Tata-Ford, Will They Kill Jaguar & Rover Brands? (F, TTM)

If you have followed the US auto industry you will know about the trials and tribulations of the US auto brands, the US autos themselves, the workers, and the plants and cities they operate in.  The Big Three are sizing down to operate on a leaner and more favorable employment environment with the unions.  Ford (NYSE: F) has been in the process of looking for a buyer for its Jaguar and its Rover units, and Tata Motors (NYSE: TTM) out of India has been labeled as the front runner for some time.  Multiple reports today put Tata in the catbird seat.

But there is something that Tata must consider.  Will it keep the same standards and the the same sort of companies behind the Rover brand and behind the Jaguar brand?  Rovers are premium SUV’s up to super-premium SUV’s.  Jaguar is a high-end luxury brand auto.  Neither one of these brands just has a ring of "Made in India" as a desired trait by the auto buyers who own these brands.  More importantly, it might be a real change in the brands in the coming years. 

Luxury car and SUV buyers haven’t migrated over to a new desire to have "Made in India" stamped on their car.  The truth is that the cars won’t be made in India, but that doesn’t mean there won’t be any perceived brand dilution.  Neiman Marcus isn’t going to start selling Old Navy clothes.  LVMH probably isn’t interested in selling Keystone beer or MD 20/20 wine.  You can see the Tata line of cars here to see what we are talking about.

We don’t know if Tata wants to use these European brand factories as a base to produce more Tata-esque cars or if it wants to keep the operations the same.  There are still more questions than answers, but luxury and more high-end car buyers might be thinking twice about buying a Jaguar or a Rover if they perceive a "Made in India" stigma.  Luxury buyers often don’t want to cut corners to save cash, and Tata needs to consider this.

We have previously pondered about Tata being a longer-term threat to U.S. auto makers, and perhaps that may be true sooner rather than later.

Jon C. Ogg
January 3, 2008