Friday, July 31, 2009
Tata Motors and Jaguar/Land Rover
The Financial Times has an interesting story today about the struggles Tata Motors has faced since acquiring Jaguar Land Rover from Ford Motor Company. The article raises important questions about issues such as the ability of niche players to survive in an auto industry that continues to consolidate globally. However, I think the most relevant question remains whether a company that makes the Nano - a low cost car for the developing world - is also well-suited to make luxury automobiles. Certainly, some auto firms, such as Toyota, make everything from subcompacts to luxury automobiles. However, Toyota has far more experience in the business than Tata, and they have scale economy advantages over Tata. Moreover, Toyota may be an exception, rather than the rule. In many industries, firms that try to serve such disparate segments of the market end up becoming average at best - not excellent at serving any particular segment. The article does point out, though, that Tata has a reputation for taking a long-term perspective. They have been patient with their investments in the past. Thus, they may ride out this dramatic slump in the auto business, and gradually learn how to make Jaguar Land Rover profitable.