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The Tata Engineering & Locomotive Company (commonly known as Telco), is India's largest private sector company in terms of revenues and market capitalisation. It is also one of the 6 largest manufacturers of commercial vehicles in the world. Telco is a part of Tata Enterprises, which is the largest industrial group in India, employing assets of Rs. 267 million (US$ 7. 6 billion) in a wide range of businesses including Automobiles, Steel, Information Technology, Telecommunications, Energy, Chemicals, Hotels and Tea Telco was incorporated in 1945, to manufacture steam locomotives. Today it has a domestic market share of 68 % in the MCV/HCV segment, 64 % in the LCV segment and 32 % in the multi-utility segment. Telco has been exporting its products since 1969 and currently exports about a tenth of its output. Export markets include the Middle East, Africa and Southeast Asia, as well as developed countries in Europe like France, UK and Spain.
It is intended that exports should account for 20 % of the automobiles sold by the Company. The analysis of the macroeconomic environment can be done by PEST model: A rigid and closed system has always been the main hurdle for growth of industry in India, which is virtually plagued by legislation and legal procedures. The complex bureaucratic style of working in this otherwise democratic country has always been a handicap for automobile industry. The stringent laws especially regarding foreign investments had deprived India from global technology and services.
The early nineties liberalisation saw some major policy changes of the government- &# 61692; Depreciation of the rupee and promoting foreign trade. &# 61692; Exim scrips to be replaced by partial and later full convertibility of the rupee on trade account. &# 61692; Liberalisation of trade policies. &# 61692; Opening up of a number of areas to the private sector. &# 61692; Deregulating the banks' and financial institutions' lending rates. &# 61692; Reduction of statutory liquidity ratios. &# 61692; Freeing of the capital market from government control. &# 61692; Abolition of the office of the Controller of Capital Issues. &# 61692; Implementation of the National Renewal Fund. &# 61692; Slashing of fiscal duties on a number of items meant for industrial production. The international exposure led to a general increase in the awareness level of the masses. The demand for quality and environmentally friendly automobiles led to strict legislation. Certain states of the union passed legislation against polluting vehicles and banned the trade of inferior quality vehicles.
The new legal and political order is directly effecting TELCO. The positive effects are: &# 61656; Direct foreign investment has led to new and valuable business partners. &# 61656; Cost of importing technology is less. &# 61656; New era of exports has dawned. &# 61656; Growth in the market and international exposure. &# 61656; The foreign carmakers are entering the huge Indian market thus making it very competitive for TELCO. &# 61656; The expertise of TELCO in diesel engines is facing threats from the new- found environmental awareness and new legislation. &# 61656; The cost effective TELCO is facing a new threat in form of new found quality measures. Spearheading the swadeshi aspect of the Indian automobile industry TELCO is trying to restrict the slaughter of the Indian industry in the hands of the foreign giants. It is through societies and pressure groups like Society of Indian Automobile Manufacturers that TELCO is raising a voice against anti swadeshi legislation. Despite some bouts of recession in the recent past, the macro fundamentals of the Indian economy are sound. Gross Domestic Product growth has averaged more than 7 % for the last three years.
The rate of inflation has remained low. The nation's foreign exchange reserves are brimming with nearly US$ 30 billion. Even in the face of such crises like the currency depreciation in Southeast Asian countries and the stock market crashes in various countries, the Indian economy has stood firm. Industry observers believe that largely cyclical factors and industrial have driven the general slowdown growth will pick up again. In the first six months of the 1997 - 98, the corporate sector registered a 11 % growth in net profit. Advance corporate tax payments jumped by 16 %, indicating a better profit performance by companies.
In the dynamics of transition of the Indian economy, the automobile industry is emerging as a leading industry. The large volumes of investment including foreign direct investment in the automobile manufacturing ventures and technical collaboration are propelling a quantum jump in up gradation of technology. Domestic demand for passenger cars and multi utility vehicles is projected at 800, 000 cars by 2000 A. D. With increased production and capacity creation in the passenger car sector, substantial growth in exports is envisaged. This tremendous growth in the vehicle sector, is geared as well to accelerate the continuous growth of the auto-component industry.
TELCO is feeling the heat of the new found economic liberty and freedom. The automobile sector is The figures defy human imagination. India, in all her diversity, encompasses one of the largest highway and road networks on the planet. In fact, it is second only to the road network of the United States. Take a look at the statistics. The total length of roads in the country exceeds 3. 01 million kilometres.
This labyrinthine network consists of 34, 608 km of national highways, 128, 622 km of state highways, and an informal network running to an astounding 2, 737, 080 km. And surprisingly enough, the road network growth has not kept pace with the mushrooming vehicle population. A study conducted by the National Highway Authority of India (NHAI) shows that the vehicle population has increased hundred-fold. Whereas, the network length of roads has increased only seven-fold. To illustrate, in 1948, Chennai, (with an area of 172 sq.
km. ) had a vehicle population of 6, 000 cars and 810 two-wheelers. Today, 50 years down the road, Chennai's roads are choked with 3, 00, 000 cars and 4, 00, 000 two-wheelers. Elsewhere, in Mumbai and Delhi, traffic snarls enable vehicles to travel at top speeds of 12 km and 22 km respectively! During the last week of October 1998, the Ministry of Surface Transport announced its ambitious plan to link Srinagar to Kanyakumari and Silver to Saurashtra. This unprecedented 7, 000 km, four-lane expressway project is expected to cost a whopping Rs. 28, 000 crores. The plan of action ensures that there will be no overlapping with the segments in the 7, 000 km-long golden quadrangle between Delhi-Mumbai-Calcutta-Chennai.
The NHAI is pursuing this objective with assistance from multilateral agencies. Since these world-class expressways will be independent of India's existing highways, an estimated Rs. 15, 000 crores is being allotted for land acquisition alone. Yet, national highways are estimated to carry 40 per cent of the total road traffic but account for only 2 per cent of the total network. The growth in general buying power and more urban population is making cars a necessity rather than luxury.
The automotive industry's strong linkages with the capital equipment and the services industry, and, the potential for earning foreign exchange through exports also acted as an impetus for its growth. The new liberal economic regime, the immense market potential and the presence of stable and cost competitive manufacturing base has led to a quantum jump in the rate of growth of the automobile industry in recent years 1993 - 1997 at an average rate of above 20 %. TELCO is adapting to the new economic order and is trying to have a better share of the pie. It has emerged as a major player in the automobile export market and is trying to capture the Indian middle class through its new range of cars.
The opening of India to the world brought in among other things new technology. The Indians with there instinctive scientific nature have adapted to the new advancements very well. India having a very large pool of scientific and engineering talent in the world has marched forward in critical areas of development - be it space or electronics. This pool of knowledge has enabled India to attain high levels of achievement in diverse high tech areas. Automobile industry especially giants like TELCO and Bajaj Auto have adapted to new technologies well. But advent of new foreign companies and the pace of technological changes make the future highly aqueous to predict.
The nineties phenomenon has had far reaching implications on the social order of the country. The emergence of the great new middle class and the birth of the new generation Indians are the two most important facets of this social order affecting the consumer market. The global reach, awareness and overall affluence have resulted in birth of the new consumerist Indian. The depravity of ages has resulted in a virtual eruption of new age of flashy cars and phones. Gandhi is pass and Uncle Sam is the order of the day. The stylish Indian took an initial toll on the automobile Industry and few giants who were not able to adapt to the style collapsed.
But now the Indian companies have adapted to the western style phenomenon and are competing as well. TELCO has responded to the changing tastes quite well with a new range of produce. The vastness of the country and different social orders have resulted The fluidity of the market and complexity of its nature are quite evident by the pest analysis. The in depth analysis of the automobile sector in India is still more complex and debate able topic. The Automotive Industry in India is now working in terms of the dynamics of an open market. Many joint ventures have been set up in India with foreign collaboration, both technical and financial with leading global manufacturers...
Also a very large number of joint ventures have been set up in the auto-components sector and the pace is expected to pick up even further. The Government of India is keen to provide a suitable economic, and business environment conducive to the success of the established and prospective foreign partnership ventures. The new liberal economic regime, the immense market potential and the presence of stable and cost competitive manufacturing base has led to a quantum jump in the rate of growth of the automobile industry in recent years 1993 - 1997 at an average rate of above 20 %. The industry has achieved tremendous growth in the 1990 's.
It achieved a turn-over of Rs. 450 bn and contributed RS. 297. 8 bn to the State Exchequer in 1996 - 97. It gives direct employment of 200, 000 and indirect employment to about 10 mn. people. The Indian automobile industry is characterized by a very high percentage (75 %) of production in the 2 / 3 wheeler sector.
India ranks as the second largest producer of 2 / 3 wheelers in the world, next only to Taiwan. India today is the largest manufacturer of tractors, as well. The world automobile leaders have evinced keen interest in India and are making their entry through joint ventures and technology cooperation agreements. RS. 127 bn or US $ 3617 mn is the investment envisaged in the new vehicle projects. If one looks at the joint venture's list, he or she can observes that the equity participation in the joint ventures indicate a wide variation ranging from 10 % to 100 % i. e.
wholly owned foreign subsidiaries. The equity participation is not regulated by Government but is market driven. It depends upon the market perceptions of the joint venture partners and their business perceptions primarily in terms of technological, financial and market strengths of the partners. The setting up of joint ventures has also led to enhanced capacity creation in the vehicle sector, particularly in the passenger car sector and the additional capacity is expected to mount by 1 mn. passenger cars in the next 4 - 5 years. The large volumes of investment including foreign...
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Research essay sample on Joint Ventures Automobile Industry
