Tata Motors in talks over China tie-up

March 6, 2014 4:57 pm

Tata Motors in talks over China tie-up

By Avantika Chilkoti and James Crabtree in Mumbai

Tata Motors is conducting talks in China over potential tie-ups in the world’s biggest car market, in a sign that the Indian carmaker is looking to turn round its flagging fortunes through international growth.

India’s largest carmaker by sales owns Jaguar Land Rover of the UK, which entered the Chinese market for the first time in 2012 through a joint venture with Chery Automobile, the privately owned car group.

But Tata Motor’s domestic Indian operations, which produce less expensive cars and trucks for consumers in emerging economies, presently has no presence in China.

Any tie-up between Tata and a Chinese player would mark a significant international expansion for the struggling Indian group, while also signalling deeper industry links between the car sectors in Asia’s two largest emerging economies.

Reports in the Indian media on Thursday suggested that Tata was in discussions with Chery. The group denied any agreement between the two groups, but confirmed it was examining partnerships in the Chinese market.

“Tata Motors does not have any joint venture agreement with Chery,” Tata Motors said. “As a part of our continued explorations in key markets, we continue to have discussions for potential opportunities for collaboration with many players, including those in China.”

The group’s Chinese moves come only a month after Cyrus Mistry, the chairman of the wider Tata conglomerate, took direct charge of his struggling automotive flagship, following the death of former chief executive Karl Slym earlier this year.

Industry observers said Chery Automotive remained the most likely candidate for any new arrangement, given the existing joint-venture with JLR and links between senior executives at both groups.

“If they have a tie-up with the same company for JLR then possibly they can do it for Tata Motors as well,” said Prayesh Jain, automotive analyst at Mumbai-based stockbroker India Infoline.

The only thing that can successfully come out of this partnership is to co-develop a [new car] platform together and share the costs

– Deepesh Rathore, director of Emerging Markets Automotive Advisors

Any partnership could potentially provide Tata Motors with an entry into China’s vast car market, or involve less expansive agreements relating to joint production or suppliers.

“The only thing that can successfully come out of this partnership is to co-develop a [new car] platform together and share the costs,” explains Deepesh Rathore, director of Emerging Markets Automotive Advisors, a New Delhi-based research group.

“They [Tata Motors] need to bring new models to the market and the engineering department is still at an early stage of evolution, so they’re not very strong in terms of designing new products and bringing them to the market.”

Tata Motors’ domestic sales have slumped in recent years during India’s economic slowdown.

Industry analysts say the Indian company needs to refresh its portfolio of cars, reorganise its structure and increase exports to other Asian economies to kick-start sales.

“The Indian side continues to remain challenging, and Jaguar continues to do well and that’s been the story for the last 12 to 18 months really,” said George Joseph, an automotive analyst at brokerage IIFL.

Chery Automotive could not immediately be reached for comment.