Tata Motors: The Name You Know, The Struggle You Don’t

Tata Motors was founded on September 1, 1945, by Sir J.R.D Tata, as a locomotive manufacturer. The company nowadays produces passenger cars, trucks, vans, coaches, buses, luxury cars, sports cars and military vehicles. It was formerly known as Tata Engineering and Locomotive Company (TELCO). Some days ago the Company completed 75 years of its journey in India.

9 को भर्ती कैम्प का आयोजन, टाटा मोटर्स में निकली बहाली, जानिए कौन और कैसे  कर सकते है आवेदन? – Jamshedpur Guru
The Beginning of the Journey

Tata Group in that era was involved with Steel Business, JRD felt that the Tatas were competent to establish in India an engineering complex the like of which the country did not yet have. Tata Steel provided the springboard for this new complex.

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Within one-and-a-half months of its birth in September 1945, the chairman JRD Tata explained to the board, “The company was promoted to manufacture not only boilers and locomotives but also heavy engineering equipment such as road rollers, tractors, earthmoving equipment, diesel engines, etc. The original intention was that the manufacture, of such heavy engineering, should be undertaken only after the Company had successfully manufactured boilers and locomotives. But, in view of the immediate post-war demand for the former type of equipment, the (managing) Agents felt that it might become necessary to commence the manufacture of such equipment at an earlier stage…”

New Director-In-Charge

For leading Tata Motors JRD needed a person who had a vision and a fire in their belly to realize those visions. He requested the Chairman of ACC, Sir Homi Mody, to release Moolgaokar. After a long discussion, In 1949, Moolgaokar joined TELCO as Director-in-charge.

Sumant Moolgaonkar (left) with J.R.D. Tata. Courtesy: Penguin Random House India

TELCO’s project started with boilers went on to underframes of wagons and then to locomotives. Britain was the main exporter of locomotives to India and was not keen to part with its technology – and its customer. So, Tatas scouted around in Germany. Soon enough, Krauss Maffei, headquartered near Munich, agreed to assist with technology for boilers and locomotives.

The Dark Partition ERA

TELCO had a tough start in the beginning when due to partition the crew who used to make boilers fled from Jamshedpur to Pakistan overnight. The boiler plant was paralysed. After setting up a fresh crew and all the hard work they finally made one boiler which according to Moolgaokar  “the most expensive in history”. After some time Locomotives steamed out from the Tata plant and in a little over a decade, more than 10,000 Tata locomotives joined Indian Railways. But soon Tatas realized that they were in a vulnerable industry. Their sole customer were Indian railways and they could beat down the prices to any level they want. They were vulnerable to demand fluctuations too.

Enter Daimler-Benz

Daimler-Benz, which till the 1950s, had not extended itself beyond Germany, asked Tatas if they were interested in manufacturing trucks. After the negotiations, the Chairman of Daimler-Benz broke the ice. He looked at JRD and said, “You draft the agreement and we’ll discuss it.” In that moment of trust, a partnership was born. In May 1954, the draft prepared by Tatas was accepted. “We derailed the locos and got on the track with trucks. After that we never looked back,” said Moolgaokar.

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The Hurdle to Grab the Permits and Licences.

The biggest blocker they had at that time was to tackle the Indian Government for permits and licences. The mid-1950s were a difficult period for the industry and the basic thinking of Prime Minister Nehru was that the state should get an increased control in heavy engineering. With some trepidation, JRD and Moolgaokar went to see TT Krishnamachari, the then Industries Minister. TTK instructed one of his secretaries to make everything available to the Tatas speedily.

The initial collaboration between Benz and Tatas was to be for fifteen years. The original name of the company was the Tata Locomotive and Engineering company. It was changed to the Tata Engineering and Locomotive company when the primary objective of the company shifted from locomotives to trucks and general engineering.

Money Making And Serving Country Both At Same Time

JRD in his letter to his friend George Woods (later to become President of the World Bank) in 1959, wrote that even though our locomotive division is never likely to make any money in view of the purchasing policy of the Indian Railways. We have to keep up with it as a matter of service to the country and in recognition of the fact that the industry was established with the Government’s support. We shall of course continue to develop truck manufacture to the maximum extent possible, but we feel the time has come to move into the small car field where there is likely ultimately to be an unlimited market.

Jacking Up Telco’s Standards

The engineers of BENZ believed in perfection, as were JRD and Moolgaokar, so it turned out to be a happy collaboration. Every week technicians in Jamshedpur reject parts that are not up to the mark. The ‘major attention to minor details’ was a painful exercise but it was through such discipline that TELCO’s standard was jacked up.

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In the upcoming years, Moolgaokar and Tatas set up an R&D factory in Pune. Moolgaokar believed that a company should have “in-built strength” and that gave TELCO the capacity to design and manufacture its own sophisticated machinery, dyes and press-tools to create the machines to make parts of a truck – a facility that very few automobile plants in the world had, as they depend on other tool manufacturers. When he was working in this aspect of TELCO, some directors felt he was spending too much money for the future when the present was still to be secured. JRD, though, supported Moolgaokar.

Financial ups and downs

Within a few years, TELCO diversified into commercial vehicles and became the market leader by the early 1970s with two out of every three trucks on Indian roads carrying a Tata badge. While the success made Telco an automotive behemoth and the second most important company in Bombay House after Tata Steel (then Tisco), it was faced with a peculiar problem.

1988: Launched Tata Mobile, India’s first pick-up truck
1991: Introduced Tata Sierra, a cross between an SUV and pick-up
1992: Introduced Tata Estate
1994: Tata Sumo hit showrooms, company’s first utility vehicle built from scratch and powered by an engine from its LCV range
1998: Indigenously developed passenger car Tata Indica showcased at Auto Expo
1998: Tata Safari, India’s first sports utility vehicle hits showrooms
2001: Launched second-generation Indica: Indica V2
2002: Launched its first sedan Tata Indigo built on Indica platform
2005: Tata Safari upgraded with new common rail engine
2007: Tata Motors and FIAT establish a joint venture in India
2008: Unveiled Tata Nano at Auto Expo
2008: Acquired Jaguar land Rover from Ford Motor Co
2008: Launched new generation Tata Indica Vista
2009: Launchednew generation of Tata Indigo Manza
2010: Launched of Tata Aria, India’s first crossover
2012: Launched next generation Tata Safari Storme
2014: Unveiled Tata Zest and Bolt at Auto Expo

There was a spike in profitability in the next few years, but the good run was ruptured by the economic slowdown in the late 1980s. In the year ending March 1987, Telco’s RoE declined to 1.4 per cent, a ratio previously seen in the early 1950s when the company was still in its infancy. The cyclicality worsened as the Indian economy was progressively opened up to competition, including foreign capital, from the early 1980s. When Ratan Tata took over the chairmanship in 1988, he believed passenger cars is the only solution to the financial crisis. It had signed up with Honda in 1986 to manufacture the Accord in India, but the government refused permission, forcing it to invest in product development in-house.

Acquisition and Sweet Revenge

In 1998 Tata Group launched its first passenger car Tata Indica, this segment was led by Ratan Tata and it was his decision to enter the passenger car business. However, it was an ill-timed move and Tata’s passenger car venture seemed to be doomed to failure. The humiliation from Ford officials pushed Tata Group and Ratan Tata to attain some different strategies. The journey has been rough indeed. But for the 2007 acquisition and turnaround of Jaguar Land Rover made a difference.  

Triumph Over Humiliation

As in an article by Forbes, Tata Motors majorly focused on three areas – improving liquidity, cost control, and new products.
Three clear and pointed strategies later worked out well for the company. From 2009 to 2012, Jaguar could barely sell 50,000 units across the world.

Andy Vine, Jaguar & Land Rover dealer in Louisville, Ky., recalled “Ratan Tata was directly involved in the business. Ratan Tata, along with Ralph Speth, travelled across the US meeting dealers and taking the feedback on Jaguar & Land Rover brands.”
In 2013, the strategy to invest in new products started paying off, with the new F-Type sports cars, XE models, and an entry-level Jaguar. The company clocked 77,000 sales that year.
Jaguar almost tripled the sales in 2017 from 2009. The luxury carmaker sold 178,601 units in 2017 with this the JLR revenue topped by $3 Billion.

Profit and Loss is just part of any business, But its the strong will and dedication of Tata’s and their engineers which earned them respect all over the world.

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