Company Spotlight MarketWatch: Automotive

Company Spotlight: Tata Motors

Tata Motors announced the launch of the Jaguar and Land Rover brands in India this month.

The Indian automaker is introducing the entire Land Rover range of luxury utility vehicles to India, including
the Range Rover and Range Rover Sport as well as the mid-sized sports-utility vehicle LR Discovery 3. To
promote the vehicles, Tata is using the strategy of opening dealerships in small towns across the country.

In addition, the company also hopes to launch Jaguar's range of premium saloons: the XK and XKR coupe
and convertible models, the XF 5-liter and the XFR.

Tata Motors is likely to import its JLR brands in a completely built-up form. It expects to sell marque brands in
a price range of INR3.5–9m through exclusive showrooms. Tata Motors workshops will provide nationwide
after-sales service support for the cars.

Business description

Tata Motors is one of the leading automobile manufacturers in India with a portfolio that includes trucks,
buses, utility vehicles and passenger cars. The company has its assembly operations in India, South Korea,
South Africa, Turkey, Sri Lanka and Russia. The company belongs to Tata Group, one of the leading
business groups in India.

The company operates through two business divisions: automotive operations and other operations.

The automotive business division designs, manufactures, assembles, sells and services commercial and
passenger vehicles, utility vehicles, spare parts, components and accessories. The company also provides
finance for all its dealers and customers. The company's manufacturing base is spread across Jamshedpur in
eastern India, Pune in western India, and Lucknow and Pantnagar in northern India, supported by a nation-
wide dealership, sales, services and spare parts network comprising over 2,000 individual locations.

The company manufactures a variety of passenger cars, including the Tata Indica (a compact car), the Tata
Indigo, (a mid-sized car) and the Indigo Marina (a station wagon version). These passenger cars are
manufactured in gasoline and diesel engine versions. The company also produces utility vehicles including
the Tata Sumo, and the Tata Safari. Both the Tata Sumo and the Tata Safari have a number of variants to
meet different consumer preferences.

The company also offers light commercial vehicles and heavy commercial vehicles. The company
manufactures a variety of light commercial vehicles, including pick-ups and trucks and buses with a gross
vehicle weight (GVW) between 0.7 tons and 7.5 tons. The medium and heavy commercial vehicles of the
company include trucks, buses, dumpers and multi-axled vehicles with a GVW between nine tons to 49 tons.
In addition, the company manufactures a range of high horsepower trucks ranging from 220 horsepower to
400 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles, through Tata Daewoo
Commercial Vehicle (TDCV), a wholly-owned subsidiary in South Korea. Furthermore, in June 2008, the
company acquired Jaguar and Land Rover from Ford Motor Company.

The company's total vehicle production capacity in India as of March 2008 was 780,960 units annually. This is
determined on the basis of two production shifts per day and including capacity for the manufacture of
replacement parts. In addition, the company also has vehicle a production capacity of 20,000 units annually in
South Korea.

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Company Spotlight MarketWatch: Automotive

The company demonstrated growth of 1.3% in FY2008, recording its highest ever sales of 597,148 units
(182,292 passenger cars; 173,409 light commercial vehicles; 191,318 medium and heavy-duty commercial
vehicles, and 50,129 utility vehicles), of which 530,547 were sold in India. TDCV sold 11,899 vehicles that
year, and Hispano sold 259.

The company's other services primarily involve information technology, services, construction equipment
manufacturing, machine tools and factory automation solutions. It also offers high-precision tooling and plastic
and electronic components for automotive and computer applications and investment businesses.

The company also offers information technology services through the subsidiary Tata Technologies (TTL).
TTL provides technology services, product lifecycle management, engineering and design services. TTL
operates through the firm INCAT and under its own name. Additionally TTL provides specialized engineering
and design services, product lifecycle management and product-centric IT services to manufacturers. It
conducts operations through its 17 subsidiary companies in 45 cities across 12 countries, and through its
offshore development centers in India and Thailand. Its customers include automotive, aerospace and
consumer durable manufacturers.

Tata's construction equipment business operates through its subsidiary Telco Construction Equipment
Company (Telcon). Telco is engaged in the manufacturing and sale of construction equipment and allied
services.

Tata Motors operates with 18 subsidiary companies and eight affiliates. Some of its subsidiaries include:
TDCV, which manufactures and sells heavy commercial vehicles; Tata AutoComp Systems, which promotes
foreign joint ventures in automotive components and systems and is also engaged in engineering services,
supply chain management and after-market operations; TML Financial Services, which is a non-banking
finance company that supports vehicle financing activities and other related activities; and Tata Motors
Insurance Services.

Key facts Major products & services

Address Bombay House Products
24 Homi Mody Street Passenger cars
Mumbai 400 001 Utility vehicles
Maharashtra Commercial vehicles
IND Buses
Website www.tatamotors.com Defense vehicles
Telephone 91 22 5665 8282 Construction equipment
Fax 91 22 5665 7799 Auto components
Turnover (INRm) 365,230.6
Employees 36,500 Services
NYSE ticker TTM Information technology services
Bombay ticker 500570 Sale and distribution of vehicles
Financial year end March Financial services

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Company Spotlight MarketWatch: Automotive

SWOT Analysis

Table: SWOT Analysis

Strengths Weaknesses

Strong domestic player Decline in market share

Steady revenue growth Employee productivity

Research and development activities

Opportunities Threats

Product launches Increasing competition

Growing passenger car market in India Environmental regulations

Acquisition of Jaguar and Land Rover

brands

Source: Datamonitor

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Company Spotlight MarketWatch: Automotive

Strengths

Strong domestic player

Tata Motors was India's largest automobile manufacturer by revenue in FY2008, with revenues of
approximately $9,072.3m. The company's market share in the Indian four-wheeler automotive vehicle market
stood at 26.1% in FY2008. The company is also the leader in the Indian commercial vehicles with a market
share of 62.7% and is the second largest player in the Indian passenger vehicles market with a share of
14.2% in FY2008. Further, the company is the world's fourth largest truck manufacturer and the second
largest bus manufacturer in the over six ton category. A strong market position gives the company significant
bargaining power and benefits it with economies of scale.

Steady revenue growth

The company recorded strong revenue growth for the last five-year period. During 2004–08, the revenues of
the company grew at a compound annual growth rate (CAGR) of 27.1% to reach INR365,230.6m
(approximately $9,072.3m) in FY2008 from INR139,696m (approximately $3,096m) in 2004. Further, the
company witnessed significant revenue growth in all five years. The revenues of the company grew at year-
on-year growth rate of 37.7% to reach INR331,525m (approximately $7,347m) in 2007. Further, the revenues
grew at a rate of 21.2% in 2006, and 42.1% in FY2005.

The steady revenue growth is also evident in the company's major business division, 'automotive'. The
revenues of the automotive division grew at a CAGR of 25.8% to reach INR331,517.5m (approximately
$8,234.9m) in 2008 from INR132,356m (approximately $3,287.7m). The company's strong revenue growth
has contributed to its market dominance.

Research and development activities

Tata Motor has strong research and development (R&D) capabilities. The company incurred large
expenditure for its R&D activities. For instance, the total R&D costs of the company was INR4,663m,
INR6,018m and INR9,906m during financial years 2006, 2007 and 2008 respectively. The company's R&D
activities focus on product development, environmental technologies and vehicle safety through its
Engineering Research Center (ERC) established in 1966. The ERC is one of the few government recognized
in-house automotive R&D centers in India. In the recent period, the ERC developed the Tata Nano, an
affordable family car, which was unveiled at the Auto Expo 2008 in New Delhi and at the Geneva Motor
Show. The company's R&D activities also focus on developing vehicles running on alternative fuels, including
CNG, liquefied petroleum gas, bio-diesel and compressed air and electric cars. The company's strong R&D
capability enables it to build a broad vehicle portfolio and improve its competitive strength in the automotive
industry.

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Company Spotlight MarketWatch: Automotive

Weaknesses

Decline in market share

Tata Motors only recorded a marginal growth
recorded sales of 585,649 vehicles, a growth
automotive industry in India recorded a growth
overall market share of the company stood at
2007.
in its vehicle sales in the last financial year. The company
of 0.9% over the previous year. During the same time, the
of 10.4% to reach total vehicle sales to 2,309,324 units. The
25.4% in 2008 as compared to a market share of 27.8% in

In its commercial vehicle segment, the company recorded a growth rate of 5.5% to reach the total sales of
352,785 units in 2008, whereas the commercial vehicle industry recorded a growth rate of 8.1% in 2008. In
passenger vehicles, the company witnessed a 5.4% decline due to the aging of some products and an
increase in the intensity of competition in the car segment, while the passenger vehicle industry as a whole
grew at 11.1% in 2008. Further, the company's market share in commercial vehicle industry declined from
64.7% in 2007 to 63.2% in 2008. The market share in passenger vehicle industry also declined from 15.6% in
2007 to 13.3% in 2008. The decline in sales would further affect the company's market share, and erode
investors' confidence.

Employee productivity

Tata Motor posted weak revenues in proportion to the total number of its employees. During 2008, the
company recorded total revenues of INR365,230.6m (approximately $9,072.3m) with a total of 36,364
employees. The revenue per employee of the group stood at INR10m (approximately $0.24m), significantly
lower when compared to its global competitors such as Toyota Motor and Nissan Motor. For instance, the
revenue per employee of Nissan Motor stood at $0.53m (with revenues of $95 billion and employees of
180,535 people) for the FY2008, significantly higher than the revenue per employee of Tata Motor. In
addition, the revenue per employee of Toyota Motor stood at $0.73m (with overall revenue of $230.8 billion
and employees of 316,121 people) in FY2008. The weak revenue per employee of the company compared to
the global auto majors indicates its weaker productivity and operational inefficiency.

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Company Spotlight MarketWatch: Automotive

Opportunities

Product launches

Tata Motors has launched various new products during 2007 and 2008. For instance, in December 2007,
Tata Motors introduced its new range of medium and heavy commercial vehicles. The new range includes
multi-axle trucks, heavy-duty trucks, tractor-trailers and tippers, and fully-built solutions like tip-trailers and
load bodies.

In March 2008, Tata Motors (Thailand) launched the Tata Xenon one-ton pickup truck at the annual Bangkok
International Motor Show. The Xenon will be sold across Thailand through the company's own dealer
network. In FY2008, the company launched the Indigo sedan and Indica with a direct injection common rail
fuel injection system, and the Sumo Grande. Apart from these, the company also launched the Indica V2 Xeta
LPG equipped with a dual fuel (gasoline and LPG) engine. Furthermore, in August 2008, the company
launched the Indica Vista, a new passenger car model. Product launches in various segments and
geographies would improve the company's product portfolio, which could result in higher sales growth for the
company. This would also enhance the company's brand image.

Growing passenger car market in India

The outlook for growth of passenger car sales in India remains positive. It is primarily due to the higher
disposable incomes and easier vehicle financing options in India. Further, it is estimated that real
consumption expenditure in India would grow from INR17 trillion (approximately $0.4 trillion) in 2007 to INR70
trillion (approximately $1.6 trillion) by 2025, a fourfold increase.

Furthermore, passenger car production in India is projected to increase from 1.3 million units in 2007 to three
million units by 2014. The sale of passenger cars is expected to grow at a CAGR of around 10% during 2008
to 2015. Tata Motors is the second largest player in the Indian passenger vehicle market with a share of
14.2% in FY2008. Furthermore, the launch of its small car, the 'NANO' in January 2008 would further fuel its
presence in the passenger vehicle market. The Tata NANO, described as the people's car, is projected to be
the least expensive production car in the world. The standard version of the Nano is projected to cost close to
INR100,000 (approximately $2,500). The four-door 'NANO' is little over 10 feet long and under five feet wide,
and is powered by a 623cc two-cylinder engine at the back of the car. The company can therefore leverage its
strong position to exploit the growing demand of passenger vehicles in India.

Acquisition of Jaguar and Land Rover brands

Tata Motors acquired the businesses of Jaguar and Land Rover (part of Ford Motor) for $ 2.3 billion in June
2008. Jaguar and Land Rover (JLR) were in the business of development, manufacture and sale of high end
luxury cars and sports utility vehicles (SUVs) respectively. JLR operated three manufacturing plants, one
component manufacturing facility and two design and engineering centers in the UK. These brands had sales
operations in more than 100 countries with over 2,200 dealers. The combined volume of these brands was
around 288,000 vehicles in 2007. In addition, these brands achieved revenues of $14.94 billion for the year
ended December 31, 2007 with an operating profit of $650m. The acquisition of JLR provides the company
with a strategic opportunity to acquire iconic brands, and increase its business diversity across markets and
product segments.

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Company Spotlight MarketWatch: Automotive

Threats

Increasing competition

Tata Motors face intense competition from both domestic and foreign competitors, including General Motors,
Honda Motor, Maruti Udyog, Mitsubishi Motors, Fiat, Ford and so on. Competition is expected to intensify
further as Indian automotive manufacturers obtain greater access to debt and equity financing in the
international capital markets or gain access to more advanced technology through alliances.

Additionally, in recent years, the government of India has permitted automatic approvals for foreign equity
ownership of up to 100% in entities manufacturing vehicles and components in India. With the gradual
liberalization of the automobile sector, the number of manufacturing facilities in India has grown progressively.
At present there are 15 manufacturers of passenger cars and multi utility vehicles, nine manufacturers of
commercial vehicles, 16 of two- and three-wheelers and 14 of tractors, in addition to five manufacturers of
engines. These changes have led to noticeably increased competition in product offerings by all the auto
manufacturers in India. Increasing competition would adversely affect the company's market share and
profitability.

Environmental regulations

The company is subject to extensive governmental regulations regarding vehicle emission levels, noise,
safety and levels of pollutants generated by its production facilities. These regulations are likely to become
more stringent in the near future. For instance, India's major cities plan to adopt the Euro 4 emissions
standards in April 2010, requiring a 35% reduction in sulfur emissions over the current Euro 3 standard.

In addition, Jaguar Land Rover has significant operations in the US and Europe which have stringent
regulations relating to vehicular emissions. For instance, The EU Commission and the EU parliament are
planning to adopt the more stringent emission standard, Euro 5, from September 2009. The proposed
tightening of vehicle emissions regulations will require significant costs for the company.

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