 from ₹ 2,206 crore in the previous year.
Tata Motors’ international business has also lacked market focus, said R. Venkatraman, senior adviser at global consulting firm AT Kearney Ltd.
“So far, the same group of people has been responsible for Brazil, South-East Asia, and they seem to be approaching these markets with what they have, in terms of products and variants. It’s a very inside-out view of the market, which obviously is not sustainable," he said.
It wasn’t a key so long as the company’s focus remained predominantly domestic. However, with the unveiling of the Nano in January 2008, which has been billed the world’s cheapest car that will be customized to suit varied geographies, and the acquisition of Jaguar Land Rover in June 2008, Tata Motors changed tack.
“The philosophy is changing from inside-out to outside-in," said Venkatraman. “Today they have a capacity to customize a lot more than what they had earlier."
One of the key mandates of Carl-Peter Forster, who joined the firm as group chief executive and managing director in April, is to globalize Tata Motors. In August, Forster said Tata Motors will look at reinforcing its presence in export markets.
“The big step forward is to create local teams in these markets, which can develop our business," he said.
The firm has already started unfolding the strategy. Last month, in a reshuffle of portfolios, it named S. Krishnan, senior vice-president for its passenger car business in India, to steer its Latin American operations.
People familiar with the company’s plan said Tata Motors is set to announce more senior-level appointments for other regions shortly. Most of these positions will be filled by relocating people from within the group.
“Today, the international team doesn’t have a finger on the pulse for any of the international markets. The local presence in the specific markets will drive the products," said AT Kearney’s Venkatraman,
In an email response, Tata Motors spokesman Debasis Ray said the auto maker will “specifically exploit export opportunities by both enlarging potential in traditional markets like South Africa, Nepal, Bangladesh, Sri Lanka and explore potential in new and growing markets like North Africa, Middle East, South-East Asia and South America".
“But the company has not chosen any specific go-to-market model for any new market," he added.
At present, Tata Motors manages its operations through local distributors in markets such as South Asia, Africa, and Europe. There are also markets, such as Thailand, where the company has set up a subsidiary—Tata Motors (Thailand) Ltd—to manage operations there.
Similarly, Tata Hispano Motors Carrocera SA manages the Hispano bus business in Spain and other markets directly.
“The go-to-market model for any new market could be either of the formats, given its wide product portfolio and its objective to expand its international business. Tata Motors continuously explores both what could be relevant markets and within them relevant business opportunities," Ray added.
In late 2002, Tata Motors signed an agreement with the MG Rover Group Ltd for marketing the CityRover in the UK. MG Rover, a troubled auto maker, couldn’t make inroads for the “made in India" vehicle and the agreement was called off within a year.