Mr Jagdish Khattar sounded very cynical about Tata's buyout of Jaguar and LandRover in today's interview on CNBC TV18. I mean he promptly asked a very enthusiastic nut of an editor from OVerdrive, 'if Jaguar have a very good model with the launch of the XS model, why is Ford selling it in the first place? And why is China not venturing to buy it? They are more aggressive players than us'
There was no clearcut answer to his question and you could see a smirk on Udayan and Khattar's faces. We all know that Khattar has been the most vocal opponent of the Tatas and would love to see Ratan stumble. Even the small one lakh Rupee car faced major opposition from the Maruthi lobby.
I don't know about the 1 lakh rupee car, but would bet that the one lakh car if possible would only be from Tata, none else.
Jaguar and Landrover fit into Tata's scheme of things. They are not looking for growth in the European markets. They are looking at making a name as a quality player. The product appreciation, patents, existing technologies and research advantages would result in a growth for Tata's low end products too as with any quality player. Remember Onida?!? BPL? That's been their gameplan all along. Now the only point which counts here is if they can make it profitable. Once it turns profitable, they can then focus on importing these marques to Asian markets ( China and India)
I'd like to point out here that the major factor in the price of a car is steel. Mr Khattar himself will vouch for the fact that a 10 % hike in the prices of steel (by Tata) would result in a corresponding rise in the prices of their cars. Almost 60 to 80 % of Maruthi's steel components is sourced by its ancillary units from Tata. And remember that Tata has already taken over Corus. If you have noticed, they have even spent 2.3 billion (a similar amount to the purchase of the auto marks) in upgrading the Corus plants to be green compliant. Corus would also be more profitable than European ones since they also source cheap ore from Asian mines.
Steel prices are already at an alltime high. What Tata will definitely do is cut down costs of Corus and also Jaguar and Landrover. In addition, a reduction in steel prices to its ancillary vendors as in India would definitely affect the profitability of Landrover and Jaguar. Remember that the cost of a car is labor and steel. These together add up to around 60 % of the costs. Now Mr.Khattar, does Maruthi have this steel advantage?
