93
Notice
Directors’ Report
(69-103)
Management Discussion & Analysis
Corporate Governance
Secretarial Audit Report
or be forced to restrict product offerings drastically to remain in
compliance. Moreover, meeting Government mandated safety
standards is difficult and costly because crash worthiness standards
tend to conflict with the need to reduce vehicle weight in order to
meet emissions and fuel economy standards.
Intensifying Competition:
The global automotive industry is highly
competitive and competition is intense in view of the continuing
globalization and consolidation in the worldwide automotive
industry. Competition is especially likely to increase in the premium
automotive categories as each market participant intensifies its
efforts to retain its position in established markets while also
developing a presence in emerging markets, such as China, India,
Russia, Brazil and parts of Asia. The factors affecting competition
include product quality and features, innovation and time to
introduce new product, ability to control costs, pricing, reliability,
safety, fuel economy, environmental impact and perception thereof,
customer service and financing terms.
The Company faces strong competition in the Indian market
from domestic as well as foreign automobile manufacturers.
Improving infrastructure and robust growth prospects compared
to other mature markets, have attracted a number of international
companies to India either through joint ventures with local partners
or through independently owned operations in India. International
competitors bring with them decades of international experience,
global scale, advanced technology and significant financial
resources. Consequently, domestic competition is likely to further
intensify in the future.
Exchange and interest rate fluctuations: The Company’s operations
are subject to risk arising from fluctuations in exchange rates with
reference to countries in which it operates.
The Company imports capital equipment, raw materials and
components from, manufactures vehicles in, and sells vehicles
into,
various countries, and therefore its revenues and cost have
significant exposure to the relative movements of the GBP, the
US dollar, the Euro, the Chinese Renminbi, the Russian Ruble, the
Japanese Yen and the Indian Rupee.
In particular the Indian Rupee decline significantly relative to
the US dollar during FY 2013-14. Moreover, the Company has
outstanding foreign currency denominated debt and is sensitive
to fluctuations in foreign currency exchange rates. The Company
has experienced and expects to continue to experience foreign
exchange losses and gains on obligations denominated in foreign
currencies in respect of its borrowings and foreign currency assets
and liabilities due to currency fluctuations. JLR has outstanding
USD denominated debt and is sensitive to fluctuations in foreign
currency exchange rates.
The Company also has interest-bearing assets (including cash
balances) and interest bearing liabilities, which bear interest at
variable rates. The Company is therefore exposed to changes in
interest rates in the various markets in which it borrows.
Although the Tata Motors group engage in managing our interest
and foreign exchange exposure through use of financial hedging
instruments such as forward contracts, swap agreements and
option contracts, adverse interest rates and a weakening of the
Indian rupee against major foreign currencies may have an adverse
effect on cost of borrowing, which could have a significant adverse
impact on the Company’s results of operations.
New products, emissions and technology:
The competitors
can gain significant advantages if they are able to offer products
satisfying customer needs earlier than the Company is able to and
this could adversely impact the Company’s sales and results of
operations. Unanticipated delays or cost overruns in implementing
new product launches, expansion plans or capacity enhancements
could adversely impact the Company’s results of operations.
Customer preferences especially in many of the developed
markets seem to be moving in favour of more fuel efficient and
environmentally friendly vehicles. Further, in many countries there
has been significant pressure on the automotive industry to reduce
carbon dioxide emissions. In many markets these preferences are
driven by increased Government regulation and rising fuel prices
and customers environmental considerations. The Company’s
operations may be significantly impacted if the Company
experience delays in developing fuel efficient products that
reflect changing customer preferences, especially in the premium
automotive category. Further a deterioration in the quality of the
Company’s vehicle could force it to incur substantial cost and
damage its reputation.
