[Document title]

[Document subtitle]

PC
[COMPANY NAME]
Introduction

Back in 2008, Tata Motors made a bold acquisition. It bought the struggling UK luxury car-

maker, Jaguar Land Rover (JLR) by shelling out close to ₹10,000 crores and vowed to turn it

around. Although the first year was a bit topsy turvy (considering the Global Financial

Crisis), JLR soon started churning out big profits thanks to Tata Motors’ intervention. And I

know we could talk about Nano or the company’s commercial vehicle segment before

delving into this bit, but it’s JLR that’s the primary revenue driver for the company. So it’s

imperative to take a closer look here if we want to isolate the real problem.

History

History was made in March 2008 when one of India’s top corporate entities, Tata

Motors

acquired luxury auto brands -- Jaguar and Land Rover (JLR) from Ford Motor for $2.3

billion,

imprinting their specialty as a takeover magnate.

Beating Mahindra and Mahindra for the prestigious brands, just a year after acquiring steel

giant

Corus for $12.1 billion, the Tata signed the deal with Ford, which on its part chipped in with

$600 million towards JLR’s pension plan.

Acquisition of JLR by Tata was one of the rarest cases of an Indian Company acquiring

luxury

brands. It was a very risky acquisition since JLR had been wobbling in the market and

surviving

on the edge. Tata had to invest a lot in the brand to make it stand out once again. The biggest

reason behind Tata acquiring JLR was that it wanted to decrease their dependency on the

Indian
market which accounted for more than 90 % of its sales.

Tata raised USD 3 billion (Rs 12000 crores) through bridge loans for 15 months from

different

banks including JP Morgan and SBI as they were facing a cash crisis due to Corus deal and

heavy investments in TATA NANO Project back home

Case Study: Tata Motors JLR - a two-edged sword.

History was made in March 2008 when one of India’s top corporate entities, Tata

Motors

acquired luxury auto brands -- Jaguar and Land Rover (JLR) from Ford Motor for $2.3

billion,

imprinting their specialty as a takeover magnate.

Beating Mahindra and Mahindra for the prestigious brands, just a year after acquiring steel

giant

Corus for $12.1 billion, the Tata signed the deal with Ford, which on its part chipped in with

$600 million towards JLR’s pension plan.

Acquisition of JLR by Tata was one of the rarest cases of an Indian Company acquiring

luxury

brands. It was a very risky acquisition since JLR had been wobbling in the market and

surviving

on the edge. Tata had to invest a lot in the brand to make it stand out once again. The biggest

reason behind Tata acquiring JLR was that it wanted to decrease their dependency on the

Indian

market which accounted for more than 90 % of its sales.

Tata raised USD 3 billion (Rs 12000 crores) through bridge loans for 15 months from

different
banks including JP Morgan and SBI as they were facing a cash crisis due to Corus deal and

heavy investments in TATA NANO Project back home

History was made in March 2008 when one of India’s top corporate entities, Tata Motors

acquired luxury auto brands -- Jaguar and Land Rover (JLR) from Ford Motor for $2.3

billion, imprinting their specialty as a takeover magnate.

Beating Mahindra and Mahindra for the prestigious brands, just a year after acquiring steel

giant Corus for $12.1 billion, the Tata signed the deal with Ford, which on its part chipped in

with $600 million towards JLR’s pension plan.

Acquisition of JLR by Tata was one of the rarest cases of an Indian Company acquiring

luxury brands. It was a very risky acquisition since JLR had been wobbling in the market

and surviving on the edge. Tata had to invest a lot in the brand to make it stand out once

again. The biggest reason behind Tata acquiring JLR was that it wanted to decrease their

dependency on the Indian market which accounted for more than 90 % of its sales.

Tata raised USD 3 billion (Rs 12000 crores) through bridge loans for 15 months from

different banks including JP Morgan and SBI as they were facing a cash crisis due to Corus

deal and heavy investments in TATA NANO Project back home.

What Went Wrong?

Brexit

Marketing your vehicle in a foreign nation might sound like a lucrative opportunity. But

geopolitical tensions can upend this equation rather quickly.

Consider what happened in 2016. Britain finally decided it wanted to part ways with the

European Union (EU). This meant the country had to rework its relationship with other

members of the Union —on matters of trade, tariffs, free movement of people, all that stuff.
For instance, back then, the EU contributed 21% of all sales accruing to JLR. The company,

meanwhile, imported 50% of all its component from other countries in the Union. So friction

between the UK and the EU had to have material consequences for both Tata Motors and

JLR.

In fact, almost immediately after the first Brexit vote, the Pound fell by as much as 10%

against the Euro. At the time JLR owed money to many entities in the European Union—

payables for supplies and raw materials. However, as soon as the Pound began to lose value,

JLR had to cough up a premium (more Pounds). In fact, they had to take a hit of ~ ₹2,300

crores on account of currency fluctuations alone. That’s quite steep!!

Also, uncertainties surrounding Brexit began affecting the UK economy as well. Sales were

down. Demand was lackluster and the company’s prospects began deteriorating rather

quickly. But it didn’t stop at that. The problems just kept piling on.

A Switch to Eco-Friendly alternatives

JLR sold diesel cars. In fact, 90% of all cars sold in the EU were diesel variants. But after the

Volkswagen emission scandal rocked the European Union, governments began to

disincentivize the use of highly polluting fuels (including diesel) by ramping up taxes. This

meant, JLR had to switch things up rather quickly. They began destocking diesel vehicles by

offering massive discounts and made substantial investments in a bid to produce and promote

more eco-friendly variants. And while this move was critical to their long term vision, it did

weigh heavily on the company’s bottom line.

Elsewhere, JLR was having trouble with quality control. Consider China. For a population

that craved for expensive luxury vehicles, JLR was a godsend in many ways. And in 2014,

the company started local production through a joint venture with Chery Automobiles. The
idea was to modify the cars slightly to pander to local tastes while simultaneously avoiding

the 25% tariff on imported vehicles.

The move did wonders. China sales surged from ~100,000 in 2015 to ~150,000 in 2017. But

with increasing volumes, customer complaints became more frequent. Product quality was a

constant source of concern.

As one article in Automotive News notes —

In 2017 alone, JLR carried out 13 recalls in China for defects with components ranging from

engines, instrument panels and airbags to batteries. The recalls covered some 106,000

vehicles, which was equivalent to more than 70 % of its local sales during the year.

And eventually, the carmaker lost its sheen. While once China contributed almost a third of

JLR's sales, today its contribution has reduced to a meager 10%.

And all of this culminated in wasteful investments that failed to translate into meaningful

opportunities. In 2018, JLR wrote off ₹27,000 crores in assets. That’s the company telling

you these assets hold no real value and ought to be written off as a loss. Meanwhile, the

company’s debt burden was spiraling out of control — from ~₹33,000 crores in FY11

to ₹1.2 lakh crore in FY20.

Current situation

Initially JLR has performed strongly after the merger and was slowly and steadily repaying

TATA’s immense faith in its name and reputation.

On June 15, 2020 JLR reported a drop in its sale figure for fourth quarter and financial year

ended March 31st, 2020 due to corona virus pandemic. The luxury carmaker said the

pandemic "significantly impacted" its projections for 2019-20, with fourth quarter retail sales
down 30.9 per cent and full year sale lower 12.1 percent. Since year 2014-15, JLR is facing

problems and its sales is reducing throughout the globe.

Tata Motors suffered consolidated fourth quarter net loss of 98.94 billion rupees, as

coronavirus lockdown across its markets weakened sales, including at JLR. Its total sales of

passenger vehicles for financial year 2019-20 is 38% less than financial year 2018-19 and

total sales of commercial vehicles is 34% less in comparison to financial year 2018-19. Tata

Motors’ losses mount, with sluggish sales in China and Brexit adding to its woes.

Tata Motors is reviewing all its businesses, revising its investments and working capital and

the company has also launched inventory correction programme. During the time of corona

virus pandemic, company has laid off 1100 employees as it is focusing on cost cutting. JLR

deal is not proving to be very good for the company in year 2020. JLR is like two-edged

sword for Tata Motors. If JLR performs well, Tata Motors earn its profit nearer to 80% from

JLR. When JLR doesn’t perform well, in that situation most of the loss of Tata Motors is

from JLR.

In the past, the company has launched few vehicles, but they did not perform well. Due to

this Tata Motor’s survival is getting difficult. The company is struggling for profits in the last

few years, in fact the company suffered huge losses of 28,826 crores in year 2019. Apart

from losses, the company has taken huge debt nearing one lakh crore. The situation of the

company is grim in 2020.

History was made in

March 2008 when one of
India’s top corporate entities,
Tata Motors
acquired luxury auto brands --
Jaguar and Land Rover (JLR)
from Ford Motor for $2.3
billion,
imprinting their specialty as a
takeover magnate.
Beating Mahindra and
Mahindra for the prestigious
brands, just a year after
acquiring steel giant
Corus for $12.1 billion, the
Tata signed the deal with Ford,
which on its part chipped in
with
$600 million towards JLR’s
pension plan.
Acquisition of JLR by Tata
was one of the rarest cases of
an Indian Company acquiring
luxury
brands. It was a very risky
acquisition since JLR had been
wobbling in the market and
surviving
on the edge. Tata had to invest
a lot in the brand to make it
stand out once again. The
biggest
reason behind Tata acquiring
JLR was that it wanted to
decrease their dependency on
the Indian
market which accounted for
more than 90 % of its sales.
Tata raised USD 3 billion (Rs
12000 crores) through bridge
loans for 15 months from
different
banks including JP Morgan
and SBI as they were facing a
cash crisis due to Corus deal
and
heavy investments in TATA
NANO Project back home
History was made in
March 2008 when one of
India’s top corporate entities,
Tata Motors
acquired luxury auto brands --
Jaguar and Land Rover (JLR)
from Ford Motor for $2.3
billion,
imprinting their specialty as a
takeover magnate.
Beating Mahindra and
Mahindra for the prestigious
brands, just a year after
acquiring steel giant
Corus for $12.1 billion, the
Tata signed the deal with Ford,
which on its part chipped in
with
$600 million towards JLR’s
pension plan.
Acquisition of JLR by Tata
was one of the rarest cases of
an Indian Company acquiring
luxury
brands. It was a very risky
acquisition since JLR had been
wobbling in the market and
surviving
on the edge. Tata had to invest
a lot in the brand to make it
stand out once again. The
biggest
reason behind Tata acquiring
JLR was that it wanted to
decrease their dependency on
the Indian
market which accounted for
more than 90 % of its sales.
Tata raised USD 3 billion (Rs
12000 crores) through bridge
loans for 15 months from
different
banks including JP Morgan
and SBI as they were facing a
cash crisis due to Corus deal
and
heavy investments in TATA
NANO Project back home