Posted in Marketing & Strategy Articles, Total Reads: 2584
, Published on 23 November 2011
In 2008, one of the biggest acquisitions in the automobile industry took place when Indian automobile giants bought British premium cars Jaguar and Land Rover (JLR) from Ford for a whopping $2.3 billion or Rs.9200 crore. This move by Tata’s was considered a very ill-planned move as the market for premium automobiles was very limited in India. Also, the economic slowdown in the year 2009 further led to a dip in the automobile industry causing a huge loss to Tata Motors. Apart from this the brand image of Jaguar wasn’t in the best condition. The acquisition was touted a huge mistake on Tata Motors part. But Tata Motors with its sheer efforts managed to weather the storm, and once the gloomy scenario was managed, the Jaguar is again looking to leap to glory.
The acquisition lead to a debt of $3billion, which affected Tata Motors net profits of Rs.2108 crore in 2008 to a loss of Rs.2505 crore in 2009. However, even at this junction Tata Motors were able to reduce the inventory and costs. Reduction in labor costs, limited advertising and efficient spending helped them from a further slide. Also, Tata Motors quickly raised Rs.4200 crore by selling stake in the company and raised another Rs.4200 crore through non-convertible debentures. All this was helped Tata Motors in showing that the JLR move wasn’t a bad one after all. And with the economy shaping up for the better in 2010, it was good signs for brand Jaguar.
One of the biggest achievements of Tata Motors during this terrible phase was to keep the brand JLR undiluted, as prior to this TML had limited exposure in the premium automobile segment. Also, apart from North America and Europe, they understood the importance of venturing into the emerging markets like China and India, which had tremendous growing potential for premium cars.
Jaguar managed to create its own market share in the premium automobile segment through its model XJ, XF and XK. Despite having limited players in the premium automobile segment, Jaguar had to face tough competition from already existing and established brands in India like BMW and Daimler Mercedes Benz. However, BMW and Mercedes Benz also offer low-end premium cars which is where Jaguar is absent, and is quite an important segment in the Indian automobile segment. To become a part of this segment JLR decided to pump Rs6100 crore for new product development. Also, the hybrid Range Rover Evoque SUV and Jaguar’s electric hybrid car (900 km per charge, top speed 320 kmph) are new products which would be critical in establishing JLR as a major force in the premium segment. All these factors show a bright opportunity for JLR in the future. The demand for premium automobiles i.e. above Rs1 crore, has also taken a huge jump by 75% in India in 2010.
But as the doors of opportunity open up, so does the competition in the premium automobile segment intensify. With brands like Bugati, Mercedes SLK, Cadillac etc also entering the Indian premium segment, the competition for JLR would only get tougher.
The journey of Tata Motors-JLR has been a roller coaster ride experience which has seen all possible highs and lows, weathered the storm of economic instability but has still managed to hold its ground and maintain its brand equity. What the future holds in store for Tata Motors and Jaguar Land Rover, remains to be seen. But one thing can be said clearly, that the wounded Jaguar is back on its feet and is looking to leap and pounce on its prey.
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