Our External Environment

Several markets around the world have been posting record levels of vehicle demand in the last few years, in the aftermath of recovery from the global recession. But this demand varies from region to region. Demand in the US has plateaued; the European market is on tenterhooks as there still is a lack of clarity on the impact of Brexit, added with diesel uncertainty, UK taxation and market cyclicality. On the back of a strong GDP growth and a strong demographic support, along with consistent consumer demand, the Chinese automotive market is growing.

During 2017-18, the new car market in the UK declined -5.1%, with registrations by business, private and fleet buyers all being down by -29.8%, -7.1% and -2.1%, respectively.

The volume of car sales in the US fell 1.8% for the first time in eight years in 2017.

In 2017, China’s Light Vehicle (LV) market rose by 2.3% or 0.63 Million vehicles to a record 27.6 Million unit. Although positive, this was the slowest growth in over a decade.

The Government of India’s support for infrastructure growth and a y-o-y increase in India’s industrial production at 4.4% (in March 2018) are all supporting the strong demand.

A robust global strategy is in place to navigate through the challenging operating context.

Globally, automobile manufacturers are making huge investments in R&D for innovation such as autonomous driving and electrification that represent a huge opportunity to change a hypercompetitive playing field. However, the global automotive industry is moving towards ACES vehicles and this technology shift requires huge investments from development to testing. The outcomes of these investments remain largely undetermined. As a result, today’s business models would have to change to capture a reasonable return on investments in new technologies.

An important factor that will determine the success of these innovations will be their affordability.

In 2017, the automotive industry’s R&D expenditures are estimated to amount to ~$98.2 Billion.

Stepping up our investments in research and innovation will offer a number of opportunities for our businesses. At the same time, we will have to be conscious of maintaining our cost leadership in the market.

Emission norms are growing stricter, with pollution control being the need of the hour. Further, those such as BS VI are on the anvil earlier than expected. This changing regulatory landscape is adding pressure on automobile manufacturers to rethink the way forward to be able to produce upgraded,v rules-compliant vehicles.

The Government of India has decided to switch over directly from BS IV (equivalent to EU 4) to BS IV (equivalent to EU 6) auto fuel by April 1, 2020.

China requires all LVs to adhere to tougher new China VIa emission standards by the middle of 2020 and China VIb emission standards by 2023.

Tata Motors has been gearing up for the change though the right technology adoption, manufacturing innovations, testing and validation process improvements. Overall, it is fully prepared for a seamless transition to the new regime.

Significant uncertainty exists in the business world, with respect to how the relationship between the UK and the European Union (EU) will unfold. As a result, substantial doubt prevails over the political and economic future of the UK and the legal structure applicable to companies that have a business presence in the country.

The ongoing transitional period ends on March 29, 2019.

Pending the determination of the terms of the future relationship between the UK and the EU, uncertainty over the former’s right to access the single EU market, EU’s customs area and global trade deals may have an impact on our European business.

Safety, environmental sustainability, brand credibility and cost are the major factors that help determine whether the customers will accept the technology value additions in our products.

The UK recorded more than 135,000 new registrations of plug-in cars by the end of January 2018, demonstrating a possible shift in consumer preferences.

Product innovation at Tata Motors is increasingly integrating cost-efficient technologies with the highest standards of safety in the PV segment and focussing on higher levels of process improvement in the CV segment. Tata Motors is improving its brand image to connect with the new-age customer through experiential marketing, revamping its network coverage and leveraging its present architecture to expand its product portfolio, among others. At the same time, JLR is focussing on customer aspirations of environment-friendly EVs, shared mobility and autonomous vehicles.

There is a growing trend of transportationon- demand services in many countries across the world. Shared mobility may also cause the consumers to rethink on vehicle ownership and opt for its lower, usage-based cost model. Customer preferences continue to shift towards this, leading to increased activity in fleet and load aggregations.

According to a recent survey in the Asia- Pacific region, millennials are 49% more likely to use shared-mobility solutions.

While the concepts of vehicle ownership are changing worldwide, this trend is not expected to be adopted quickly in India, where car ownership still holds aspirational value. This offers a clear opportunity for our automotive business in the country. Catering to markets in the US, UK, Europe and China, JLR is already focussing on ‘on-demand’ transportation and has forged partnership with Lyft and with its subsidiary In Motion, is making shared and autonomous mobility a reality.

From July 1, 2017, the Indian Government introduced a unified tax regime, known as the Goods and Services Tax (GST). As a result, the removal of inter-state checkpoints has led to lower costs associated with supply chain. Also, warehouse consolidation is leading to greater overall efficiency, resulting in reduction of overall operational costs.

Additionally, the re-modelling of warehousing in a post-GST economy is propelling the prominent trends in the country’s logistics sector, such as a shift to the hub and spoke model, introduction of robotics, demand for better-quality warehouses as well as back-end and frontend integration of supply chain management. The base rate for the GST on different PV and CV has been set at 28%, besides a cess (1% to 15%, as the case may be), marginally impacting the end prices.

Apart from this, the Government of India’s enhanced focus on infrastructure growth, e-commerce and a renewed impetus to the rural economy are all factors that are shaping the opportunity landscape for the automotive sector.

TML is confident that the Indian economy’s inherent resilience will help it overcome the initial teething problems faced due to the GST implementation; the Company is positive about the future of its pan-India operations. The Company is also prepared to tap the rural market, which forms 35% of the total market.