Tata is the sole Indian conglomerate to have secured a position in the top 100 of the Global Conglomerate Ranking. With a presence in almost all sectors, including consumer products, IT, retail, automobiles, and aviation, they have established a significant foothold. Despite its vast portfolio, Tata Motors is widely recognized as the face of the group, having been founded in 1945 by JRD Tata and developed into Ratan Tata’s passion project in the 1990s. The company dominates the market share in heavy and light vehicles, such as trucks, pickups, and excavators, as well as passenger cars, having held this position since 2010. Despite facing near-bankruptcy in 2018-19, Tata Motors has made a remarkable comeback, capturing approximately 45% of the commercial vehicle market, 14% of the passenger vehicle market, and 87% of the electric vehicle market in India in 2021-22. Furthermore, on a unit sales basis in 2021-22, Tata Motors sold 67% more vehicles in the passenger vehicle segment and a staggering 353% more vehicles in the electric vehicle segment than in the previous fiscal year.
Overview of Tata Motors
The Tata Group was founded by Jamsetji Tata in 1868 when he converted an abandoned oil mill into a cotton mill. After his death in 1904, his sons Dorabji and Ratanji Tata took over the company and expanded into steel, power generation, and edible oil businesses. J.R.D Tata, the youngest chairman, took charge of the company in 1938 and expanded the business into the aviation industry as well as chemicals, consumer goods, software services, and consultancy.
In 1945, J.R.D Tata founded Tata Engineering and Locomotive Company (Telco) with the initial aim of manufacturing local boilers and locomotives for Indian Railways. However, they realized that relying solely on orders from Indian Railways would not be profitable, so they decided to manufacture their own brand of commercial vehicles such as diesel engines and tractors. Tata Motors signed a contract with the German carmaker Daimler Benz in 1954 to gain expertise in manufacturing commercial vehicles. The first TELCO truck was introduced to the market within six months. In 1959, Tata opened a Research and Development Center in Jamshedpur, and by 1961, Telco began exporting cars to Sri Lanka.
In 1966, Telco established another R&D department in Pune to focus on automobile manufacturing and increase its capacity in the manufacture of motor vehicles. In 1969, Tata canceled the agreement with Daimler Benz and launched the first truck with the Tata logo. The truck became so popular that by 1970, Tata had become the market leader. Today, two out of every three trucks in India are Tata trucks.
Tata Motors underwent significant expansion during the two decades following its inception. In 1977, the company’s Pune R&D department manufactured the first heavy commercial vehicle, the S series truck. The following year, they produced four-wheel drive heavy trucks for the Indian Army, and in 1985, they partnered with Hitachi to develop the Hydraulic Excavator, which further advanced their manufacturing capabilities in the heavy commercial vehicle market. The company launched its first light commercial vehicle, the Tata 407 mini pickup, in 1986, which was designed and manufactured entirely in India. A year later, they launched its successor, the Tata 608, and in 1989, they released the Tata Mobile 206, their third light commercial vehicle model.
In 1991, Ratan Tata became the chairman of Tata Sons, the holding company of the Tata Group, and launched the company’s first passenger car, the TATA Sierra. Despite a positive response from buyers, management was not satisfied with its performance, prompting the release of a new car, the TATA Estate, the following year. However, this station wagon was not successful, as it was the first of its type and the culture had not yet taken off in India. In 1994, the company introduced its new SUV line, the Tata Sumo, which was the successor to the Tata Sierra. Later, in 1998, they launched the Tata Safari in the SUV segment and the Tata Indica in the Sedan segment, which was Ratan Tata’s dream project and marketed as the first fully indigenous car made in India.
However, due to quality issues and low mileage, the Tata Indica failed to gain much traction in the market, and the Safari also struggled to attract buyers. These mediocre sales and losses prompted the company to consider selling off its motor vehicle business.
In 1999, Ratan Tata and his team went to America to meet with Ford CEO Bill Ford to discuss the potential sale of the company. However, the meeting was unproductive, and Bill Ford mocked Ratan Tata for his business decisions, leaving him humiliated in front of his team. Nevertheless, he returned to India determined to make Tata Motors a success and focused his attention on the company. The Tata Indica was redesigned by the Tata Group of Engineers and released with a better design, new features, better mileage, and a new marketing strategy, resulting in the car becoming the best-selling car in Indian history. Following this success, Ratan Tata changed the name of TELCO to Tata Motors in 2003.
Tata Motors had a successful year in 2004 as they acquired South Korean truck manufacturer Daewoo Commercial Vehicles Company and got their stock listed on the New York Stock Exchange. In 2005, they launched their new SUV Tata Safari, and in the fiscal year 2006-07, they sold around 6 lakh vehicles. 2008 was a big year for the company as they announced the launch of the Tata Nano car, which was priced under 1 lakh rupees and affordable for India’s middle class. Additionally, due to the economic crisis in 2008, the Tata Group was able to buy the Jaguar and Land Rover division from Ford for $2.3 billion which has a good market demand in the European and Chinese region, and they invested another $5 billion to develop the new markets for the JLR(Jaguar Land Rover) lineup. However, the company’s domestic market was already undergoing major changes.
In 2009, the Tata Nano model was launched in the market, which was originally planned to be priced at Rs 1 lakh, but later came to the market with a price tag of Rs 1.5 lakh. The plan to set up a manufacturing plant in Kolkata was blocked, but the manufacturing plant was later set up in Gujarat at the invitation of the then Chief Minister of Gujarat, Narendra Modi, which caused a delay in the delivery of the car. The unusual design of the car and issues related to build quality and after-sales created a negative impression of Tata Motors in the Indian market. Moreover, as the company focused more on Jaguar Land Rover, Tata’s cars became outdated as new models were not released, resulting in a decrease in their market share in the domestic market and an increase in the market share of other brands like Mahindra, Maruti Suzuki, Hyundai, Honda, etc. In 2011-12, Tata had the highest market share in the passenger car segment which was 14.2 percent, which gradually decreased to 4.6 percent during 2015-16. On the other hand, Electric cars started becoming popular during this time and as 90 percent of Jaguar Land Rover runs on diesel, Tata’s profit in the global market started to go down.
In 2016, Tata Motors appointed Guenter Butschek as their CEO to address this situation, and he implemented several strategies. Initially, the company accumulated a huge debt of Rs 47,552 crore and had to count huge losses, but eventually, the situation changed significantly. Even in the fourth quarter of 2018, this company faced a loss of Rs 26,961 crore, which is the biggest loss in a quarter in Indian history. In FY 2021-22, Tata Motors sold around 1.1 million vehicles, of which around 5 million were passenger vehicles, increasing their market share in the passenger vehicle segment to 13.9 percent. Additionally, 87 percent of India’s total EV market is now under Tata Motors. The company’s total revenue in this financial year is 2.8 trillion Indian rupees, and it is currently ranked number 21 in the automobile world ranking.
How Turned Around?
New Product Introduction
Guenter Butschek, who took over in 2016, has been focusing on revitalizing Tata Motors’ product lineup. As of January 2020, the company’s older models have been redesigned with the new “New Forever” range, featuring the Impact 2.0 design. These cars come equipped with powerful BS-VI engines and boast new features. Additionally, Tata Motors has launched new models, such as the Punch and Harrier, with the same Tata Impact 2.0 design theme as the Nexon, Indica, and Tiago models. The Tata Nexon, Punch, and Harrier models have been performing well. In addition to offering internal combustion engine variants, Tata Motors has also introduced electric variants to the market. The company has introduced approximately 25 new variants of different models, both old and new.
Streamlining Manufacturing Process
Previously, Tata used various platforms to manufacture its car models in the Indian market. A platform is essentially the foundation or structure on which a vehicle is designed. The engine, appearance, and features of a car are all dependent on the platform. Using different platforms for different models increased the number of unique components in Tata’s manufacturing line. This resulted in a large number of parts and components that needed to be produced or imported before any car could be manufactured. The biggest drawback of using different platforms was the increase in wastage when a model failed to meet sales targets or was discontinued. These parts and components could not be used in another model, leading to increased costs and losses for Tata.
However, under the leadership of Guenter Butschek, Tata now uses only two platforms for all its models: Alpha and Omega. This has resulted in a reduction in the number of unique parts and an increase in shared parts and components depending on the model. This means that parts and components from one model can be used in other models, reducing operational difficulties and costs for Tata Motors.
Betting on Electric Vehicle
At one point, the majority of Tata’s vehicle lineup, almost 90 percent, relied on diesel fuel. However, as the global market for electric vehicles (EVs) continued to expand from the mid-2010s, many leading automakers began introducing their own EV models. In line with this worldwide trend, Tata established a separate division known as Tata Passenger Electric Mobility Limited (TPEML) to develop their own EVs. Collaborating with Tata Autocomp, this division ensures that EV models are designed and assembled quickly. Additionally, Tata Chemicals designs batteries for electric vehicles, while Tata Power establishes charging networks throughout the country. With these efforts, when Tata introduced their EVs to the Indian market, customers warmly accepted them. The Nexon EV model is an excellent example of Tata’s success in EV development, as the company decided to expand its EV offerings with the Tiago and Tigor models. Moreover, almost all of Tata’s upcoming vehicles, including two more EV variants, will have EV versions of the Nexon. Tata has already unveiled two concept cars, the Tata Sierra and Tata Avainya, at the 2023 Auto Expo, which will be luxury SUVs with fast charging, futuristic design, and advanced features when they are launched in 2025. Tata, which already holds an 87 percent market share in the EV segment, plans to introduce 10 more EV models by 2025. The company sold 1,9105 units of EVs in 2022 and aims to reach a milestone of 80,000 units by 2023. Meanwhile, Tata’s biggest rival, Maruti Suzuki, has announced that it will not bring EVs to the Indian market before 2025, giving Tata more time to strengthen its position in the EV market.
Build Quality & Safety
Tata has taken steps to improve the safety and quality of their vehicles. In the past, Tata cars were criticized for their build quality and manufacturing defects, leading to a recall of their cars from the market. The company sources parts from various vendors to build their cars, and it was challenging to ensure the quality of the components for each model built on separate platforms. However, by using only two platforms for all their cars, Tata was able to reduce their listed vendors from 1,200 to 300-400, making it easier to inspect the quality of the parts and components supplied by the vendors. Tata’s focus on changing its image also led to increased quality inspection and improved build quality of its cars. They use advanced materials and the new Impact 2.0 design aesthetic, while also emphasizing crash testing, resulting in 5-star NCAP crash test ratings for their Nexon and Altroz models and 4-star ratings for Tiago and Tigor models. Additionally, better availability of parts and improved after-sales service has increased the popularity of the company.
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