Ford-preferred Jaguar/Land Rover bidder Tata Motors could make a huge technological leap and save years of development by acquiring the luxury vehicle icons, Indian analysts told a news agency.
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“From a technology point of view and given the Tatas’ global ambitions, this purchase would make a lot of sense,” Chirag Shah, analyst at Mumbai’s Emkay Securities, told Agence France Press (AFP).
“If they want to move into the league of the VWs and the Audis, they need to make these kinds of investments,” Shah was quoted as saying.
“They – in fact the Indian auto players – don’t have the technological capacity right now to match these global companies. They would be saving a lot of time and money by acquiring these brands.”
AFP said Tata urgently needs to develop new technology to fend off competition from foreign car makers like General Motors, Suzuki, Hyundai and Ford which have invested heavily in plants in India to compete in the fast-growing domestic market.
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By GlobalDataIndia is already an ‘export hub’ for small Suzuki and Hyundai models.
Tata Motors has so far designed only one passenger car – the Indica hatchback. It was derided as not up to western European export standards when sold briefly in the UK as the City Rover several years ago.
AFP noted that Tata Motors’ shares closed Friday 1.25% down to INR784.30 amid uncertainty about the balance sheet implications of the prospective deal with Ford that comes as its vehicle sales have sagged.
But analysts told the news agency Tata would be buying Jaguar and Land Rover just at a time when the large investments by Ford to turn around the brands are paying dividends.
“They would be buying in at the right time,” Hormuz Sorabjee, editor of leading Indian car magazine Autocar, told Agence France Press.
“Jaguar has a lot in the pipeline that’s interesting,” he added.
The acquisition “would represent a huge leap ahead in terms of product and product is king in this business.”
Analysts reportedly noted Land Rover now is making money and that Jaguar is expected to break even.
“Ford paid $US5-7bn for the companies depending on how you do the conversion and adjusted for inflation. And it has pumped in $10bn more in trying to turn the brands around,” Shah told AFP.
“Tata is getting the fruits of this investment at a fraction of the cost.”
“The deal is prestigious and the (new) brands could emerge as strong revenue earners over a long term of five to six years,” Mumbai brokerage Prabhudas Lilladher auto analyst Mahantesh Sabarad said.
AFP noted that Tata, which on 19 January unveils its INR 100,000 (1 lakh)/$2,500 ‘people’s car’, could end up in the unusual position of manufacturing two of the world’s most prestigious brands as well as one of the cheapest.
