By IANS
London : Tata is expected to invest up to 1 billion pounds ($2 billion) in Jaguar and Land Rover over the next four or five years, a newspaper reported Thursday, a day after the Indian industrial group bought the iconic British brands.
Tata paid $2.3 billion to acquire the prestigious marques from American carmaker Ford Motor. The new investment will honour Ford’s business plans and lead to two new models for both brands, the Daily Telegraph said.
Most British commentators and auto industry watchers have welcomed the deal announced Wednesday after months of speculation and delicate negotiations. However, they have also pointed to some of the difficulties lying ahead for Tata.
While the deal was good for Ford, some 16,000 directly-employed workers, British brand prestige and the Midlands region where factories are located, the gains for Tata were “harder to fathom”, The Times said in a business comment.
With niche products not lending themselves to mass production, Tata may be forced to bring production to India at some point, analysts said.
“If there is a single lesson from Ford’s ownership, it is that these businesses cannot be successfully scaled up. Any attempt to boost sales beyond a certain point dilutes the brand. Niche businesses they are going to remain. There may be some technology crossover back to the volume car business in India. Ultimately production may be pulled back to low-wage India,” the paper’s investment editor commented.
“It would be foolish to underestimate Tata, which grapples with businesses as diverse as tea, steel, hotels and financial services. Its conservative, paternalistic and long-term philosophy has paid dividends in the past. But it has much to do to persuade sceptics this is not a vanity purchase.”
According to some industry watchers here, Tata may want to scale up production of the two brands to about a million in the long term to take on other luxury cars such as Audi, BMW and Mercedes.
But Lord Bhattacharyya, professor at Warwick University and an informal adviser to Tata, told the Times he doubted that the two brands would ever be made outside Britain.
“These are niche, iconic models and I would expect them to remain niche. I think 350,000 to 400,000 is as far as Tata would want to take volume. The technology is here, the research and development is here. I think the manufacturing will remain here,” he said.
Many commentators have dismissed fears that Tata’s ownership means the end of the road for British carmaking, pointing out that most BMWs and Mercedes are made in South Africa and that Jaguar and Land Rover have survived ownership by Ford, which is an American company.
“Perhaps the biggest worry for JLR’s new owner is the prospect of tough new carbon-emission laws in Europe and California that will penalise makers of thirsty, high-performance vehicles,” said The Economist.
“JLR is particularly vulnerable. Even Mercedes and BMW make small cars that will help offset their gas-guzzlers when the new rules, based on fleet-average emissions, come into force. Of course, if Tata could find a way to sell its Nano in Europe and California, that would be one synergy well worth having.”