By on February 2, 2009

India’s Tata has gone from darling to dumpling in just a year. The high profile Nano People’s Car project still hasn’t gone into production, and the $2.3b purchase of Jaguar and Land Rover now seems spectacularly ill-timed. Business Week recently covered the story with these great opening notes: “What a difference a year makes.”  India is in the throes of its own economic crisis; thanks to high inflation, high interest rates, tight credit markets, excessive corporate debt and a suddenly spending averse middle class. Pretty much like most places in the world, but a little different.

The Nano project crashed into a virtual brick wall last year when local protests caused Tata to abandon the nearly completed Nano production facility; after investing $350m . . . and before building any saleable cars.

Meanwhile, Tata’s big dog status in India’s commercial vehicle market (over 60 percent share) became a liability when that market plunged precipitously (40 percent!). India faces its first manufacturing and services exports decline in modern history.

Government spending, however, is being ramped up to soften the blow to Tata. Ergo: “On Wednesday, the company bagged a $450 million, 12-year contract to build and maintain buses for the city of New Delhi, which is in the midst of upgrading its infrastructure.”

Sounding familiar yet?

While all that is going on at home, the expensive short term bridge loans used last year to temporarily finance the Jaguar/Land-Rover purchase are coming due with no real prospects for replacing them. Although the UK has announced loans to keep the British auto industry afloat, it isn’t clear if Tata will be able to get its mitts on any of that money to pay down those bridge loans.

The usual unnamed sources at Tata are said to have said: “Of course, we plan to apply for as much help as we can get under that program, but the indication we’ve gotten from the [government officials] there is that the loans are intended to help keep production lines running, not directly pay off accumulated debt.”

The rapid expansion of Tata on the backs of a booming home market, executive enthusiasm and easy credit markets has put the company in dire stress. But, hey, Tata can take some small comfort that it is in better shape than outsourcing titan Satyam Computer Services, which has seen three executives (so far) carted off to jail in a billion dollar accounting scandal.

Compared to that, Tata is in good shape. Rut row.

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24 Comments on “Tata Motors. Profile of an Indian Car Company in Trouble...”

  • avatar

    I think M&M is in a better position to export here than Tata, and as a runner up in the market they have room to grow.

  • avatar

    The Tata Nano is a 52 MPG (city) and 61 MPG (road) car.

    How can Tata even remotely be in trouble?

    I keep hearing that if Detroit would only produce “green” cars, then all of their problems would magically be whisked away.

    The Tata will be out before the Volt…

  • avatar

    “Green” car does not necessarily equal “good” car. That stands for Tata AND Detroit…

  • avatar

    If only Tata could get onto “Who Wants to Be a Millionaire” and win.

  • avatar

    The Nano isn’t being made would be problem #1. To misquote Henry Ford, You don’t make money on the cars you’re going to build.

  • avatar

    England tells Jaguar scat, or is it Tata?

  • avatar

    toxicroach, “You don’t make money on the cars you’re going to build.”

    You might mention that to GM, too.

  • avatar
    Jeff Puthuff

    no_slushbox, I’ve not seen the movie. Is it 1 million rupees or dollars?

  • avatar
    John Horner

    “The Tata Nano is a 52 MPG (city) and 61 MPG (road) car. How can Tata even remotely be in trouble?”

    Because the factory they built to build the Nano is never going to open, and now they are scrambling to figure out how to move the factory.

  • avatar
    Geo. Levecque

    I can see that Tata Motors will soon not be able to get out of the hole when they purchased those two British Brands, as they are not British anymore, why should the UK Taxpayer pay for them to make Cars? Maybe someone from the UK could comment on this please.

  • avatar

    Jeff Puthuff:

    I haven’t seen it either, I’ve just read a review. After learning that the whole plot was just getting on “Who Wants to Be a Millionaire” I decided it wasn’t worth watching. It could be the British version, in which case it would be 1 million Pounds, but even that isn’t what it used to be.

  • avatar

    It is yet to be proven if the Nano can achieve those lofty mpg figures and still meet normal western expectations for crash-safety and emissions …

  • avatar

    It’s 20 million rupees and the whole movie is about flashbacks. I lost interest an hour in, but it was nice.

  • avatar

    This really sucks!
    I was really looking forward to seeing the Nano go into production.
    Even though it may not have met it target price,as an enthusiast,I was looking forward to the development of the car from its concept.
    And PLEASE don’t blame America for this failure!
    Indian car
    Indian Exec`s
    Greed and pompousness is universal!
    Maybe only a ‘nut’ like Henry Ford could could really do it?
    Food for thought…..

  • avatar

    Tata was already in trouble when the “local protests” stopped the factory. Some said the local protests were most welcome. The second plant never materialized. Tata’s (mis-) fortunes are built on steel. Steel went from boom to bust in Summer of 2008. Nuff said.

  • avatar
    Mike Stevens

    I think the Nano is an admirable, extremely ballsy attempt at redefining the automobile in a very Indian way. No, it’s not a car in the sense that you and I know them, but it does have the potential to mobilize and accelerate the economic growth of one of the world’s largest societies. Too bad that the current economic climate will make the Nano an almost impossible proposition anytime soon, and especially difficult to price at the level touted to the world. Too bad for Tata, which could have used what they learned with the Nano and other homegrown offerings (coupled with the engineering know how they will learn from owning Jag and Land Rover) to eventually develop a credible, world-competitive high-volume car. But, maybe it’s good news for GM and the other hometown companies that another car company with the potential to be like Hyundai someday isn’t going to reach adolescence anytime soon in India. As Toyota, Nissan, and (more recently) Hyundai have proved, humble beginnings don’t necessarily mean a humble future.

  • avatar
    Ralph Kinney Bennett

    I agree with Mike Stevens that the Nano is a heroic effort by Tata to bring an affordable car to the Indian masses. But Tata is long past its “humble beginnings.” It is and has been a major automotive industry player in India and beyond. Its trucks and industrial vehicles are huge in Asia and its amazingly agile and versatile little half-ton pickup truck, the Ace, is a phenomenon among Indian farmers and small businessmen. Ratan Tata, the chairman of Tata and the dreamer behind the Nano is, indeed, a bold and resourceful man. Don’t count Tata out yet. The bigger problem, in the dim background at the moment, is the powerful forces within the Indian government who are anti-car and very uneasy about a vehicle other than a motor scooter or a motorized rickshaw coming within reach of ordinary citizens.

  • avatar

    I’m not so sure inflation will continue to be a problem in India. Most of the inflation was due to a fast growing economy. With the global recession there’s not that much growth in the BRIC economies.

    The problems w/ the Nano plant were primarily due to political maneuvering. The local state government (Communists, btw) wanted the plant but their opposition saw it as a wedge issue.

  • avatar

    I think M&M is in a better position to export here than Tata, and as a runner up in the market they have room to grow.

    That’s because Mahindra has some light trucks and SUVs that are closer to the needs of this market than anything Tata currently sells, though Tata’s Ace commercial vehicle might make sense as a delivery truck in Manhattan.

    Either way, I think there will be an Indian vehicle for sale in the US before a Chinese one.

  • avatar

    Jaguar scat

    They must use a very large box of kitty litter.

  • avatar

    So what was the protest about that managed to close a factory that was so close to completion? Did they build on top of someone else’s property? Was it built on a sacred site? Or was it trouble makers looking for a payoff to “go away”.

  • avatar

    The protesters said that tenant farmers were evicted.

    My impression is that the protests had more to do with the political agenda of the Trinamool Congress party than with protecting tenant farmers.

  • avatar

    Geo. Levecque asked “why should the UK Taxpayer pay for them to make Cars?”

    Because those cars are STILL built in the UK, with (some say) UK workers. If Tata has to close those plants, the UK will be paying anyway with unemployment and lost wages in their communities.

    I could be way off base here but aren’t the Rover engines built in Germany? Maybe the Germans will fess up some cash too? Time to go a beggin’…

  • avatar

    I admire Mr. Tata for his determination to put his people on wheels, but the Nano and its inevitable competition would have amounted to a climatological apocalypse. Assuming you believe in AGW, that is.

    It would be better, from a resource consumption standpoint, to simply wave a magic wand and turn every new car on sale in the United States into an Escalade ESV.

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