Reports that two Indian vehicle manufacturers — Tata Motors and the Mahindra group — are separately planning to bid for British auto companies Jaguar and Land Rover are testimony to the global power now exerted by the Indian economy. The two companies, which US auto manufacturer Ford is selling off for $1.5 billion as part of restructuring plans to put itself back into profit, are icons of wealth and luxury. It is a bitter deal for Ford, which bought Jaguar in 1989 for $2.5 billion and has invested a fortune on it since and acquired Land Rover for $2.7 billion from BMW in 2000, but a great one for either Tata or the Mahindra group. The two marques would be jewels in theirs and India’s burgeoning economic crowns, whichever of the two were to acquire them.
The possibility of such a deal leaves the financial world breathless. Indian business is plowing through corporate Europe and America as if in a supermarket, picking up anything it wants — steel, IT, pharmaceuticals, vehicles — whatever has a “For Sale” sticker on it. And some that do not! Tata’s coffers in particular seem to be bottomless. At the beginning of the year, its steel subsidiary bought Anglo-Dutch steelmaker Corus for $13.7 billion. It was India’s biggest ever foreign takeover. Last year saw rival Indian steelmaker Mittal triumph in a protracted battle to seize European producer Arcelor against its own will, making for what is now the biggest steel company in the world.
What else of Western manufacturing is going to be scooped up by Indians as they flex their financial muscles? Ford are expected to sell off its other major European auto company, Swedish-based Volvo. It would not be surprising if Tata and Mahindra set their eyes on that as well. One place the Jaguar and Land Rover report will not be appreciated, however, is in the UK. It will have sent shivers down the spines of the combined 19,000 British employees at the two companies. They are bound to wonder whether production would continue in the UK or be transferred to India. If the latter, then they are out of a job.
It makes financial sense to move production lines, if not all the works then at least part. Labor costs in India are far lower — and finance is one of the main reasons why Ford is selling. It would bring down costs dramatically. Despite its investment, it has not been able to make a profit from Jaguar although it has from Land Rover. Moving assembly lines is no problem; China moved the complete Rover assembly line from Birmingham to Nanjing in 5,000 containers last year after that British vehicle manufacturer was bought out. As for worries about Indian quality control, they are a thing of the past. If Mercedes can manufacture happily in India, why not Jaguar?
Just as Tata and Mittal were betting that the price of steel would continue to rise in a steel-hungry world when they honed in on Europe’s steel business (and they were right), so Tata and Mahindra are betting that the market for luxury vehicles is going to grow, not so much in Europe and the US as in the new lucrative markets — India itself, Russia, China and the Far East. That too seems a certainty. India already has the world’s largest middle class and new billionaires are springing up faster there than in any country in the world other than the US. The wealthy always want luxury.
