JLR’s Smarts, New Models Help Tata Reinvent Itself

MUMBAI – Facing severe setbacks in the market and the burdensome obsolescence of its models, Chairman Cyrus Mistry is planning to rebuild Tata Motors under his Horizonext Plan.

The Indian automaker reported a $39.5 million profit in the 2013-2014 fiscal year, thanks to its Jaguar Land Rover luxury division. Sales of Jaguar and Land Rover brands increased 15.5% in the period while Tata sales tumbled 31%.

Tata’s share of the Indian market, a robust 38.2% in full-year 2013, had dwindled to 10.7% over the first seven months of 2014.

JLR has propped up Tata in recent years despite the parent company’s ample design and engineering resources: an engine and power development lab in Pune, a wholly owned European Technical Center in England and a panel of distinguished consultants and in-house talents in both India and the U.K.

But after three years of sales and market-share contraction, Tata realizes it needs to better understand what the customer wants and incorporate it in the design and engineering of new models. This will require integrating all of its expertise, sources and resources.

JLR and Tata occupy different segments – the former in luxury markets and the latter selling mass-market hatchbacks, sedans and utility vehicles. Yet, says Girish Wagh, vice president-product development, “There has been and there will be a tremendous amount of sharing between the two.”

Tata-JLR thus need significant exchanges of ideas regarding Tata’s market strategies and JLR technologies.

Mistry knows that apart from the overall downturn in the markets, Tata has been losing ground because of its poorly performing car business and a perception the automaker doesn’t get a product right at launch. He is on his way to set things right.

“We face our biggest challenge, as even in India we compete with the global players like Maruti Suzuki and  Hyundai Motor, Ford India and General Motors India, Honda Cars India and Toyota Kirloskar Motor,” he says.

Tata is preparing to launch models aimed at competing on equal terms with those automakers, as well as new-generation newcomers to India such as Nissan, Renault and Volkswagen.

Tata plans two new-generation models every year to 2020. New products emerging under the Horizonext initiative aim to regain ground lost to the Maruti Swift Dzire, Hyundai Xcent and Honda Amaze by using comparable technologies at a lower price.

A first step is the Zest, a well-equipped, afforable compact sedan launched last month. A Bolt hatchback is due in October. Both are coming on new platforms.

Fuel efficiency of the Zest, however, is only fractionally lower than that of its competitors. The new Revotron gasoline engine achieves 41.4 mpg (5.7 L/100 km) and the new F-Tronic diesel with automatic manual transmission, 54.1 mpg (4.3 L/100 km). Engine specifications of the Bolt have not been finalized.

Tata’s facelifted Safari Storme will reach showrooms in about a month, in time for India’s festival season. In addition to its new design, third-row space has been increased.

The automaker reportedly is developing two new SUVs likely to be on the road by 2017. A JLR platform and parts from the Land Rover Freelander are being used for these new products, and installation of JLR’s Ingenium engine is under consideration.

Tata is modernizing its distribution channels for export sales as well as local markets. Under a hub-and-spoke model for exports, India will be the key marketing hub with several smaller hubs in the European Union, Nigeria and possibly Indonesia.

The automaker has sold 500,000 vehicles in Venezuela since extending its sales network to the South American country in 1961, and marketing experts think Tata can sell another half a million there in five years.

By ramping up exports, Tata hopes to offset slumping domestic demand and raise its profile as a global player. It also has a strategic purpose: learning from foreign markets how to grow domestic sales even during a downturn.

Another aspect of this strategy is the export of Tata commercial vehicles to more than 60 countries. Cars could be linked to CVs shipped overseas.

A re-invented Tata is emerging as it implements Horizonext with an awareness of its past performance and the benefits of JLR’s success.