Tata the industrial conglomerate that predominates at the heart of India's resolution in the Global Business stage. For nearly two eras the TATA Group has built multiple industries in India and remains a market leader in most of them. You probably must have heard about the Tata Motors car division but you will soon discover that their reach extends notably exceeding that one subsidiary.

We'll see how 3 generations of TATA businessmen have established one of India's most successful companies.

History before the beginning of Tata

The tale of Tata starts during the reign of the British Empire. India was a huge exporter of cotton back then, but the brutal regimen of the British East India Company left little room for local entrepreneurs to develop. 

The poor treatment by the British eventually resulted in a revolt against them in 1857 which ended the power of the British East India Company and replaced it with the British Raj. Now compared to its ruthless predecessor the Raj was much more focused on keeping the peace. The Raj didn't exploit the Indian population quite as harshly and it also invested a lot of money for example in building India's first Railway. 

Jamsetji Tata Era

Of course, at the end of the day, the British Raj was still an oppressive colonial power but at least it finally gave the local population the economic opportunity to develop themselves. Because India was an exporting land the first Indian entrepreneurs came from exactly that sector and one of them was Jamsetji Tata. He was the son of an exporter in Bombay(Mumbai) and he graduated in 1858 it was the precise opportunity to take benefit of the economic reformations of the British Raj.

Because his father's export business was developing in 1859 Jamsetji Tata went to Hong Kong to develop a subsidiary there and upon seeing the share scale of British trade there, he realizes that the Tata export business must truly have Global potential. Over the next decade, he could visit Japan, China, and Great Britain building a network of distribution for his father's business.

Who Started Tata Industries?

Jamsetji Tata ultimately formed his own exporting business in 1858 and using the money he started manufacturing textile mills (Empress Mills in Nagpur in 1874) of his own effectively conceiving a vertically combined business.

When did Jamsetji Tata Start?

From the very start, Jamsetji Tata's perspective was to find the best practices used across the world and bring them to India. In his textile mills, he introduced policies that were practically unknown to most of India like granting sickness perks and pensions to his employees. But Jamsetji wasn't satisfied with just the textile industries, he witnessed wonders in Industrial Revolution that had been created in Europe and he aspired to recreate them back home.

He commenced working on the Steel production plant in 1901, modeled after the one seen in Germany(Krupp Steel). Even more ambitious was his Hydroelectric plant motivated by his visit to the Niagara Falls power plant in 1903(Edward Dean Adams Power Plant).

Tata's Identified Power of Tourism

Jamsetji realized the incredible power of tourism and so he also created a chain of hotels starting with the Taj Mahal Palace Hotel which even today is one of the most recognizable buildings in Mumbai. 

Jamsetji Tata was truly a man devoted to business and also helped people through it he valued education to a certain point he donated lands and buildings towards the making of the Indian Institute of Science, the renowned University of India.

Who Owns Tata Group?

However, Jamsetji Tata didn't live to see most of his project complete because he died on a business trip in Germany in 1904, leaving the already sizable Tata Company to his two sons.

Sir Dorabji Tata Trust in 1932. 

Sir Ratanji Tata Trust in 1918.

Together they solidified their ownership into a single holding company which in turn is owned by the Charitable Trust they planned for future generations. They had a great vision of the Future.

Future generations of Tatas

Jamsetji Tata's sons fulfilled many of his ambitions they oversaw the creation of India's first Steelworks in 1907, India's first cement plant in 1912, and the first indigenous insurance company in 1919. By the time the leadership mantle passed onto the next generation in 1938 Tata Sons was comprised of 14 different companies. Wherein that Power was established in 1910 and Tat Oil Mills in 1917.

This time however instead of going to one of Jamsetji's grandsons, leadership rather went into the hands of a distant cousin with a profoundly interesting background. 

Jehangir Tata Era (J.R.D Tata)

Jehangir Ratanji Tata better known as J.R.D Tata has been in the company since 1925 but he had been raised in France and was a dear friend(Louis Bleriot) to the gentleman who made the first flight across the English Channel (The flight happened in 1909).

In other words, J.R.D Tata was a passionate Aviator, and in 1929 he obtained India's first pilot license so unsurprisingly his first big project at Tata was to develop an Airline.

How did Tata Airlines begin?

J.R.D Tata was the founder of Tata Airlines. In 1932 Jehangir Tata (J.R.D) developed the Tata Air Service which first only transported mail but then in 1938 started arranging passenger flights as well even helping out the British in the II World War. Now you would think that India's independence in 1947 has been beneficial to Tata. But in actuality, the socialist policies formed by the latest government were in favor of individual companies. 

India's first Prime Minister (Pandit Jawahar Lal Nehru) noticed just how successful JRD has been with his airline and in 1953 unilaterally PM decided to Nationalize. He kept JRD as Airlines’s chairman until 1977 and you can visualize how the company only went downhill from there, sinking into ever-increasing debts.

How did Tata motors Start?

Of course, JRD would not allow politics to get in the way of their Profession and so he did his best to grow Tata while evading the rage of the socialist. JRD created Tata Motors in 1945 originally with the idea of building locomotives but in 1954 he diverged out into commercial vehicles through a partnership with the German car automaker Daimler. 

Over 52 years of leadership JRD grew the TATA Group from 14 companies to 95 companies but to do that he had dramatically reduced the ownership of Tata Sons owned in each one to satisfy the socialist.

In 1969 the Indian government introduced the "Monopolies and Limiting Trade Practices" Act that intimated essentially targeted Tata even though they were very far from a monopoly by Western standards. But as JRD extended the group and reduced its ownership in the individual subsidiaries he started losing control of Tata.

Sir Ratan Tata Era

Some of his companies weren't performing well and the gentleman who was sent to fix them was none other than Ratan Tata. He is one of Jamsetji's great-grandchildren and he entered the TATA Group in 1962. His first major project came in 1971 and it was pretty much challenging.

Ratan Tata was given charge of one struggling TATA company known as Nelco(National radio and electronics company) which in 1950 was India's biggest producer of radios but just 20 years later it had fallen to 3% market share. Ratan's focus was on technology and the future so instead of trying to retrieve the radio instead funded the development of new products like satellite communication which reclaimed NELCO in 1980 and made Ratan the clear successor of J.R.D Tata.

Foreign companies were allowed to invest in India

Ratan Tata claimed leadership of Tata Group in 1991, right as a waiver of economic liberalization swept across India. The socialists lost power and India finally joined the Global capital market but this presented a big threat to Tata. Up until now, it had operated in a very protected economy that was suddenly opened to competition from foreign companies. Worse yet, if JRD had let Tata become extremely decentralized it would be very slow to adapt to a new competitor.

Getting back the ownership of Tata subsidiaries

Ratan Tata had no choice but to re-establish ownership over all the TATA subsidiaries and that didn't come cheap at all. He sold 20% of TATA Sons the holding company and used that money to buy shares in the Tata subsidiaries especially Tata Steel and Tata Motors.

He then arranged all the hundred subsidiaries in 7 sectors establishing a framework along with which he could actually control them. But just building power isn't enough to turn around a struggling business and in 1990 pretty much every TATA company was losing ground to international competitors. Sir Ratan Tata's answer however was brilliant he started acquiring foreign competition and occupying them into the TATA Group effectively buying all their talent and supply chains and experience to grow his business back home in India while also growing globally.

Ratan Tata's purchasing frolic begin in the year 2000 when his beverage company Tata Tea acquired the Tetley company from Great Britain. Over the next decade, Ratan ended up acquiring hundreds of companies for pretty much every subsidiary in the TATA Group. Most notably he purchased the European Steel Titan Corus for $12 billion in 2007 and then Jaguar Land Rover for $2 billion in 2008. 

As you can just figure out the international buying spree has been paying profits for Tata and today the majority of their revenues actually come from outside of India. What's even more impressive is that the majority of Tata subsidiaries are actually public companies whose shares can be purchased on the stock market in India.

Obtaining Air India Back to Tata

Sir Ratan Tata welcomed  Air India back in Tata on 6th October 2021 from Government. Due to Intensive losses at Air India Airline, it was bided by Government and Tata won the bid and bought it. Tata Airlines which was once given to the Government by JRD Tata was obtained this year in 2021 after the decision of the CEO of Tata Group Natarajan Chandrasekaran. Today Tata has 3 Airlines under its management Air Asia, Vistara, and Air India.

Tata will be the title sponsor for IPL 2022

Tata Group will replace Chinese mobile manufacturer VIVO as the IPL title sponsor from the forthcoming season. IPL Chairman Brijesh Patel stated Vivo had initially signed an Rs.2,200 crore deal for IPL title sponsorship rights from 2018 to 2022. However, it backed out as the title sponsor for IPL 2020 before returning in 2021. Vivo's contract was then extended till 2023. IPL will now be known as TATA IPL. Tata has replaced Vivo as the Title Sponsor. 

 On 9 September Ford declared that the company is reconstructing and following this the production of every Ford vehicle which is consumed in India will be shut down with immediate effect and the production of vehicles that are exported from India would continue till 2022 only.

Ford India said that “we have tried each and every way whether it be finding a partner or reseller or doing a collaboration”. But nothing worked so they had to exit. They said that now it is unfeasible to do business here. In the past 10 years, they have faced a loss of 2 billion dollars, and also due to the pandemic and the hit which they faced in the demand, Ford is completely unable to recover from it and that's why they have to shut down the operation of manufacturing from India.

Country of Origin

Ford Motor Company is an American Multinational Auto manufacturer established in Detroit, Michigan, United States. It was established by Henry Ford in 1903.

Is it only Ford who is exiting India?

Now people who own Ford vehicles should not worry because ford has made arrangements for them also. They will be provided with servicing and all. But the exit of ford is not only the exit. This trend is trending for the past few years. In August 2021 SsangYong announced that the partnership they had with Mahindra and Mahindra worked with only one car and they too are existing or pulling off. Before this, in December 2020 General Motors also made such a statement that after operating for the past 13 years due to low sales and increment in losses they are shutting down. 

And also before it, in September 2020 Harley Davidson made a switch statement and in February 2019 Fiat also said that just seven years after entering the market their planning to go out so if ford is not alone in exiting then this is a concerning situation for India.

So it is very important to know why it is happening?

Now if we discuss domestic cars. Cars which we use if we observe their market shares then Hyundai, Maruti Suzuki, Mahindra and Mahindra, and Tata these four manufacturers have controlled the whole lion's shares of the Indian market and this is the main reason which foreign companies don't get space in the market and the overall growth rate of the market is around 2 to 3 percent CAGR (Compounded Annual Growth Rate). If you look at the past few years market is growing at this growth rate only. It means the market is not proliferating but the market is already consolidated and controlled by 3 to 4 players only have controlled the whole market.

Requirement of Market

Unique market demand is needed if we look at Ford, General Motors, etc are foreign companies. And the type of cars requiring the countries of their origin is totally different from those required here in India. Neither the segment nor size of the car is in the foreign countries have demand here. Nor do people have money and access to roads that are needed for those cars. 

So as a result the type of car required here is of low price segment, cars which require a low cost of ownership. Those cars are not available to these foreign companies, these cars are available at Hyundai, Maruti Suzuki, and Tata. That is the reason why their cars are selling a lot and the cars of foreign companies have no buyers. 

Even if foreign companies try to sell cars of this segment by doing some cut corners or lowering the prices so their Global reputation and global brand value have to preserve if, by cutting corners try to manufacture a car that may be less safe or a car of a segment which is available nowhere so they're in the fear of decrement in their brand value and image in the global market. 

And this fear keeps them away from introducing such types of cars and this is a big reason why they are not able to meet the requirements of the people here and the cars which they are offering have no demand and that's why they are not able to grow their market.

High Taxes on Cars

The next thing is high taxes as already discussed above sale is not increasing even though CAGR growth is not increasing and taxes here are 40 to 50 percent and this is not only for petrol-based or diesel-based vehicles because many people think that taxation is only for petrol-based or diesel-based vehicles and it won't be for electric vehicles. 

Elon Musk once said that "first reduce the taxes then only we will be able to launch our cars". Officials from Audi said that the sale in India is only 1% of the whole Global sales. But its revenue is 10% because the majority portion is spent on taxes. 50% to 60% of the car value goes into taxes. And due to these huge taxes, the price of a car in the Indian market is 1.5 to 2 times the price in the market US or Europe. 

So neither the company can explain the cost nor Indian people can afford the car. This is a big reason why foreign companies even try to sell the car in India by importing from other countries too to seems nearly impossible.

Shared Automotive Services

The next reason is maybe people don't want to buy cars. This is a very interesting concept which is called shared mobility. The brand which offers cars for rent comes under this category. The brands which offer taxicab services come under the category of Ola, Uber, etc. The brands which you wish to work on the subscription model come under this category refers that the demand for this concept will increase in the future. 

First, off you buy a car and drive it only 2 days a month it is better to use the concept of shared mobility take a car on a subscription for the period it is required, and then return. Nowadays working on subscription models has increased. For example, Adobe Premiere Pro where people edit videos is also a subscription that people buy, and Youtube premium where people watch videos. These subscription-based products have also entered the market of cars, by which the requirement of 10 people will be satisfied with one car.

So the overall sales of cars will decrease, as earlier 10 cars were sold and now only one. So a dent is made in the sales that maybe people don't want to buy a car. So this trend is emerging in the market. This is very important to look at why the automobile sector is declining.

The Electric Vehicle Revolution

The subsequent case is associated with electric vehicles. India 2017 respected Union Minister Shri. Nitin Gadkari said that 250 million vehicles that exist currently running within India, especially cars will be transformed into electric cars by the end of the year 2030 this dream that gets fulfilled is not mandatory. This seems to be a very huge target. This may get delayed by 10 to 15 years also, but hopefully, this would happen. 

Nowadays people are shifting to electric vehicles as people get subsidies, taxes are reduced and rebates are given to various state governments or promoting this and within 10 to 15 years a market worth 200 billion related to electric vehicles will stand in India. And if you look at the foreign company's cars, India is also slightly turning towards electric vehicles. 

But at present, all the cars run either petrol-based or diesel-based. Any car which is priced below 10 lacs and comes under the segment of electric vehicle has no existence. None of the electric cars available at present is value for money and we don't have a charging infrastructure. But the companies will soon shift from petrol and diesel and move out towards EV. 

Future of EV

The companies which will soon launch electric vehicles understand the demand of the market in will make appropriate changes those companies in the coming years will succeed. So the companies which are working on past strategies will face challenges while running their business. So these were some of the thoughts on why foreign companies like Ford are exiting. In the coming 10 to 15 years, what changes in the automobile sector in India will be facing also which exciting development can happen.

Conclusion

Other automobile companies such as Tata, Hyundai, and Maruti Suzuki have captured the Indian automobile market because they know what Indian Consumers want. It is just like the example of Amazon Prime and Netflix where Netflix hasn't really understood what the Indian audience wants while Prime is releasing really good shows such as Mirzapur and Family Man which satisfy the Indian audience's taste.