Tata Motors: A Longer-Term Threat to US Autos?

What would happen if the US auto industry had to compete against India in its neverending turf war? The long and hard truth is that for now the US market is probably safe as far as competition from India, but Tata Motors is growing in India and throughout Asia and ultimately could make more of a dent in world auto sales.  It also sells in Australia, Europe, and the Middle East.

Tata Motors Ltd. (TTM-NYSE/ADR) reported earnings in India.  Its profit was roughly $140 million after $2 Billion in revenues on a conversion basis from Rupees to dollars after the company sold north of 172,000 units.  The part of the business that is even more impressive is the buses and trucks unit that grew more than 20%, compared to 14% growth in passenger cars and jeeps.  Their units were also broken down as 87,467 commercial units and 70,248 passenger vehicles.

The good news is that US auto makers don’t have to compete with the company locally here in the US, although they do overseas.  Tata sells cars, trucks and buses in India, Asia, Australia, the Middle East and some in Europe.  Many of the cars and vehicles just don’t look like they would sell in the US, but some would.  You can see how the autos just look and feel different at the company product offerings on their web site.

The $2 Billion equivalent in sales is small in comparison to an average $50 Billion in quarterly sales out of General Motors (GM-NYSE), $40 Billion out of Ford (F-NYSE), or even $20+ Billion out of Honda (HMC-NYSE).  This isn’t exactly a threat to the US auto industry, not yet anyway.  But look out a decade when the rest of the emerging markets are growing and the US auto industry is potentially still facing many of the same issues as today.  The fact that Tata Motors is part of the larger group of companies, the Tata Group, makes this even more probable since the rest of the group is in steel, chemicals, IT, hotels, and financial services.

Jon C. Ogg
May 18, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.