TATA SWOT 2008

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Tata Motors Limited

Company Profile

Publication Date: 18 Dec 2008

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ABOUT DATAMONITOR

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Tata Motors Limited

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TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts............................................................................................................... 4

SWOT Analysis.....................................................................................................5


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COMPANY OVERVIEW

Tata Motors is one of the leading automotive vehicle manufacturing companies in India.Thecompanys automobile products include all types of commercial and passenger vehicles.The companyalso provides finance for its customers and distributors.The company primarily operates India, SouthKorean, South Africa, Turkey, Sri Lanka and Russia. It is headquartered in Mumbai, India andemployed 36,364 people as on March 31, 2008.

The company recorded revenues of INR365,230.6 million (approximately $9,072.3 million) duringthe financial year ended March 2008 (FY2008), an increase of 10.2% over 2007.The operating profitof the company was INR23,694.1 million (approximately $588.6 million) during FY2008, a decreaseof 10.4% compared to 2007. The net profit was INR14,205.9 million (approximately $352.9 million)in FY2008, a decrease of 21.6% compared to 2007.

KEY FACTS

Tata Motors LimitedHead OfficeBombay House24 Homi Mody StreetMumbai 400 001Maharashtra

IND91 22 5665 8282Phone

91 22 5665 7799Fax

http://www.tatamotors.comWeb Address

365,230.6Revenue / turnover(INR Mn)

MarchFinancial Year End

36,364Employees

TTMNew York Ticker

500570Bombay Ticker


Tata Motors LimitedCompany Overview

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SWOT ANALYSIS

Tata Motors is one of the leading automotive vehicle manufacturing companies in India with a portfoliothat includes trucks, buses, utility vehicles and passenger cars. The company has a strong marketposition. The company is the worlds fourth largest truck manufacturer and the second largest busmanufacturer in the above 6 ton category. A strong market position enables Tata Motors gain acompetitive edge in various markets. However, increased levels of competition may threaten thecompanys market position.

WeaknessesStrengths

Decline in vehicle salesStrong domestic playerEmployee productivitySteady revenue growth

Research and development activities

ThreatsOpportunities

Increasing competitionProduct launchesEnvironmental regulationsGrowing passenger car market in India

Acquisition of Jaguar and Land Roverbrands

Strengths

Strong domestic player

Tata Motors is Indias largest automobile manufacturer by revenue (with revenues of approximately$9,072.3 million) in FY2008. The companys market share in the Indian four-wheeler automotivevehicle market (i.e. automobile vehicles other than two and three wheeler categories) stood at 26.1%in FY2008. The company is also the leader in the Indian commercial vehicles with a market shareof 62.7% and is the second largest player in the Indian passenger vehicles market with a share of14.2% in FY2008. Further, the company is the worlds fourth largest truck manufacturer and thesecond largest bus manufacturer in the above 6 ton category. A strong market position gives thecompany significant bargaining power and benefits it with the economies of scale.

Steady revenue growth

The company recorded strong revenue growth for the last five year period. During 2004-08, therevenues of the company grew at a CAGR of 27.1% to reach INR365,230.6 million (approximately$9,072.3 million) in FY2008 from INR139,696 million (approximately $3,096 million) in 2004. Further,the company witnessed significant revenue growth in all the five years.The revenues of the company


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grew at year-on-year growth rate of 37.7% to reach INR331,525 million (approximately $7,347 million)in 2007. Further, the revenues grew at a rate of 21.2% in 2006, and 42.1% in FY2005.

The steady revenue growth is also evident in the companys major business division, automotive.The revenues of automotive division grew at a CAGR of 25.8% to reach INR331,517.5 million(approximately $8,234.9 million) in 2008 from INR132,356 million (approximately $3,287.7 million).The strong revenue growth of the company has contributed to its market dominance.

Research and development activities

Tata Motor has strong research and development (R&D) capability. The company incurred largeexpenditure for its R&D activities. For instance, the total R&D costs of the company was Rs.4,663million, Rs.6,018 million and Rs.9,906 million during financial years 2006, 2007 and 2008 respectively.

The companys R&D activities focus on product development, environmental technologies andvehicle safety through its Engineering Research Centre (ERC) established in 1966. The ERC is oneof the few government recognized in-house automotive R&D centers in India. In the recent period,the ERC developed the Tata Nano, an affordable family car, which was unveiled at the Auto Expo2008 in New Delhi and at the Geneva Motor Show. The companys R&D activities also focus ondeveloping vehicles running on alternative fuels, including CNG, liquefied petroleum gas, bio-dieseland compressed air and electric cars. The strong R&D capability enables the company to build abroad range of vehicle portfolio and improves its competitive strength in the automotive industry.

Weaknesses

Decline in vehicle sales

Tata Motors recorded decline or marginal growth in its vehicle sales in the last financial year.Thecompany recorded a sale of 585,649 vehicles, a growth of 0.9% over last year. During the sametime, the automotive industry in India recorded a growth of 10.4% to reach the total vehicle sales to2,309,324 units.The overall market share of the company stood at 25.4% in 2008 as compared toa market share of 27.8% in 2007.

In commercial vehicle segment, the company recorded a growth rate of 5.5% to reach the total salesof 352,785 units in 2008. Where as, the commercial vehicle industry recorded a growth rate of 8.1%in 2008. In passenger vehicles, the company witnessed a 5.4% decline due to aging of some products

and increase in the intensity of competition in the car segment.Where as, the passenger vehicleindustry grew at 11.1% in 2008. Further, the companys market share in commercial vehicle industrydeclined from 64.7% in 2007 to 63.2% in 2008.The market share in passenger vehicle industry alsodeclined from 15.6% in 2007 to 13.3% in 2008.The decline in sales would further affect the companysmarket share, and erode investorsconfidence.

Employee productivity



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Tata Motor posted weak revenues in proportion to the total number of its employees. During 2008,the company recorded total revenues of INR365,230.6 million (approximately $9,072.3 million) witha total of 36,364 employees.The revenue per employee of the group stood at INR10 million(approximately $0.24 million), significantly lower when compared to its global competitors such asToyota Motor, and Nissan Motor. For instance, the revenue per employee of Nissan Motor stood at$0.53 million (with revenues of $95 billion and employees of 180,535 people) for the FY2008,significantly higher than the revenue per employee of Tata Motor. And also the revenue per employeeof Toyota Motor, another competitor stood at $0.73 million (with overall revenue of $230.8 billionand employees of 316,121 people) in FY2008. The weak revenue per employee of the companycompared to the global auto majors indicates its weaker productivity and operational inefficiency.

Opportunities

Product launches

Tata Motors has launched various new products during the last two year period (200708). Forinstance in December 2007, Tata Motors introduced its new range of Medium and Heavy CommercialVehicles. The new M&HCV range includes multi-axle trucks, heavy-duty trucks, tractor- trailers andtippers and fully-built solutions like tip-trailers and load bodies.

In March 2008, Tata Motors (Thailand) launched the Tata Xenon 1-ton pickup truck at the annualBangkok International Motor Show. The Xenon will be sold across Thailand through the company'sown dealer network. In FY2008, the company launched the Indigo sedan and Indica with the DirectInjection Common Rail (DICOR) and Sumo Grande. Apart from these, the company also launchedthe Indica V2 Xeta LPG equipped with a dual fuel (gasoline and LPG) engine. Further in August2008, the company launched Indica Vista, a new passenger car model. Product launches in varioussegments and geographies would improve the product portfolio, which could result in higher salesgrowth for the company. This would also enhance the companys brand image.

Growing passenger car market in India

The outlook for growth of passenger car sales in India remains positive. It is primarily due to thehigher disposable incomes and easier vehicle financing options in India. Further, it is estimated thatreal consumption expenditure in India would grow from INR17 trillion (approximately $0.4 tril lion) in2007 to INR70 trillion (approximately $1.6 trillion) by 2025, a fourfold increase.

Further, the passenger car production in India is projected to increase from 1.3 million units in 2007to 3 million units by 2014. The sale of passenger cars is expected to grow at a CAGR of around 10%during 2008 to 2015. Tata Motors is the second largest player in the Indian passenger vehicle marketwith a share of 14.2% in FY2008. Furthermore, the launch of its small car, NANOin January 2008would further fuel its presence in the passenger vehicle market. Tata NANO, called as the peoplescar is projected to be the least expensive production car in the world. The standard version of theNano is projected to cost close to INR100,000 (approximately $2,500). The four-door NANOis of



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little over 10 feet long and nearly 5 feet wide and is powered by a 623cc two-cylinder engine at theback of the car.The company can therefore, leverage its strong position to exploit the growingdemand of passenger vehicles in India.

Acquisition of Jaguar and Land Rover brands

Tata Motors acquired the businesses of Jaguar and Land Rover (part of Ford Motor) for $ 2.3 billionin June, 2008. Jaguar and Land Rover (JLR) were in the business of development, manufactureand sale of high end luxury cars and SUVs respectively. JLR operated 3 manufacturing plants, 1component manufacturing facility and 2 design and engineering centers in the UK. These brandshad sales operations in more than 100 countries with over 2,200 dealers.The combined volume ofthese brands was around 288,000 vehicles in 2007. Further, these brands achieved revenues of$14.94 billion for the year ended December 31, 2007 with an operating profit of $ 650 million.

Acquisition of JLR provides the company with a strategic opportunity to acquire iconic brands, andincrease the companys business diversity across markets and product segments.

Threats

Increasing competition

Tata Motors face intense competition from its domestic as well as foreign competitors includingGeneral Motors, Honda Motor, Maruti Udyog, Mitsubishi Motors, Fiat, Ford and so on. Competitionis 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 technologythrough alliances.

Additionally, in recent years, the government of India has permitted automatic approvals for foreignequity ownership of up to 100% in entities manufacturing vehicles and components in India. Withthe gradual liberalization of the automobile sector, the number of manufacturing facilities in Indiahas grown progressively. At present there are 15 manufacturers of passenger cars and multi utilityvehicles, 9 manufacturers of commercial vehicles, 16 of 2/3 wheelers and 14 of tractors besides 5manufacturers of engines. These changes have led to noticeably increased competition in productofferings by all the auto manufacturers in India. Increasing competition would adversely affect thecompanys market share and profitability.

Environmental regulations

The company is subjected to extensive governmental regulations regarding vehicle emission levels,noise, safety and levels of pollutants generated by its production facilities. These regulations arelikely to become more stringent in the near future. For instance, India's major cities plan to adoptthe Euro IV emissions standards in April 2010, requiring a 35% reduction in sulfur emissions overthe current Euro III standard.



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In addition, Jaguar Land Rover has significant operations in the US and Europe which have stringentregulations relating to vehicular emissions. For instance, The European Union (EU) Commissionand the EU Parliament are planning to adopt more stringent emission standard EURO 5fromSeptember 2009.The proposed tightening of vehicle emissions regulations will require significantcosts for the company.



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