TELCO Background Information Abhinav

7/30/2019 TELCO Background Information Abhinav

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Background note on TELCO: Historical development

TELCO (TATA Engineering and Locomotive Company) now known as TATA Motors with

Inspired by people as its tag line is a common name across India. The company has at present

its footprints across almost all the domains in public and private transportation.

From TELCO to TATA Motors

TELCO was a brainchild of J.R.D. Tata and established in 1945. The company entered in a

commercial agreement (15 years) in 1954 with a TATA-Daimler-Benz joint venture. It started

producing heavy trucks for commercial purposes and the first truck rolled out in 1960 from the

Pune unit. The truck resembled the GermanDaimertruck.

In 1986, going by the Indian market and infrastructure, the company shifted focus on producing

Light Commercial Vehicle (LCV) mainly TATA 407. In coming years, TELCO sought to evolve

and expand into the personal vehicle market. It collaborated with Cummins Engine Company in

order to produce more efficient diesel engines. Tata Indica, a model (produced in 1998) was a

runaway success both in India and on other European markets. Its second model Indica V2 too

was a success. This was the first ever indigenously produced vehicle. This also made TELCO

(TATA) brand name known to every household as a symbol of trust and nationality.

Other major historical events are given in chronological order below:

1991: Launched TATA Sierra (MUV), entered passenger segment.

1994: Launched TATA SUMO (LCV).

1998: Launched TATA Safari (SUV). Indias first in its segment. Also, Indica was launched that

became a major success.

2004: Acquisition of Daewoo Motors. TATA Motors make International presence. Daewoo re-

named to TATA-Daewoo.


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2005: Acquired a 21% controlling stake in the Spanish bus and coach manufacturer Hispano

Carrocera. TATA Ace, low cost truck launched and became an instant hit. Gestation of TATA

Nano as a car for ever household started.

2006: Tata formed a joint venture with the Brazil-basedMarcopolo, Tata Marcopolo Bus, tomanufacture fully built buses and coaches. Manufacturing plant of Nano hit a road block at

Singur, West Bengal when farmersprotested against the plants construction on their lands.

2008: Acquisition of Jaguar and Land Rover (for a net 2 billion $).

2009: Tata Nano launched. But first model was rolled out in 2012. Receives an underwhelming

response mainly due to poor mans car tag attached to it.

2010: Acquired an 80% stake in the Italy-based design and engineering company Trilix for a

consideration of 1.85 million. Plan to enhance its styling and design capabilities.

2012: Announced its willingness to invest 6 billion Rs on developing Futuristic Infantry Combat

Vehicles in collaboration with DRDO. Tata Nano first model delivered.

From the past Tata Motors' strength has been its financial power that it draws from the fact that

its labor costs amount to only 9% of the profit. The company never shies away from innovation.

Post Nano experience, Tata has now expressed their wish to come up with a car made 100% out

of plastic, in an effort to fight rising costs for metal production.

References:

http://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqI=

http://www.autoevolution.com/tata-motors/history/

http://en.wikinews.org/wiki/World%27s_cheapest_car_launched_in_India,_will_go_on_sale_in_April
http://en.wikipedia.org/wiki/Hispano_Carrocerahttp://en.wikipedia.org/wiki/Hispano_Carrocerahttp://en.wikipedia.org/wiki/Hispano_Carrocerahttp://en.wikipedia.org/wiki/Hispano_Carrocerahttp://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Tata_Marcopolo_Bushttp://en.wikipedia.org/wiki/DRDOhttp://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqIhttp://www.autoevolution.com/tata-motors/history/http://www.autoevolution.com/tata-motors/history/http://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqIhttp://en.wikipedia.org/wiki/DRDOhttp://en.wikipedia.org/wiki/Tata_Marcopolo_Bushttp://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Hispano_Carrocerahttp://en.wikipedia.org/wiki/Hispano_Carrocera


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Our Vision

To be a world class corporate constantly furthering the interest of all its stakeholders.

Our Mission

Shareholders: To consistently create shareholder value by generating returns in excess of

Weighted

Average Cost of Capital (WACC) during the upturn and at least equal to Weighted Average Cost

of Capital (WACC) during the downturn of the business cycle.

Customers: To strengthen the Tata brand and create lasting relationships with the customers by

working closely with business partners to provide superior value for money over the life cycle.

Employees: To create a seamless organization that incubates and promotes innovation,

excellence and the Tata core values.

Vendor and Channel Partners: To foster a long-term relationship so as to introduce a broad range

of innovative products and services, that would benefit our customers and other stakeholders.

Community: To proactively participate in reshaping the countrys economic growth. To take a

holistic approach towards environmental protection

Threats

Other competing car manufacturers have been in the passenger car business for 40, 50or more years. Therefore Tata Motors Limited has to catch up in terms of quality and

lean production.

Sustainability and environmentalism could mean extra costs for this low-cost producer.This could impact its underpinning competitive advantage. Obviously, as Tata globalises

and buys into other brands this problem could be alleviated.

Since the company has focused upon the commercial and small vehicle segments, it hasleft itself open to competition from overseas companies for the emerging Indian luxury

segments. For example ICICI bank and DaimlerChrysler have invested in a new Pune-

based plant which will build 5000 new Mercedes-Benz per annum. Other players

developing luxury cars targeted at the Indian market include Ford, Honda and Toyota. In

fact the entire Indian market has become a target for other global competitors including


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Maruti Udyog, General Motors, Ford and others. Competition is expected to intensify

further as Indian automotive manufacturers obtain greater access to debt and equity

financing in the international capital markets or gain access to more advanced

technology through alliances. Additionally, in recent years, the government of India has

permitted automatic approvals for foreign equity ownership of up to 100% in entities

manufacturing vehicles and components in India.

Rising prices in the global economy could pose a threat to Tata Motors Limited on acouple of fronts. The price of steel and aluminium is increasing putting pressure on the

costs of production. Many of Tata's products run on Diesel fuel which is becoming

expensive globally and within its traditional home market

The company is subjected to extensive governmental regulations regarding vehicleemission levels, noise, safety and levels of pollutants generated by its production

facilities. These regulations are likely to become more stringent in the near future. In

addition, Jaguar Land Rover has significant operations in the US and Europe which havestringent regulations relating to vehicular emissions. The proposed tightening of vehicle

emissions regulations will require significant costs for the company.

Future Outlook of Tata Motors

Challenges ahead...

1) Stiff competition from global brands like Benz and BMW2) Marutithe aggressive market leader

What the organization already has up its sleeves...

a) 6 new models to be introduced in the year 2013mix of brand new models andrefreshersintended as a step to maximize presence in the volume segmentof Indian

passenger car industry, with small cars bringing in 70% of sales.

b) Planning a dense dealership network and devising marketing strategy aimed at targetingrural population

c) The much awaited Tata MiniCat Air Carthe eco-friendly car that runs on air


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What we suggest...

a) Foray the SUV segment. Tata Motors has already taken baby steps into this segment withSafari Storme. This is a lucrative market to be taken head on.

b) Cars are increasingly becoming as much a fashion statement as a necessity. They need towork on the design front of Tata passenger cars.

c) Ensure high safety standards. The NANO fall-out on safety grounds still needs to berecovered.

d) Intensify service centres networkTATA motors Weaknesses:

Returns on investment in TATA motors share is low. Safety standards are not maintained often ignored, this has led to tarnished

image of tata automobiles.( eg: tata nano)

The company's passenger car products are based upon 3rd and 4thgeneration platforms, which put Tata Motors Limited at a disadvantage withcompeting car manufacturers.

Despite buying the Jaguar and Land Rover brands (see opportunities below);Tata has not got a foothold in the luxury car segment in its domestic, Indian

market. Is the brand associated with commercial vehicles and low-costpassenger cars to the extent that it has isolated itself from lucrative segmentsin a more aspiring India?

One weakness which is often not recognised is that in English the word 'tat'means rubbish. Would the brand sensitive British consumer ever buy intosuch a brand? Maybe not, but they would buy into Fiat, Jaguar and LandRover

Opportunities In the summer of 2008 Tata Motor's announced that it had successfully purchased the

Land Rover and Jaguar brands from Ford Motors for UK 2.3 million. Two of the World's

luxury car brand have been added to its portfolio of brands, and will undoubtedly off

the company the chance to market vehicles in the luxury segments.

Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 foraround USD $16 million.


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Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilstthe World is getting ready for greener alternatives to gas-guzzlers, is the Nano the

answer in terms of concept or brand? Incidentally, the new Land Rover and Jaguar

models will cost up to 85 times more than a standard Nano!

The new global track platform is about to be launched from its Korean (previouslyDaewoo) plant. Again, at a time when the World is looking for environmentally friendly

transport alternatives, is now the right time to move into this segment? The answer to

this question (and the one above) is that new and emerging industrial nations such as

India, South Korea and China will have a thirst for low-cost passenger and commercial

vehicles. These are the opportunities. However the company has put in place a very

proactive Corporate Social Responsibility (CSR) committee to address potential

strategies that will make is operations more sustainable.

The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendlyengines. The bus has optional organic clutch with booster assist and better air intakesthat will reduce fuel consumption by up to 10%.

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TELCO Background Information Abhinav