Tata Motors Limited

Tata Motors Limited - SWOT Analysis

Tata Motors Limited (Tata Motors or 'the company') is an automotive manufacturing company
engaged in the development, design, manufacture and assembly, sale, and financing of
vehicles, as well as sale of auto parts and accessories. Diversified geographic presence,
researchand development activities and focus on quality are the company’s major strengths,
dependence on third party suppliers and product recalls remain areas of concern. Launch of
new products, aggressive strategies for expansion and penetration in new markets, and
growing global automotive market could provide growth opportunities to the company.
However, stringent environmental regulations increase in input prices, intense competition
could affect its business operations.

Tata Motors Limited- Strengths

Strengths - R&D Activities

The company is well supported by its robust in-house research and development (R&D)
facilities. Innovation-based strategies enable the company to stay abreast of the changes in
the industry and provide it the ‘first mover’ advantage by launching products ahead of
competition and delivering advanced products and services to its customers. The company
develops innovative, high-performing and cost-effective passenger vehicles and commercial
vehicles. The company has three R&D centers for Tata Motors Limited (TML) in India, South
Korea and the UK. It consists of two Jaguar Land Rover (JLR) innovation hubs in Europe and
the US. In FY2018, the company invested INR23,980 million on its TML research and
development efforts and EUR2,016 million on its JLR R&D efforts.

Strengths - Focus on Quality

Tata Motors focuses on maintaining high quality standards throughout its business activities,
as quality assumes greater importance and significance in retaining its customers. It
undertakes stringent quality management principles to ensure delivery of high class services
to its clientele. Compliance with the highest standard enhances the brand image of the
company and raises customer confidence in the company’s offerings.The company’s quality
and the environment department continuously strives at standardizing management systems,
adding criteria and behavior models, and implementing these standards to achieve integration
of processes. The company operations are certified according ISO 9000 (Quality
Management Standards), ISO 14000 (Environment Management Standards), OHSAS 18000
(Occupational Health and Safety Assessment Series), SA 8000. The company’s suppliers also
adopt the ISO 9001/TS 16949 quality management system frameworks.

Strengths - Diversified Geographic Presence

Tata Motors has a diversified geographic presence. Tata Motors had 97 (direct and indirect)
subsidiaries including 14 in India and 83 abroad as of March 2018. The company
manufactures its Tata brand vehicles through six manufacturing facilities in India. Its sales and
distribution network in India comprises approximately 4,931 sales contact points for its
passenger and commercial vehicle business. Through subsidiaries and associate companies,
Tata Motors has operations in the UK, South Korea, Thailand, South Africa, and Indonesia. It
also markets its commercial and passenger vehicles in several countries in Europe, Africa,
the Middle East, South East Asia, and South Asia. The company's commercial and passenger
vehicles are being marketed in several countries in Europe, Africa, the Middle East, South
East Asia, South Asia, South America, commonwealth of independent states (CIS), and
Russia. Also, as of March 2018, Tata Motors had nine associate companies and six joint
ventures. The company has joint ventures in India, China, and the UK. Similarly, Jaguar Land
Rover distributes its Jaguar vehicles in approximately 120 markets across the world and its
Land Rover vehicles in approximately 129 markets across the world, through a global network
of 22 national sales companies, 79 importers, 2 export partners, and 1,571 franchise sales
dealers, of which 1,226 are joint Jaguar and Land Rover dealers. In addition, the revenues of
Tata Motors are diversified across all the geographic regions it operates in. For instance,

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India, the company's largest geographic market, accounted for 20.2% of the company’s
revenue in FY2018. This was followed by the UK (17.4%), the US (15.2%), China (14.7%),
rest of Europe (15.7%), and rest of the world accounted for the remaining 16.8%. Hence,
diversified geographic presence ensures that the company does not rely on any one market
for a majority of its revenues, which in turn reduces its business risk.

Tata Motors Limited - Weaknesses

Weaknesses - Dependent on third party suppliers

Tata Motors products are sold and serviced through a network of authorized dealers and
service centers across India and through a network of distributors and local dealers in
international markets. The company monitors the performance of its dealers and distributors
and provide them with support to enable them to perform to their expectations. Any under
performance by its dealers or distributors could materially and adversely affect their sales and
results of operations. Also, the company relies on third parties to supply with the raw
materials, parts and components used in the manufacture of our products. For some of these
parts and components, Tata Motors are dependent on a single source. Its ability to procure
supplies in a cost-effective and timely manner is subject to various factors, some of which are
not within its control. While the company manages its supply chain as part of the vendor
management process, any significant problems with the supply chain in the future could
disrupt the company’s business and materially and adversely affect its operations, as well as
sales.
While the company manage its supply chain as part of the vendor management process, any
significant problems with the supply chain in the future could disrupt the company’s business
and materially and adversely affect its operations, as well as sales.

Weaknesses - Product recalls affect the company's brand image

The company has recalled a number of its vehicles in the recent past, due to the supply of
defective products, parts, or related after-sales services. In September 2018, the company
issued a voluntary recall for its 9000Tigor diesel sedan cars to fix an issue with the emissions
of the cars manufactured between March 6 and December 1, 2017. While such product
recalls increase the company's operational cost they also indicate decline in product quality
which could negatively impact the consumer confidence in Tata Motors' products and could
strain its sales in the future.

Tata Motors Limited- Opportunities

Opportunities - Aggressive Strategies for Expansion and Penetration in New Markets

The company has been aggressively entering new geographies and countries to boost its
global presence. Tata Motors, in the recent years, has grown its market share across various
African and Middle East markets such as Kenya, Nigeria, Tanzania, Saudi Arabia, the UAE,
and Qatar, in addition to maintaining its dominant market position in the South Asian markets
of Bangladesh, Nepal, and Sri Lanka. In keeping with its strategy to enter and grow in new
regions, the company is focused on business in the ASEAN countries, where in the past two
years, it entered Indonesia, Malaysia, and the Philippines, and also in Australia. The company
also expanded its range through acquisitions and joint ventures. The acquisition of Jaguar
Land Rover expanded its geographical presence significantly. Through Jaguar Land Rover,
Tata Motors offer products in the premium performance car and premium all-terrain vehicle
categories with globally recognized brands and the company diversified its business across
markets and product categories. Tata Motors also intends to build upon the internationally
recognized brands of Jaguar Land Rover. Further, TDCV continues to be the largest exporter
of heavy commercial vehicles from South Korea. The joint venture with the Thonburi Group,
Tata Motors (Thailand) Limited, is also focusing on increasing its geographical reach by
introducing Thailand manufactured pickup trucks in other Asian markets. In FY2018, Tata
Motors (SA) (Pty) Ltd (TMSA)caters to the domestic South African market sold 773 chassis in

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the South African market. Hence, the company's aggressive strategies for geographic
expansion and penetration would provide growth opportunities for the company in new
markets. In addition, it would diversify its business risk in the long run.

Opportunities - Launch of New Products

The launch of new and improved products at regular intervals may help Tata Motors retain
and attract new customers. Product launches are expected to serve the changing needs of
the company's customers and in turn attract a new customer base.In September 2018, the
company launched its compact SUV, Tata Nexon in Bangladesh, thus expanding its SUV car
portfolio in Bangladesh. In July 2018, the company launched an extensive range of small and
light commercial vehicles including consists of Tata Xenon, Tata Super Ace, SFC 407, LPT
407, LPT 613 & LPT 1116 Trucks in Paraguay. In the same month, the company launched
WINGER 15S Vehicle, designed for Tour & Travel Segment in India. In July 2018, the
company announced the name of its SUV christened as ‘Tata Harrier at the Auto Expo 2018.
In April 2018, the company launched TATA ACE GOLD – the original ‘Chotta Haathi’ to
increase its product portfolio in SCV segment in India. In April 2018, the company in
partnership with its distributor DRB-HICOM Commercial Vehicles Sdn. Bhd. (DHCV),
launched the Tata Super Ace and the Ultra range of commercial vehicles in Malaysia.

Opportunities - Growing Global Automotive Industry

The global automotive manufacturing industry has produced relatively consistent levels of
growth overall in recent years. Tata Motors stands to benefit from the positive outlook for
global automotive manufacturing industry. According to in-house research, the global
automotive manufacturing industry was valued at US$1,386.5 billion in 2017, and is expected
to grow at a CAGR of 3.6% during 2017-22 to reach US$1,657.1 billion by 2022. This growth
was due to improve global economic condition, which lead to grow the global automotive
industry by adopting newer technologies. Category wise, car manufacturing accounted for
45.3% share of total market value in global automotive industry, followed by motorcycle
manufacturing with 39% and truck manufacturing with 15.7% in 2017. In terms of geography,
Asia-Pacific accounted for 48.1% share of total market value in global automotive industry,
followed by Europe with 25%, the US with 17%, Middle East with 0.2%, and Rest of World
with 9.7% in 2017.

Tata Motors Limited - Threats

Threats - Intense Competition

Tata Motors' operates in a highly competitive automotive market. Such intense competition
could have a material adverse impact on the operations of the company. It faces competitive
pressure from automotive manufacturers, branded car firms, and retailers offering car
accessories. The company’s business depends on its ability to stimulate consumer demand
for its car and accessory products. Some of the key factors driving competition in the industry
include product design, pricing, after sales service, and effectiveness of marketing and
distribution channels product quality and features, innovation and product development time,
ability to control costs, reliability, safety, fuel economy, customer service and financing terms.
Its main competitors include AUDI AG, Fiat Chrysler Automobiles NV, Ford Motor Company,
General Motors Company, Groupe PSA, Honda Motor Co., Ltd., Isuzu Motors Limited,
Mahindra & Mahindra Limited, Mitsubishi Motors Corporation, Nissan Motor Co., Ltd.,
Porsche Holding GmbH, Renault SA, Suzuki Motor Corporation, Toyota Motor Corporation,
and Volkswagen AG.

Threats - Stringent Environmental Regulations

As an automobile company, Tata Motors is subjected 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 and compliance
costs may significantly impact the company's future results of operations. In particular, the US

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and Europe have stringent regulations relating to vehicular emissions. Jaguar Land Rover
business has significant operations in the US and Europe which have stringent regulations
relating to vehicular emissions. The proposed tightening of vehicle emissions regulations by
the European Union will require significant costs of compliance for Jaguar Land Rover.
Legislation is now in place limiting the manufacturer fleet average greenhouse gas emissions
in Europe for passenger cars starting 2012 and the US with their Federal Green House Gas
(GHG) Standard that apply to 2012-16 model year vehicles and issued regulations in 2012 for
tightened fuel economy and emissions standards for model years 2017-25. In addition, many
other markets either have or will shortly define similar greenhouse gas emissions standards
such as Canada, Mexico, China, Japan, South Korea, Switzerland, Brazil, Saudi Arabia,
Turkey, Taiwan, and Australia. In Europe, implementation of LCV carbon dioxide standards
would impact the Defender and a small number of Free lander and Discovery vehicles.
Furthermore, the Ministry of Road Transport & Highways and the Bureau of Energy Efficiency
in India finalized labeling regulations for the M1 category of vehicles, which includes all
passenger vehicles up to less than or equal to 10 seats. The label shows the combined fuel
economy of the vehicle, along with the ranking of fuel efficiency on a five star system. To
comply with the current and future environmental norms, the company could incur substantial
capital expenditure and research and development expenditure to upgrade products and
manufacturing facilities, which could affect the cost of production and results of operation.
Hence, new or changing laws, regulations and government policies regarding increased fuel
economy, reduced greenhouse gas and other emissions, vehicle safety and taxes may have
significant impact on the Tata Motors’ business.

Threats - Increase in Input Prices

Input prices largely influence the price of vehicles sold by the company. In FY2018 and
FY2017, consumption of raw materials, components and aggregates and purchase of
products for sale constituted approximately 63.2% and 61.5% respectively, of the revenues of
Tata Motors. Prices of commodity items used in manufacturing automobiles, including steel,
aluminum, copper, zinc, rubber, platinum, palladium, and rhodium have become increasingly
volatile in recent years. Further price movements would closely depend on the evolving
economic scenarios across the globe. While the company continues to pursue cost reduction
initiatives, an increase in price of input materials could severely impact its profitability to the
extent such increase cannot be absorbed by the market through price increases and/or could
have a negative impact on the demand. In addition, because of intense price competition and
the company's high level of fixed costs, it may not be able to adequately address changes in
commodity prices even if they are foreseeable.

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