Executive Summary: Tata Motors' Expansion into the US and other Foreign Markets

The task of expanding an Indian brand of automobile little-known to the US market into the same market requires corporate diligence and heavy capital investment. The research that follows analyzes all aspects of the introduction of Tata’s smallest and cheapest car, the Nano, to the US auto market. The financial analysis contained in Exhibits 1 through 7 details the rationale behind Tata establishing itself in the US market with a network for 40 car dealerships. Additionally, all Nano vehicles will be sourced directly from the current Nano plant in Gujarat State, India. Importing all cars in the first several years will delay the prospect of building an expensive auto manufacturing plant in North America.

*

A detailed supply chain regarding moving completed Nano cars from the factory in India to dealerships across the US is also included. This process will involve using rail, truck, and shipping partners to transport the vehicles half-way around the world. This type of supply chain is lengthy and includes many risks. The largest transportation-related risk concerns adverse whether events that may affect shipping. The greatest strategic risk for Tata Motors is that US consumers will not be as enthralled with the foreign brand as expected. Rising materials costs and potential labor unrest also pose threats to Tata’s global success. Regardless, Tata must make a concerted effort to establish its long-term brand presence in the US using the steps listed above. The unique nature of its vehicles helps make Tata poised to succeed early on in the US.

Other posts on Tata Motors related to US expansion:

Executive Summary: Tata Motors' Expansion into the US and other Foreign Markets
Tata Motors Recent Financial Performance and Customers
Method and Rationale for Tata Motors' Expansion into the US
Demand Forecast for the Tata Nano in the US
Tata Motors Expansion into the US: Retail Pricing Forecast
Tata Motors Expansion into the US, Build Dealerships vs. Dealer Network
Tata Motors Expansion into the US, Import vs. Auto Mfg Plant
Works Cited for Tata Motors Expansion into US

*Image obtained from "PajamaDeen."

Tata Motors Recent Financial Performance and Customers

Financial Performance
The financial results of Tata Motors have been spotty in recent years due to the worldwide economic crisis. As an ADR listed on the New York Stock Exchange, Tata is required to file Form 20-F each fiscal year reporting the company’s results of operations. Per this form, Tata earned revenue of $20.9 billion on cost-of-sales of $13.9 billion for the 12 months ending March 31, 2010. These figures present a sharp increase from 2007 results, which shows revenue of $7.47 billion on cost-of-sales of $5.93 billion. Accordingly, the gross profit margin has increased from 18.4% in 2007 to 30.9% in 2010. This enhanced top-line efficiency has clearly come at a price, however, as a look at Tata’s balance sheet reveals skyrocketing debt as an absolute figure. Total debt increased from $2.34 billion in 2007 to a whopping $11.2 billion by March 31, 2010. Next, a look at profit can help determine if this leveraging has paid off for the company. Net income for the past three years shows no trend, as the company earned $495 million and $857 million in 2008 and 2010, respectively, but booked a net loss of $1.35 billion in 2009. Tata took on little debt to acquire the Land Rover and Jaguar brands in 2009, but soft markets for luxury goods since then have caused this segment to underperform. This, coupled with depressed discretionary consumer income in the past few years and high interest payments on long-term debt, have led to Tata’s lackluster financial results.
Customers
Tata sells a variety of passenger vehicles in India, including models named Nano, Indica, and Vista. Further, Tata’s most popular commercial vehicles (light trucks) include the Ace and Prima. The fact that the company sells a wide variety of personal, business, and military-use vehicles is significant as it indicates Tata Motors’ extensive customer base. Domestically, Tata sells products to individual consumers, businesses of all sizes, and the Indian government. Internationally, Tata retails similar vehicles with slight modifications, but generally to the same customer base: value-conscious consumers.

Other posts on Tata Motors related to US expansion:

Executive Summary: Tata Motors' Expansion into the US and other Foreign Markets
Tata Motors Recent Financial Performance and Customers
Method and Rationale for Tata Motors' Expansion into the US
Demand Forecast for the Tata Nano in the US
Tata Motors Expansion into the US: Retail Pricing Forecast
Tata Motors Expansion into the US, Build Dealerships vs. Dealer Network
Tata Motors Expansion into the US, Import vs. Auto Mfg Plant
Works Cited for Tata Motors Expansion into US


All figures have been converted from Indian Rupees to US Dollars using a rate of 44.4 rupees per 1 dollar, the exchange rate on March 31, 2011.
"Tata Motors Ltd. ADR Annual Report Form 20-F." Morningstar, 31 Mar. 2010. Web. 31 Mar. 2011. .
"Tata Motors : Products & Services : Commercial Vehicles." Tata Motors : Home. Web. 31 Mar. 2011. .