Landie Ok Please

Land Rover could be a good fit for the company's portfolio but what Jaguar brings to the table is not clear.

Even as it readies to roll out a Rs 1lakh car, Tata Motors is going upmarket.The Rs 27, 396 crore auto major which makes both commercial vehicles and cars, has thrown its hat in the ring for US car maker Ford Motor Company's iconic brands, Jaguar and Land Rover. Analysts say the two could fetch Ford anywhere between $ 1.5""$2 billion, including a control premium. The sale ""which is reportedly a package deal "" will help Ford, which is reeling under losses of $12.7 billion in 2006, but reports have it that most buyers are only keen on the Land Rover.

That's because the Land Rover is a profitable brand while the Jaguar, though a classy car isn't selling enough. With sales down 32 per cent in 2006 in the United States, its biggest market, the Jaguar lost $715 million last year and could lose about $500 million this year. Under the circumstances, it's hard to see how the Tatas are going to be able to revive sales. As industry watchers say it's not about existing models but the next three models that need to be developed to keep the brand alive "Serious amounts of money need to be invested in research and development if the brand attributes are to be maintained,"observes a consultant.

Adds another, "The reality is that even Ford has not able to realise synergies despite having platforms which were shared with some Jauguar models. And the Tatas don't have a platform in the luxury segment." Ford bought Jaguar for $2.5 billion in 1989 and has reportedly spent another $10 billion nurturing the brand. Will it be possible to shift the production to India to take advantage of lower costs ? Unlikely, say experts, because it will not be easy to make components of the same quality here and the car simply won't have the same finish. Even if the Tatas inherit the R&D, analysts believe it will be hard to transplant the knowledge in India or use it to make other vehicles, because the engines are completely different. Moreover, if there were a large enough market in India for the luxury car, it might have made sense but that isn't the case.If the Tatas do buy Jaguar, they need to need to ensure that the "Britishness' of the brand, a key selling proposition, is retained.

The acquisition of Land Rover, on the other hand, which was bought by Ford in 2000 from BMW for $2.73 billion "" could be a good play on the global utility vehicle market. With sales of 1,92,500 vehicles in 2006, it's a far more straighforward business to run than Jaguar. Moreover, the competition such as America's Jeep and Japan-designed off road vehicles, are not perceived to be of the same quality. The Tatas will have access to state of the art technology, which will give them a competitive edge.

More important, there could be a reasonably good demand for the vehicle in India as also other emerging markets. Says an industry analyst, "With the help from the engineering and R&D set- up of Land Rover, it might be possible for the Tatas to make utes in India catering for the less-developed markets." Also, unlike in the case of the Jaguar which has a premium positioning, it might be easier for the Tatas to leverage the distribution of Land Rover.

In fact, one of the reasons why Fiat made an attempt to acquire Land Rover was that it wanted to use the dealer network to re-launch the Alfa-Romeo brand in the US. Fiat later backed out because it was worried, at the time, that its long-term credit rating would be hurt. Since the Jaguar may be difficult to sell by itself, Ford may want to bundle it with the Land Rover. Perhaps, Tata and Fiat,which are already working together in India, make a joint bid for the two. That way the brands and assets could be utilised optimally. A win-win situation you could say.