Vehicle by Tata

By Calef Letorney
Photos by: Calef Letorney and Courtesy of Land Rover / Tata
Just days before this issue of The NEWS was to go to press the TATA Group’s acquisition of Jaguar-Land Rover was officially announced. At this time the details of the deal are still being ironed out, but both parties have committed to the transaction and the negotiations are likely to be concluded by time you read this. Of course this new information makes the story we had intended to run in this spot, entitled “Whose Your Daddy?” focusing on the uncertainty in the next owner of Jaguar-Land Rover, a bit behind the times. Now that we know who our daddy is, I am interested in finding out a little bit more about him and discuss some of the possible ramifications for Jaguar-Land Rover and the North American Market.

Originally a locomotive manufacturer, the Tata Group of India was established in 1945. When India gained independence in 1947 it expended a great amount of resources in its rail system and Tata flourished. Seeing automobiles as the future, Tata acquired technology from Daimler-Benz AG and began manufacturing trucks. Since then, Tata has diversified into steel, power, hotels and information technologies. However, Tata is still best known for its big, simplistic trucks (such as the ones pictured about) that are popular throughout the Asian market.

Renowned for efficient and cost effective manufacturing Tata has been very successful in keeping costs down to maximize profits. A remarkable example of Tata’s ability to produce vehicles inexpensively can be seen in their new car designed especially for the Indian market, which is scheduled to be unveiled shortly, that is said to retail at only 100,000 rupees ($2,500)! Having an understanding of Tata’s modus operandi raises some serious questions about their intentions for Jaguar- Land Rover.

The first question in many analysts’ mind is: What will become of the Land Rover production facilities in the UK? With an eye for efficiency, Tata has incentive to completely shut down the UK production ASAP and relocate production to India where they can combine with current facilities and take advantage of cheap labor. This seems logical as other manufacturers are choosing India. GM is spending $6 billion to build a plant and develop vehicles in India for the vehicles in the Asian market.

Another prime reason to close the UK production facilities is that Tata could then develop the valuable real estate on which the Solihull facility is located. Surely this is within the scope of an organization as diverse as the Tata Group. And so it seems likely that Tata will move production to India, cutting up the Jaguar-Land Rover that we have come to know and love.

GASP! What will happen to the quality of Land Rovers? After all Indian production is not renowned for quality and Tata is certainly not spared this criticism. How reliable can a $2,500 car be? Many Americans pay that much for quality bicycles and we want Land Rovers that will last. Will the American market support Land Rovers made in India? Could this be the beginning of the end of Land Rover as we have known? The sky is truly falling.

Hold on to your feathers Chicken Little, there is good reason to believe the sky isn’t falling just yet: A very strong argument can be made that Tata plans to change little with Jaguar-Land Rover, despite the fact that everyone knows Jaguar could use some change as it has been loosing money for decades.

One major reason not to promptly end production in the UK is the employees. UK workers have very strong labor contracts and relocating promptly would leave Tata paying significant severance packages. It makes no sense for Tata to move to India to take advantage of cheap labor while they are still paying the Brits they just put out of work. Cost of labor is not the only reason to keep production in the UK, moving Jaguar-Land Rover from the UK will disrupt brand loyalty.

Tata knows that the value of Jaguar-Land Rover is based on prestige, which would be significantly devalued by Asian production. It makes little sense to purchase Jaguar-Land Rover and spend more money on new production facilities in order to lower production costs if the demand for those brands will be adversely affected. Tata would be exposed to a lot less risk if they were to simply aquire Jaguar-Land Rover and enjoy the profitability of Land Rover right where it is. When discussing what Tata plans to do with Land Rover, it is crucial to ask ‘Why did Tata purchased Jaguar-Land Rover?’ In order to answer that it helps to look at the Indian economy and the products Tata is currently making.

India is the world’s second fastest growing economy after China. With a newly emerging middle class and a growing upper class the demand for luxury vehicles is growing rapidly in India. While Tata has been producing trucks for decades, its first venture into cars was only ten years ago and $2500 car has been their only new design since. Tata has yet to release the affordable luxury cars and SUVs that the Indian market is ready for and it is because they don’t have the technology.

Some analysts are seeing Tata’s acquisition of Jaguar-Land Rover as a technology grab more than anything else. This is not a new role for Land Rover, as many claim BMW’s temporary ownership of Land Rover allowed them to gain the technology necessary to produce the BMW X5 SUV for less of an investment than developing it on their own. If indeed the Jaguar-Land Rover purchase was primarily a technology grab, then follows that Tata may not want to put much energy into changing things before reselling.

So I have covered the worst-case scenario and the business as usual possibility, but is it possible that TATA’s purchase could be a good thing for us North American Land Rover aficionados? Consider this: What if TATA kept producing the luxury vehicles in Solihul and moved the Defender production to India?! If Range Rovers production remained in England the rich would still buy them, rappers would still “floss”‘ them lyrically (assuming they could still put big shiny spinning rims on them), and the status quo would remain. Indian production of the Defender could significantly lower costs as Defenders are a very labor intensive product. Of course the Indian manufactured Defender would also be prime for the US market which is clamoring for Defenders. Recently a relatively stock, low mileage NAS Defender 110 went for $80,000 at the Barrett-Jackson Auto Auction. TATA must certainly recognize the demand for Defenders in the USA. The question remains, do we really want an Indian-made Defender? Just a few hundred words ago I was saying the quality would be less than par. OF COURSE we want Indian made Defenders! Lets face it, Defender production quality wasn’t that great in England, lets give the Indians a try! For all we know the Indian production could be better. I just want to know, can we get some diesels too?

Of course it is impossible to do anything more than hazard a guess at the future of Land Rover, so I am going to leave my official opinion out. I hope this article has allowed you to make up your own mind as to whether our beloved Land Rover is in for rocky times or the second coming of the Defender. It is certainly worth noting the irony of the situation: Jaguar and Land Rover, two brands that embody the posh British colonizing spirit, are now owned by a former colony. Who would have ever imagined the decisions of business men in India affecting the livelihood of factory workers of the UK?! This sounds like poetic justice to me.

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