5/1/2008 | 3 MINUTE READ

Insider: A New Frontier

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While most observers have been focused on China as the next potential juggernaut to further erode America's automotive market, an unexpected force has emerged.


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Tata Group-formed in Chinchpolki, India, in 1869 at a textile mill by Jamsetji Tata-officially took its place on the global automotive stage last month when it acquired Jaguar and Land Rover from Ford for $2.3-billion, less than half of what Ford paid for the brands in the late 1990s. The Indian company, which has been building mass-market passenger vehicles for several decades, is about to embark on one of the most ambitious plans to resurrect these struggling brands-Jaguar sales were down more than 33% worldwide during the first two months of 2008, while Land Rover sales were running 13% lower in the U.S. and 7.8% in Europe-and the rest of the world is sure to watch closely to see whether Tata will ride this gamble to success or detrimental failure.

Why is Tata's move so important? It is the first of the next wave of emerging market automakers to play in the U.S. market with a brand that doesn't sell a vehicle priced below $35,000. No $99 down/$99 per month deals here. It will be a significant challenge for Tata, known for building economy-minded vehicles (the company will launch its $2,500 Nano microcar later this year in its domestic market), to meet the requirements of luxury vehicle buyers, who aren't likely to warm up to cheap interiors and nagging quality. One could contend, however, that Jaguar never really had a good quality reputation even as Ford tried to revamp its image as a reliable, sporting English brand.

Likewise, trying to sell luxury gas-guzzling SUVs in an era where gas prices are not likely to subside will be daunting. Sure, Land Rover has smaller SUVs planned, but those vehicles will likely still lack the fuel efficiency even the adventurous millionaire will seek. Then there's the image side-Land Rover will have to quickly reposition itself as a green luxury SUV marque or it will risk losing customer base, most of whom want to be seen as leaders when it comes to social trends, and we all know green is going to be king for many years to come.

Then there's the investment-Tata is going to have to spend billions to keep Jaguar and Land Rover relevant. Jag has a slew of new products in the pipeline, as does Land Rover. Those vehicles cannot be based off the Tata Indica or any other entry-level mass market platform. There's little doubt that Tata will have to seek a partner to help offset some of these development costs. One possibility would be for it to link up with Fiat's Ferrari and Maserati brands to share platforms, engine architectures and electronics. Rumor has it that Ferrari is looking to enter the sedan market to go against Porsche's upcoming Panamera, and that could make a decent foundation for a new high-end Jag sedan. Maserati is also looking for an SUV to add to its stable, along with Alfa Romeo-another member of the Fiat family-and that would fit nicely under Land Rover sheetmetal. Manufacturing also provides an interesting opportunity for Tata. Here, again, the Indian and Italian automakers can come together to share manufacturing assets, building their platform sharing vehicles in the same facility, including a possible plant in the U.S.-Fiat has said it is interested in exploring production in the U.S.

Tata has an opportunity to show the world that the next generation of automakers can do what needs to be done to play effectively on the world stage, all the while leaving egg on the face of Ford. The ingredients for success are there, if Tata's management sticks to a roadmap with unwavering commitment by not letting personalities, cultures and minor economic hiccups cause a distraction, which has happened to a number of automakers over the years, with DaimlerChrysler being the poster child for this.

Failure to follow this roadmap is likely to leave a significant question mark over whether any emerging market automaker has what it takes to compete against the established leadership, although I use that term loosely. It would also spook others who are interested in jumping onto the global stage, which will only leave those in Detroit and Stuttgart saying "I told you so," and that's a smugness we don't need.