Tata Motors and the Automotive Industry

The Smart People Emily Frey, Eric Harmon, Arielle

Hord, Caitlin Kantosky

Outline• History and Product offerings• Tata Group & Corporate Responsibility• Financial Analysis• Tata’s Future & what impact, if any, for the

American auto market

History

• Started in 1945 in Mumbai, India.

• Original production was on locomotives.

• 1954– First car rolled off of the

assembly line.• Tata’s are a family of

Indian industrialists and philanthropists.

• The family founded:– Ironworks– Steelworks– cotton mills– hydroelectric-power

plants • Are of their endeavors

have been proved to be crucial to India's industrial development.

History• Tata Motors is India’s

owns the largest independent company in India.

• Mercedes and Tata teamed up to create a truck line.– First major business deal

with another firm.

• Together both companies started their commercial vehicle operations in 1960.

• in 1986 the company created and sold the first LCV– LCV = light commercial

vehicle – Was the Tata 407

History

• Tata Motors decided to pursue joint ventures.– Cummins Engine Co.,

Inc., was the first company to jointly venture with Tata in 1993.

– Manufactured a diesel engine that had high horsepower and emitted less harmful chemicals.

• Began creating new lines in the late 1990’s and early 2000’s:– Compressed natural gas

buses– 1109 vehicle, used for

commercial purposes.– Ex-series– Newly designed LCV

called the 207 DI

Products

• Tata Indigo– Created in 2002– Mid-sized sedan.– Different models run on

either normal gasoline or diesel fuel.

– Seats 5 people.– Same luxuries as

American made vehicles.

Products

• Tata Indigo SW– Station wagon version of

the Indigo.– Same basic features as

the Indigo.– Seats 5 people.– Different models fun on

different fuels.– Different optional safety

features than other vehicles.

Products

• Tata Indica– Hatchback version of the

Indigo sedan.– Easily affordable.– Smallest in the line of

Tata vehicles to date. – Seats 5 people.– Same basic features as

the sedan.

Products• Tata Safari– Mid-sized SUV.– Has a special engine

called DICOR.• Direct Injection Common

Rail.• Allows the engine to

intercool itself.

– Comes in either a 4x4 or a 4x2.

– Can seat 7 passangers.

Products

• Tata Sumo– Runs off of diesel fuel.– Seats up to 7

passengers.– Has a separate rear and

front suspension for an optimal ride.

– Has two separate air conditioners for the front and rear of the vehicle.

Tata Group• 100 companies throughout 7 business sectors•Engineering, materials, energy, chemicals, services, consumer products, information systems and communications•Tata AutoComp Systems - Automotive•Tata Steel - Materials•Tata Power - Energy•Rallis India - Chemicals•Tata Realty and Infrastructure - Service•Tata Tea - Consumer Products•Tata Technologies - Information Systems and Communications

Corporate Social Responsibility

•“A Company that cares about the future”•Committed to corporate social responsibility•Signed the United Nations Global Compact

•Plays role in community development•Environmentally-friendly products and technology

Corporate Social Responsibility•Two main concerns:•Reduction of pollution•Restoration of ecological balance•Implemented soil and water conservation programs

•Cleaner Engines•Advanced emission-testing labs•Developing alternate fuel engines

•Sewage treatment facilities•Encourages tree planting

Corporate Social Responsibility

•India – Recycling Culture•Value in discarded products

•Europe – “Throw-away” culture•European ELV Directive

Corporate Social Responsibility•Community Development•Community Service Division•Promote economic independence•“Self-initiated cottage industries”

Tata Finance: overview

• Stock Trend• Growth and Expansion– Sales– assets

• Financing Operations• Tata vs. American Companies

Tata Motors Inc. Stock

• TTM• NYSE since 2004• $15.84 as of Friday (Yahoo, 2008)• Down 8% in last year

Since 2004: TTM

Growth and Expansion

• large Indian market– Familiar with market– Brand loyalty

• Fuel efficiency • Mahindra & Mahindra- $1.88 billion

Debt vs. Equity

• Debt growth: $2.3 billion $4.1 billion• Equity growth: $1.2 billion $2.1 billion– 55 million outstanding shares– ROE : 19%

• Debt/ equity ratio: .87 – Industry average: .58– Cash now for growth

Growth

• Asset growth doubled since 2005– Acquisition of Jaguar and Land Rover from Ford

• Sales:– $7.6 billion and grew 42.2% from 2006

• PROFITS!!– $.95 billion on 2005 $1.5 billion on 2007

Cash Management

• Liquidity and solvency are good• Inventory• Improved cash management:– 12% of assets in 2005– 4% of assets in 2007

Comparatively Speaking

Brand: Tata Ford GM

Sales: $7.6 billion $172 billion $181 billion

# of employees 33,900 246,000 266,000

Profit Margin 20% 17% 6.7%

Effects on U.S. Economy

• Slow economy– High oil prices– Demand for fuel efficiency– Cut backs

• Tata’s effect

Jaguar and Ford• Purchase from Ford– Concerns

• Changes or Plans– More Tata vehicles– Made in India• Future

U.S. Car Companies• $ 2 Billion in sales

• GM-$50; Ford-$40; Honda- $20

• In the U.S.

• Going overseas– 75% by 2017 for GM

• Expanding in India

U.S. Car Companies

• Toyota- 7.5% increase in profits

• Foreign Markets– No help– 1. Can’t offset– 2. India out of reach

The Next Auto Capital

• Detroit current auto capital

• 21st century belongs to India

• 2050 in India and China– Labor– Environment

Future of the Nano

• Not for the U.S.– 3rd world countries– U.S. standards

• Detroit make or buy version

Summary

• Tata history and products• Tata Group• Tata: Social Responsibility• Tata Motors Finance• Future

Questions