Company Quick10K Filing
Tata Motors
20-F 2020-03-31 Filed 2020-08-13
20-F 2019-03-31 Filed 2019-07-30
20-F 2018-03-31 Filed 2018-07-31
20-F 2017-03-31 Filed 2017-07-28
20-F 2016-03-31 Filed 2016-07-28
20-F 2015-03-31 Filed 2015-07-30
20-F 2014-03-31 Filed 2014-08-01
20-F 2013-03-31 Filed 2013-08-02
20-F 2012-03-31 Filed 2012-07-31
20-F 2011-03-31 Filed 2011-07-28
20-F 2010-03-31 Filed 2010-09-30

TTM 20F Annual Report

Part I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
EX-2.3 d846114dex23.htm
EX-7.1 d846114dex71.htm
EX-8.1 d846114dex81.htm
EX-12.1 d846114dex121.htm
EX-12.2 d846114dex122.htm
EX-13.1 d846114dex131.htm

Tata Motors Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

20-F 1 d846114d20f.htm FORM 20-F Form 20-F
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                to                

Commission file number: 001-32294

 

 

 

LOGO

TATA MOTORS LIMITED

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

 

Republic of India  

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Jurisdiction of incorporation or organization)   (Address of principal executive offices)

H.K. Sethna

Tel.: +91 22 6665 7219

Facsimile: +91 22 6665 7790

Email: hks@tatamotors.com

Address:

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Name, Telephone, Email and/or Facsimile number, and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of Each Exchange On Which Registered

Ordinary Shares, par value Rs.2 per share*   TTM   New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

‘A’ Ordinary Shares, par value Rs.2 per share

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 3,088,973,894 Ordinary Shares and 508,502,896 ‘A’ Ordinary Shares, including 320,793,365 Ordinary Shares represented by 64,158,673 American Depositary Shares (“ADSs”), outstanding as of March 31, 2020. Each ADS represents five (5) Ordinary Shares as of March 31, 2020.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☒  Yes    ☐  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐  Yes    ☒  No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒    Accelerated filer  ☐    Non-accelerated filer  ☐    Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards1 provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

 

U.S. GAAP  ☐

   International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒   

Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

 

*

Not for trading, but only in connection with listed American Depositary Shares, each representing five (5) Ordinary Shares.

 

 

 

 

1 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.


Table of Contents

In this annual report on Form 20-F, each of the following terms has the meaning ascribed to it below:

 

   

“ADR” means an American Depositary Receipt evidencing one or more ADSs;

 

   

“BSIV” means Bharat Stage IV, a Bharat stage emission standard instituted by the Government of India;

 

   

“BSVI” means Bharat Stage VI, a Bharat stage emission standard instituted by the Government of India;

 

   

“CNG” refers to compressed natural gas;

 

   

“Commercial Vehicles” or “CVs” means vehicles in the commercial vehicle segment, including SCV & Pickups, MHCVs, ILCVs and CV Passenger Vehicles;

 

   

“Company” refers to Tata Motors Limited;

 

   

“Companies Act” refers to the Indian Companies Act, 2013, as amended from time to time, unless stated otherwise;

 

   

“Crores” refers to ten million Rs;

 

   

“CV Passenger Vehicles” means commercial Passenger Vehicles, which are passenger carriers in the Commercial Vehicle segment;

 

   

“Earnings Before Other Income, Interest and Tax” means earnings before share of profit/(loss) of equity accounted investees (net), assets written off/loss on sale of assets and others (net), other income/(loss) (net), foreign exchange gains/(loss) (net), interest income, interest expense and income tax expense;

 

   

“Euro”, “EUR” and “€” mean the currency issued by the European Central Bank;

 

   

“Fiscal” means our fiscal year ending on March 31 of that year;

 

   

“Free Cash Flow” is a non-IFRS measure that equals cash flow from operating activities, less payment for property, plants and equipment and intangible assets;

 

   

“GBP” means the British pound, the lawful currency of the United Kingdom;

 

   

“GVW” means gross vehicle weight;

 

   

“IFRS” means the International Financial Reporting Standards and its interpretations as issued by the International Accounting Standards Board;

 

   

“ILCVs” means intermediate and light Commercial Vehicles, which are vehicles that have a GVW between 3.5 metric tons and 12 metric tons;

 

   

“Ind AS” means the Indian Accounting Standards;

 

   

“Indian GAAP” means the accounting principles generally accepted in India;

 

   

“Indian rupees” and “Rs.” mean the lawful currency of India;

 

   

“JLR” means Jaguar Land Rover;

 

   

“Korean won” means the lawful currency of South Korea;

 

   

“Lakhs” refers to one hundred thousand Rs;

 

   

“Liters” means the measurement equivalent to 61.02 cubic inches of volume, or approximately 1.057 U.S. quarts of liquid measure;

 

   

“LPG” refers to liquified petroleum gas;

 

   

“Metric tons” or “tons” is a measurement equal to 1,000 kilograms or approximately 2,200 pounds;

 

   

“MHCVs” means medium and heavy Commercial Vehicles, which are vehicles that have a GVW of over 12 metric tons;

 

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Table of Contents
   

“Millimeters” or “mm” means the measurement equal to 1/1000 of a meter. A meter is equal to approximately 39.37 inches and a millimeter is equal to approximately 0.039 inch;

 

   

“Passenger Cars” means vehicles that have a seating capacity of up to five persons, including the driver, that are further classified into the following market categories:

 

 

Compact — length between 3,600 mm and 4,000 mm;

 

 

Executive — length between 4,500 mm and 4,700 mm;

 

 

Luxury — length above 5,000 mm;

 

 

Mid-size — length between 4,250 mm and 4,500 mm;

 

 

Micro — length up to 3,200 mm;

 

 

Mini — length between 3,200 mm and 3,600 mm;

 

 

Premium — length between 4,700 mm and 5,000 mm; and

 

 

Super Compact — length between 4,000 mm and 4,250 mm;

 

   

“Passenger Vehicles” means Passenger Cars or Utility Vehicles;

 

   

“Ratio of Net Debt to Shareholders’ Equity” is measured as (total debt less cash and cash equivalent, mutual funds—current and money market funds) divided by equity (including non-controlling interest).

 

   

“Revenue” means the total revenue net of excise duty unless stated otherwise;

 

   

“RMB” and “Chinese Renminbi” mean the lawful currency of the People’s Republic of China;

 

   

“Russian Ruble” means the lawful currency of Russia;

 

   

“SCV” means small Commercial Vehicles;

 

   

“SG$” means the Singapore dollar, the lawful currency of Singapore;

 

   

“Shares” means the Ordinary Shares and the ‘A’ Ordinary Shares of Tata Motors Limited, unless stated otherwise;

 

   

“Small Commercial Vehicles & Pickups” or “SCVs & Pickups” means vehicles that have a GVW of up to 3.5 tons;

 

   

“SUV” means sports utility vehicle;

 

   

“TML” refers to Tata Motors Limited a parent company;

 

   

“UK” and “United Kingdom” mean the United Kingdom of Great Britain and northern Ireland; and

 

   

“Utility Vehicles” or “UVs” means vehicles that have a seating capacity of five to ten persons, including the driver, which includes SUVs, multi-purpose vehicles and vans.

In addition to the terms defined above:

 

   

References to “we”, “our”, “us” and “Tata Motors Group” are to Tata Motors Limited and its consolidated subsidiaries, except as the context otherwise requires;

 

   

References to “Jaguar Land Rover”, “Jaguar Land Rover business”, “Jaguar Land Rover Group” and “JLR” are to Jaguar Land Rover Automotive Plc and its subsidiaries, except as the context otherwise requires;

 

   

For our Jaguar Land Rover business, references to premium cars and luxury performance SUVs refer to a defined list of premium competitor cars and SUVs;

 

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Table of Contents
   

Unless otherwise stated, comparative and empirical Indian industry data in this annual report on Form 20-F have been derived from published reports of the Society of Indian Automobile Manufacturers (“SIAM”);

 

   

Figures in tables may not add up to totals due to rounding; and

 

   

All references to websites in this annual report on Form 20-F are intended to be inactive textual reference for information only and information contained in or accessible through any such website does not form a part of this annual report on Form 20-F.

Cautionary Note Regarding Forward-looking Statements

This annual report on Form 20-F contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may”, “will”, “should”, “potential”, “intend”, “expect”, “seek”, “anticipate”, “estimate”, “believe”, “could”, “plan”, “project”, “predict”, “continue”, “future”, “forecast”, “target”, “guideline” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements.

Information regarding important factors that could cause actual results to differ materially from those in our forward-looking statements appear in a number of places in this annual report on Form 20-F and the documents incorporated by reference into this annual report on Form 20-F, and include, but are not limited to:

 

   

changes in general economic, business, political, social, fiscal or other conditions in India, the United States, the United Kingdom and the rest of Europe, North America, Russia, China or in any of the other regions where we operate;

 

   

the magnitude and the length of economic disruption as a result of the worldwide COVID-19 pandemic;

 

   

implementation of our growth strategy and new projects, including mergers, acquisitions and divestments, planned by management;

 

   

the level of competition in the automotive industry;

 

   

movements in the prices of key inputs such as steel, aluminum, rubber and plastics;

 

   

development of new technologies affecting the automotive market;

 

   

accidents and natural disasters;

 

   

changes in our credit rating and the terms on which we finance our working capital and capital and product development expenditures and investment requirements;

 

   

fluctuations in the currency exchange rate against the functional currency of the respective consolidated entities;

 

   

the performance of our distribution channels and contractual arrangements with suppliers;

 

   

government policies including those specifically regarding the automotive industry, including industrial licensing, environmental regulations, safety regulations, import restrictions and duties, excise duties, sales taxes, value added taxes, product range restrictions, diesel and gasoline prices and road network enhancement projects;

 

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various litigation, government investigations and proceedings affecting us; and

 

   

other factors beyond our control.

All forward-looking statements included herein are based upon information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date hereof to conform these statements to actual results.

Non-IFRS Measures

We use the following non-IFRS performance indicators to monitor financial performance:

Earnings Before Other Income, Interest and Tax

Earnings Before Other Income, Interest and Tax is earnings before share of profit/(loss) of equity accounted investees (net), assets written off/loss on sale of assets and others (net), other income/(loss) (net), foreign exchange gains/(loss) (net), interest income, interest expense and income tax expense. It is monitored by management for the purpose of performance of income earned by our operations. Earnings Before Other Income, Interest and Tax is presented because management believes this represents the earnings earned by the business of the Company. Reconciliation of our consolidated Earnings Before Other Income, Interest and Tax to our consolidated net income is provided in Item 5.A “Operating and Financial Review and Prospects—Operating Results—Overview.”

Free Cash Flow

Free Cash Flow is measured as cash flow from operating activities, less payments for property, plants and equipment and intangible assets. It is monitored by management for the purpose of quantifying ongoing needs for investments in plants and machinery, products and technologies. Free Cash Flow is presented because management believes this provides investors with a relevant measure of cash available to address our debts, pay dividends and fund capital expenditures and other strategic initiatives. Reconciliation of our Free Cash Flow to cash flow from operating activities is provided in Item 5.A “Operating and Financial Review and Prospects—Operating Results—Overview.”

Ratio of Net Debt to Shareholders’ Equity

Ratio of Net Debt to Shareholders’ Equity is measured as (total debt less cash and cash equivalent, mutual funds—current and money market funds) divided by equity (including non-controlling interest). It is monitored by management because it helps assess our debt commitments. Ratio of Net Debt to Shareholders’ Equity is presented because management believes it is a relevant financial measure for investors to understand the leverage employed in our operations and of our ability to obtain financing. Calculation of our Ratio of Net Debt to Shareholders’ Equity is provided in Exhibit 7.1 to this annual report on Form 20-F.

The non-IFRS measures used herein should not be considered in isolation and are not measures of our financial performance or liquidity under IFRS. They may not be indicative of our results of operations, and should not be construed as alternatives for any IFRS measures. Additionally, the non-IFRS measures may not be comparable to other similarly titled measures used by other companies.

 

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Table of Contents

TABLE OF CONTENTS

 

PART I 

            1  
 

Item 1.

    

Identity of Directors, Senior Management and Advisers

     1  
   

A.

  

Directors and Senior Management

     1  
   

B.

  

Advisers

     1  
   

C.

  

Auditors

     1  
 

Item 2.

    

Offer Statistics and Expected Timetable

     1  
   

A.

  

Offer Statistics

     1  
   

B.

  

Method and Expected Timetable

     1  
 

Item 3.

    

Key Information

     1  
   

A.

  

Selected Financial Data

     1  
   

B.

  

Capitalization and Indebtedness

     4  
   

C.

  

Reasons for the Offer and Use of Proceeds

     4  
   

D.

  

Risk Factors

     4  
 

Item 4.

    

Information on the Company

     33  
   

A.

  

History and Development of the Company

     33  
   

B.

  

Business Overview

     36  
   

C.

  

Organizational Structure

     71  
   

D.

  

Property, Plants and Equipment

     74  
 

Item 4A.

    

Unresolved Staff Comments

     79  
 

Item 5.

    

Operating and Financial Review and Prospects

     79  
   

A.

  

Operating Results

     79  
   

B.

  

Liquidity and Capital Resources

     95  
   

C.

  

Research and Development, Patents and Licenses

     110  
   

D.

  

Trend Information

     110  
   

E.

  

Off-balance Sheet Arrangements

     110  
   

F.

  

Tabular Disclosure of Contractual Obligations

     110  
   

G.

  

Safe Harbor

     110  
 

Item 6.

    

Directors, Senior Management and Employees

     110  
   

A.

  

Directors and Senior Management

     110  
   

B.

  

Compensation

     114  
   

C.

  

Board Practices

     114  
   

D.

  

Employees

     120  
   

E.

  

Share Ownership

     123  
 

Item 7.

    

Major Shareholders and Related Party Transactions

     124  
   

A.

  

Major Shareholders

     124  
   

B.

  

Related Party Transactions

     126  
   

C.

  

Interests of Experts and Counsel

     127  
 

Item 8.

    

Financial Information

     127  
   

A.

  

Consolidated Statements and Other Financial Information

     127  
   

B.

  

Significant Changes

     128  
 

Item 9.

    

The Offer and Listing

     128  
   

A.

  

Offer and Listing Details

     128  
   

B.

  

Plan of Distribution

     128  
   

C.

  

Markets

     128  
   

D.

  

Selling Shareholders

     128  
   

E.

  

Dilution

     128  
   

F.

  

Expenses of the Issue

     128  
 

Item 10.

    

Additional Information

     129  
   

A.

  

Share Capital

     129  
   

B.

  

Memorandum and Articles of Association

     129  
   

C.

  

Material Contracts

     138  
   

D.

  

Exchange Controls

     138  
   

E.

  

Taxation

     142  
   

F.

  

Dividends and Paying Agents

     148  
   

G.

  

Statement by Experts

     148  

 

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H.

  

Documents on Display

     148  
   

I.

  

Subsidiary Information

     149  
 

Item 11.

    

Quantitative and Qualitative Disclosures about Market Risk

     149  
 

Item 12.

    

Description of Securities Other than Equity Securities

     149  
   

A.

  

Debt Securities

     149  
   

B.

  

Warrants and Rights

     149  
   

C.

  

Other Securities

     149  
   

D.

  

American Depositary Shares

     150  

PART II

            150  
 

Item 13.

    

Defaults, Dividend Arrearages and Delinquencies

     150  
 

Item 14.

    

Material Modifications to the Rights of Security Holders and Use of Proceeds

     150  
 

Item 15.

    

Controls and Procedures

     151  
 

Item 16A.

    

Audit Committee Financial Expert

     152  
 

Item 16B.

    

Code of Ethics

     152  
 

Item 16C.

    

Principal Accountant Fees and Services

     153  
 

Item 16D.

    

Exemptions from the Listing Standards for Audit Committees

     153  
 

Item 16E.

    

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     153  
 

Item 16F.

    

Change in Registrant’s Certifying Accountant

     154  
 

Item 16G.

    

Corporate Governance

     154  
 

Item 16H.

    

Mine Safety Disclosure

     156  

PART III

            157  
 

Item 17.

    

Financial Statements

     157  
 

Item 18.

    

Financial Statements

     157  
 

Item 19.

    

Exhibits

     157  

 

 

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PART I

 

Item 1.

Identity of Directors, Senior Management and Advisers

A. Directors and Senior Management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.

 

Item 2.

Offer Statistics and Expected Timetable

A. Offer Statistics

Not applicable.

B. Method and Expected Timetable

Not applicable.

 

Item 3.

Key Information

A. Selected Financial Data

The following tables set forth selected financial data, including selected historical financial information as of and for each of Fiscal 2020, Fiscal 2019, Fiscal 2018, Fiscal 2017 and Fiscal 2016, in accordance with IFRS, as issued by the International Accounting Standards Board.

The selected IFRS consolidated financial data as of March 31, 2020 and 2019 and for each of Fiscal 2020, Fiscal 2019 and Fiscal 2018 are derived from our audited IFRS consolidated financial statements included in this annual report on Form 20-F. The selected IFRS consolidated financial data as of March 31, 2018, 2017 and 2016 and for Fiscal 2017 and Fiscal 2016 are derived from our audited IFRS consolidated financial statements not included in this annual report on Form 20-F.

You should read our selected financial data in conjunction with Item 5 “Operating and Financial Review and Prospects.”

 

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Selected Financial Data Prepared in Accordance with IFRS

 

     Year ended March 31,  
     2020     2020     2019     2018     2017     2016  
    

(In US$ millions,

except share and

per share

amounts)

                               
  (in Rs. millions, except share and per share amounts)  

Revenues

     33,782.1       2,556,123.4       2,959,666.9       2,856,910.8       2,632,176.8       2,682,793.8  

Finance revenues

     503.9       38,127.8       33,995.5       26,040.3       24,318.3       22,318.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     34,286.0       2,594,251.2       2,993,662.4       2,882,951.1       2,656,495.1       2,705,112.6  

Change in inventories of finished goods and work-in-progress

     294.9       22,311.9       20,532.8       (20,465.8     (73,751.2     (27,540.1

Purchase of products for sale

     1,616.1       122,283.5       132,588.3       159,039.9       139,245.3       128,494.6  

Raw materials, components and consumables

     20,167.4       1,525,964.3       1,809,875.4       1,718,028.0       1,593,803.1       1,536,255.1  

Employee cost

     4,075.5       308,372.8       346,261.1       302,624.8       283,588.0       288,117.4  

Defined benefit pension plan amendment

     —         —         1,479.3       (36,090.1     —         —    

Depreciation and amortization

     2,744.1       207,632.1       230,197.8       209,818.2       182,405.4       168,074.9  

Other expenses

     7,947.4       601,339.1       657,298.7       629,755.4       608,461.6       585,321.4  

Impairment losses in Jaguar Land Rover

     —         —         278,379.1       —         —         —    

Impairment losses in passenger vehicle business

     58.9       4,454.8       —         —         —         —    

Provision for Onerous Contracts

     102.7       7,770.0       —         —         —         —    

Impairment losses of assets in subsidiaries

     46.7       3,532.0       —         —         —         —    

Provision/(Reversal) for loss of inventory (net of insurance recoveries)

     —         —         —         (111.9     (13,301.0     16,383.9  

Expenditure capitalized

     (2,313.3     (175,033.8     (196,595.6     (185,882.0     (168,768.8     (166,783.2

Assets written off/loss on sale of assets and others (net)

     41.4       3,131.9       13,186.7       29,148.6       11,418.6       9,477.4  

Other (income)/loss (net)

     (211.6     (16,009.4     (35,438.7     (47,873.3     (39,590.1     (12,613.0

Foreign exchange (gain)/loss (net)

     224.5       16,985.4       5,824.2       4,332.9       16,590.4       21,047.0  

Interest income

     (154.6     (11,696.9     (7,864.6     (7,122.4     (5,640.7     (7,186.6

Interest expense

     958.9       72,553.1       57,586.0       46,791.3       42,365.7       47,912.6  

Share of (profit)/loss of equity accounted investees (net)

     132.2       10,000.0       (2,095     (22,782.6     (14,930.0     (5,774.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) before tax

     (1,445.2     (109,339.6     (317,553.1     103,740.1       94,598.8       123,925.9  

Income tax (expense)/credit

     (48.2     (3,644.5     25,425.0       (37,678.2     (35,035.6     (27,420.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) after tax

     (1,493.4     (112,984.1     (292,128.1     66,061.9       59,563.2       96,505.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Year ended March 31,  
     2020     2020     2019     2018      2017      2016  
    

(In US$ millions,

except share and

per share

amounts)

                                 
  (in Rs. millions, except share and per share amounts)  

Net income/(loss) attributable to equity holders

     (1,506.0     (113,940.3     (293,142.7     65,040.7        58,539.3        95,516.2  

Net income/(loss) attributable to non-controlling interest

     12.6       956.2       1,014.6       1,021.2        1,023.9        988.8  

Dividends per share of Ordinary Shares

   US$ —         Rs. —         Rs. —         Rs. —          Rs.0.2        Rs. —    

Dividends per share of ‘A’ Ordinary Shares

   US$ —         Rs. —         Rs. —         Rs. —          Rs.0.3        Rs. —    

Weighted average of Ordinary Shares outstanding:

              

Basic

       2,95,23,53,090       2,887,348,474       2,887,348,357        2,887,218,310        2,873,188,838  

Diluted

       2,95,23,53,090       2,887,348,474       2,887,842,826        2,887,818,076        2,873,809,883  

Weighted average of ‘A’ Ordinary Shares outstanding:

              

Basic

       50,85,02,473       508,502,371       508,502,336        508,483,714        506,063,234  

Diluted

       50,85,02,473       508,502,371       508,736,110        508,736,110        506,320,979  

Earnings/(Loss) per share of Ordinary Shares:

              

Basic

   US$ (0.4     Rs. (32.9     Rs. (86.3     Rs. 19.1        Rs. 17.2        Rs. 28.3  

Diluted

   US$ (0.4     Rs. (32.9     Rs. (86.3     Rs. 19.1        Rs. 17.2        Rs. 28.2  

Earnings/(Loss) per share of ‘A’ Ordinary Shares:

              

Basic

   US$ (0.4     Rs. (32.9     Rs. (86.3     Rs. 19.2        Rs. 17.3        Rs. 28.4  

Diluted

   US$ (0.4     Rs. (32.9     Rs. (86.3     Rs. 19.2        Rs. 17.3        Rs. 28.3  

As described in Note 2(y) of our consolidated financial statements included in this annual report on Form 20-F, during Fiscal 2020, we applied IFRS 16.

As described in Note 2(x) of our consolidated financial statements included in this annual report on Form 20-F, during Fiscal 2019, we applied IFRS 9 and IFRS 15.

As described in Note 2(o) of our audited IFRS consolidated financial statements included in this annual report on Form 20-F, during Fiscal 2018, we changed our presentation of assets written off/loss on sale of assets and others (net) in the consolidated income statement. The change in presentation was retrospectively applied to prior year comparatives. The change in the presentation does not affect net income, total comprehensive income and earnings/(loss) per share in any of the periods presented.

As described in Note 2(x) of our audited IFRS consolidated financial statements included in this annual report on Form 20-F, during Fiscal 2017, we changed our presentation of foreign exchange gain/(loss) in the consolidated income statement. The change in presentation was retrospectively applied to prior year comparatives. There was no impact on net income for the years ended March 31, 2016.

 

     As of March 31,  
     2020      2020      2019      2018      2017      2016  
    

(in US$ millions,

except number of

shares)

                                    
     (in Rs. millions, except number of shares)  

Balance sheet data

                 

Total assets

     41,509.3        3,140,802.1        2,987,119.9        3,235,510.9        2,666,646.0        2,619,981.3  

Long term debt, net of current portion

     11,009.7        8,33,048.1        708,067.0        611,419.4        605,644.5        504,511.3  

Total shareholders’ equity

     7,903.7        598,034.7        558,067.4        913,521.0        538,842.2        768,036.7  

Number of equity shares outstanding

                 

-Ordinary Shares

        3,088,973,894        2,887,348,694        2,887,348,694        2,887,348,428        2,887,203,602  

-‘A’ Ordinary Shares

        508,502,896        508,502,371        508,502,371        508,502,291        508,476,704  

 

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Exchange Rate Information

For convenience, some of the financial amounts presented in this annual report on Form 20-F have been translated from Indian rupees into U.S. dollars at the rate of Rs.75.6650 to US$1.00, based on the rate in the city of Mumbai as published by the Foreign Exchange Dealers’ Association of India on March 31, 2020.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

This section describes the risks that we currently believe may materially affect our business, financial condition and results of operations. The factors below should be considered in connection with any forward-looking statements in this annual report on Form 20-F and the cautionary statements on page iii. Although we will make reasonable efforts to mitigate or minimize these risks, one or more of a combination of these risks could materially and adversely impact our business, revenues, sales, net assets, financial condition, results of operations, liquidity, capital resources and prospects.

Risks Associated with Our Business and the Automotive Industry

We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, and which may significantly harm our business, prospects, financial condition and results of operations.

Since the end of 2019, a disease caused by a novel strain of coronavirus (“COVID-19”), has spread in China and throughout the world, and the World Health Organization declared the COVID-19 outbreak a pandemic in March 2020. No fully effective treatments or vaccines have been developed as of the date of this annual report, and such development of treatments or vaccines may take a significant amount of time. The COVID-19 pandemic and associated governmental responses have adversely affected workforces, consumer sentiment, economies and financial markets. Such adverse effects, along with decreased consumer spending, have led to a global economic downturn. Based on the latest assessment by the International Monetary Fund, India’s economy is forecast to contract by 4.5% and it is estimated that the global economy would contract by 4.9% in 2020 due to the COVID-19 pandemic.

The COVID-19 pandemic has spread across all key regions, including the United Kingdom, China, North America, India and continental Europe, from which we derive the substantial majority of our revenues. Governments imposed travel bans, quarantines, lockdowns, “stay-at-home” orders, and similar mandates on individuals to substantially restrict daily activities and on many businesses to curtail or cease normal operations. Such measures, though temporary in nature, may continue or be re-enacted depending on the development of the COVID-19 pandemic. These measures have severely impacted the economic activity across the globe, resulting in the major economies facing the risk of significant and unprecedented economic downturns and recession. Social distancing measures have been eased or are being eased, and economic activity is gradually resuming. However, there remains considerable uncertainty about the extent, speed and regional differences of any recovery including any longer term impacts on our business and the possibility of a second wave of the COVID-19 pandemic. There have been instances where local lockdowns have been re-imposed where infection rates have started to suddenly increase again. There is a risk that widespread strict social distancing measures may be reintroduced in the future until effective treatments or vaccines have been developed. The COVID-19 pandemic, as well as efforts to contain it, has caused significant economic and financial disruptions around the world, including disruption to manufacturing operations, logistics and global supply chains and financial markets. Based on our management analytical estimates, as a result of the COVID-19 pandemic, profit before tax (“PBT”) for Tata Motors Limited was impacted by approximately Rs.5,000 million and free cash flow was impacted by approximately Rs.20,000 million in Fiscal 2020. We are expected to continue to be impacted by the COVID-19 pandemic in Q1 of Fiscal 2021 with minimal revenues and cash outflows estimated at Rs.50,000 million. As part of our mitigating actions, we have implemented rigorous cost and capital expenditure control measures, including cash improvement programme of Rs.60,000 million (including a cost savings programme of Rs.15,000 million). Capital expenditure guidance for Tata Motors Limited has been reduced by 66% to Rs.15,000 million in Fiscal 2021. For JLR, based on our management analytical estimates, PBT was impacted by GBP 599 million and free cash flow by GBP 767 million in Fiscal 2020, owing to the COVID-19 pandemic. JLR’s focus has been on conserving cash and prioritising capital expenditure on key products. It is expected that JLR will continue to be impacted by COVID-19 pandemic in Q1 Fiscal 2021 hence cash outflows is estimated to be up to GBP 2 billion. Capital expenditure guidance for JLR in Fiscal 2021 is reduced by 40% to GBP 2.5 billion while cash and cost savings through Project Charge + have been targeted at GBP 1.5 billion for Fiscal 2021.

 

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As a result of the COVID-19 pandemic, the Company and Jaguar Land Rover enacted temporary plant shutdowns and implemented work-from-home protocols for employees who were able to work remotely in various jurisdictions, including India and the United Kingdom, to ensure public safety and to comply with government guidelines in various geographies. These shutdowns caused and will continue to cause disruptions in our business and negative effects on our cash flows, primarily because our operations realize less revenue during shutdowns while continuing to incur costs. As of the date of this annual report, Tata Motors Limited and Jaguar Land Rover have resumed production at all of its plants except for the Jaguar plant at Castle Bromwich in the UK (scheduled to restart production in August 2020), each under defined health and safety protocols.

There is significant uncertainty surrounding the extent and duration of such business disruptions, as continued cross-border restrictions could adversely affect our supply chains in India and globally. Although we have restored operations at our production facilities, our manufacturing rates and timelines may nonetheless be affected by global economic markets, the decrease in consumer confidence or changing behaviors such as working from home arrangements, which could impact demand in the global transportation and automotive industries.

The economic slowdown attributable to the COVID-19 pandemic has led to a severe decrease in global vehicle sales in markets around the world and the extent of recovery is still uncertain. Moreover, as a result of the restrictions imposed by governments in affected countries and negative consumers’ reaction to the COVID-19 pandemic in general, showroom traffic at our dealers dropped significantly and many dealers temporarily ceased operations, thereby reducing dealers’ demands for our products. Recently, over 98% of Jaguar Land Rover retailer sites are open either fully or partially, while over 90% of Tata Motors retailer sites have reopened.

The COVID-19 pandemic and the resulting business disruptions in several jurisdictions where we operate have had a material adverse impact on our operations, liquidity, business, financial conditions and/or credit ratings (Please see Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Sources of Funding Liquidity” of this annual report on Form 20-F). Any future impact on our business may take some time to materialize and may not be fully reflected in the results for the first quarter of Fiscal 2021 and certain levels of disruption are expected for the remainder of Fiscal 2021. Even after the COVID-19 pandemic subsides, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur. Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic could have a continuing adverse effect on demand for our products, as well as limit or significantly reduce points of access to such products.

Further, government-sponsored liquidity or stimulus programs in response to the COVID-19 pandemic may not be available to our customers, suppliers, dealers, or us, and in the event that such programs are available, they may nevertheless be insufficient to address the impact of the COVID-19 pandemic. Supply and distribution chains may be disrupted by the bankruptcies of our suppliers or dealers or a permanent discontinuation of their operations. Consequently, the impact on our business, prospects, financial condition and results of operation cannot be fully determined at this time.

Furthermore, we have implemented enhanced health and safety measures in our operations, such as new screening protocols, in line with public health rules and guidelines and industry practices to combat the spread of the COVID-19 pandemic. We are exposed to the risk of an increase in the number of workplace and third-party claims arising from actual or alleged failures to implement such measures adequately, or at all. In addition to the increase in costs associated with the implementation of such measures, we are also faced with the potential increase in legal, advisory and other costs as a result of any COVID-19 pandemic related claims from workers or third party suppliers that may come into contact with our operations. All or any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operation.

Deterioration in global economic conditions could have a material adverse impact on our sales and results of operations.

The ongoing COVID-19 pandemic has a significant impact on economic activity globally. There are potentially high risks of credit rating downgrades across different sectors and countries. All geographies we operate in may be severely impacted as a result of ongoing COVID-19 pandemic. There remains considerable uncertainty around the ongoing COVID-19 pandemic and its negative impact on the financial and commodity markets.

The automotive industry could be materially affected by the general economic conditions and developments in India and around the world and investors’ reaction to such conditions and developments. The automotive industry, in general, is cyclical, and economic slowdowns in the recent past have affected the manufacturing sector in India, including automotive and related industries. Deterioration of key economic metrics, such as the growth rate, interest rates and inflation, reduced availability of competitive financing rates for vehicles, implementation of burdensome environmental and tax policies, work stoppages and increase in freight rates and fuel prices could materially and adversely affect our automotive sales and results of operations. Deterioration in key economic factors in countries where we have sales operations may result in a decrease in demand for our automobiles. A decrease in demand could, in turn, cause automobile prices and manufacturing capacity utilization rates to fall.

 

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Any worldwide financial instability, including as a result of the ongoing COVID-19 pandemic and with respect to increased protectionist measures and withdrawal from trade pacts by countries in which we operate, could also have a negative impact on the Indian economy, including the movement of exchange rates and interest rates in India. In the event global economic recovery is slower than expected, or if there is any significant financial disruption, this could have a material adverse effect on our cost of funding, portfolio of financing loans, business, prospects, results of operations, financial condition and the trading price of the Company’s Shares and ADSs.

In November 2018, the United States, Mexico and Canada signed the United States-Mexico-Canada Agreement (“USMCA”), which is intended to succeed the North American Free Trade Agreement. The USMCA was revised by the three countries in December 2019, and has been ratified by the legislature of each of three countries. Potential governmental actions related to tariffs or international trade agreements has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the North American economy or world economy or certain sectors thereof and, thus, our business.

Our Jaguar Land Rover business has significant operations in the United Kingdom, North America, continental Europe and China, as well as sales operations in markets across the globe. Conditions in automotive markets remained challenging in Fiscal 2020 as a result of the COVID-19 pandemic significantly impacting sales and operations, as well as the wider global economy. If automotive demand softens because of lower or negative economic growth in key markets or due to other factors, Jaguar Land Rover’s business, prospects, financial condition and results of operation could be materially and adversely affected as a result. In addition, the current U.S. presidential administration may seek to introduce additional changes to laws and policies governing international trade and impose additional tariffs and duties on foreign vehicle imports, which could have a material adverse effect on Jaguar Land Rover’s sales in the United States.

The United Kingdom’s exit from the European Union may adversely impact our business, prospects, financial condition and results of operations.

Brexit and the potential impact of the withdrawal of the United Kingdom have created significant uncertainty regarding the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union-derived laws to replace or replicate. On March 29, 2017, the United Kingdom formally notified the European Council of its intention to leave the European Union. After a number of iterations, the European Commission and the UK’s negotiators reached an agreement on the terms of the United Kingdom’s withdrawal from the European Union, and these terms have been approved by the UK and European parliaments. The United Kingdom formally withdrew from the European Union, in accordance with the terms provided by the withdrawal agreement, on January 31, 2020 after which it entered into the transition period specified in the withdrawal agreement, which is currently scheduled to end on December 31, 2020. During this period, it is expected that the majority of the existing European Union rules will continue to apply in the United Kingdom. The terms of Brexit are still uncertain, including United Kingdom’s access to the European Union single market permitting the exchange of goods and services between the United Kingdom and the European Union. The United Kingdom may not be able to reach an agreement on its future relationship with the European Union by the end of the transitional period, and it is uncertain whether an extension to the transitional period, as a result of the COVID-19 pandemic or otherwise, is possible.

The legal, political and economic uncertainty regarding the terms of the United Kingdom’s exit from the European Union may adversely affect our businesses, including Jaguar Land Rover. This uncertainty may also result in economic slowdown and/or a deteriorating business environment in the United Kingdom and in one or more European Union Member States. In particular, changes in taxes, tariffs and other fiscal policies could have a significant impact on Jaguar Land Rover; 21% of its retail sales volume in Fiscal 2020 was to customers based in the Europe Union (excluding the United Kingdom) and a substantial portion of its suppliers are situated there. The extent of Brexit’s impact on our operations in the United Kingdom will depend significantly on the trade negotiations between United Kingdom and European Union and the length of the transition period. The economic outlook could be further adversely affected by the risk of a greater push for independence by Scotland or Northern Ireland or the risk that the euro as the single currency of the European Union could cease to exist. We may be subject to risks associated with related foreign exchange volatility and supply chains if access to the European Union market is restricted as a result of Brexit. Changes to the UK’s border and immigration policy could likewise occur as a result of Brexit, potentially affecting our business’s ability to recruit and retain employees from outside the United Kingdom. Any of the foregoing factors and other factors relating to Brexit that we cannot predict may have a material adverse effect on our business, prospects, financial condition and results of operation, including the risks of impairments.

 

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Impairment of tangible and intangible assets may have a material adverse effect on our results of operations.

Designing, manufacturing and selling vehicles is capital intensive and requires substantial investments in tangible and intangible assets such as research and development, product design and engineering technology. We review the value of our tangible and intangible assets to assess on an annual basis or trigger events basis whether the carrying amount is less than the recoverable amount for the asset concerned based on underlying cash-generating units (“CGU”) (such as Commercial Vehicles, Passenger Vehicles, Jaguar Land Rover and Vehicle Financing), either based on value in use (“VIU”) or fair value. During Fiscal 2020, we recorded an impairment charge of Rs.4,455 million for our Passenger Vehicles business due to changes in market conditions. During Fiscal 2020, we also recorded impairment charge of Rs.2,975 million and Rs.557 million in our subsidiaries Tata Motors European Technical Centre Plc and Trilix S.r.l., respectively. We recorded a GBP3.1 billion (Rs.278,379 million) impairment charge during Fiscal 2019 due to adverse market conditions, particularly in China, rising interest rates and the failure to meet internal business plans for our Jaguar Land Rover business. We may have to bear further impairment losses in the future if the carrying amount of tangible and intangible assets exceeds the recoverable amount, which could have a material adverse effect on our business, prospects, financial condition and results of operation.

Disruptions to our supply chains and shortages of essential raw materials may adversely affect our production and results of operations.

We rely on third parties for sourcing raw materials, parts and components used in the manufacture of our products. At the local level, we rely on smaller enterprises where the risk of insolvency is greater. Furthermore, for some parts and components, we are dependent on a single source. Our ability to procure supplies in a cost-effective and timely manner or at all is subject to various factors, some of which are not within our control. Furthermore, there is a risk that manufacturing capacity does not meet the sales demand thereby compromising our business performance. Given the time frames and investments required for any adjustment to the supply chain, there is no near-term remedy for such a risk. While we manage our supply chain as part of our supplier management process, any significant problems or shortages of essential raw materials in the future could adversely affect our results of operations.

The ongoing COVID-19 pandemic may lead to significant disruptions in the supply chains in India and globally. There are risks that our suppliers may be adversely affected hence may not be able to fully resume normal operations and ramp up their production schedule to levels immediately prior to the COVID-19 pandemic. Our suppliers of critical components are located across the world and some of them have declared provisions related to force majeure under relevant contracts. Thus, we expect disruptions, at uncertain frequencies, in operations at our global and Indian tier 1, 2 and 3 suppliers leading to inconsistent supplies. Further, suppliers are saddled with huge work-in-progress and semi-finished inventories, which may reduce their working capital and their ability to supply materials in line with the customer expectations.

In response to the COVID-19 pandemic, various national, state, and local governments where we and our suppliers operate issued decrees prohibiting certain businesses from continuing to operate and certain workers from reporting to work. Those decrees have resulted in supply chain disruptions and higher absenteeism in our facilities or our suppliers’ factories. It remains unclear how long these decrees will remain in place, whether decrees will be re-imposed, what additional decrees may be instituted, and the impact they may have on our company and our suppliers.

For Tata Motors Limited, the COVID-19 pandemic initially impacted supplies from certain areas in China in February 2020. Subsequently, supplies from European vendors were affected. Eventually, the nationwide lockdown imposed on India in late March 2020 led to complete suspension of manufacturing activities across the country. While manufacturing activities have resumed gradually across India since late May 2020, there are uncertainties for some supplies due to impact on vendors of shortage of manpower, limited raw material supplies, restrictions on working hours, incidence of COVID-19 positive cases at the supplier’s end and restricted permission to operate as per local regulations. Jaguar Land Rover enacted temporary shutdowns at the China Joint Venture plant in January 2020 and elsewhere in March 2020 as a result of which its supply chain was inevitably disrupted. Jaguar Land Rover has restarted production at China Joint Venture since March 2020 and most of other plants since mid-May 2020. While JLR’s suppliers have reopened lately and there have been no significant supply disruptions, current economic environment has put pressure on the supply chain and as a result JLR may receive claims in relation to suppliers in distress, and other COVID-19 pandemic related disruption claims. We may be compelled to provide additional support for our suppliers as a result of the COVID-19 pandemic. We are working closely with our suppliers to monitor the risks by, inter alia, defining inventory maintenance norms, building safety stocks, exploring localization options and exploring alternative sources, among others.

 

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Deterioration in automobile demand and lack of access to sufficient financial arrangements for our supply chain could impair the timely availability of components to our business. In addition, if one or more of the other global automotive manufacturers were to become insolvent, this would have an adverse impact on the supply chains and may further adversely affect our results of operations. We are also exposed to supply chain risks relating to lithium ion cells, which are critical for our electric vehicle production. Any disruption in the supply of battery cells from such suppliers could disrupt production of our vehicles. The severity of this risk is likely to increase as we and other manufacturers expand the production of electric vehicles and the demand for such vehicles increases.

We have also entered into supply agreements with Ford and certain other third parties for critical components and we remain reliant upon Ford and Ford’s joint venture with the PSA Group (the “Ford-PSA Joint Venture”) for a portion of our engines. However, following the launch of the Engine Manufacturing Centre (“EMC”) in Wolverhampton, and the subsequent China Joint Venture, we now also manufacture our own “in-house” engines, as such supply agreements will terminate by December 2020. We may not be able to manufacture certain types of engines or find a suitable replacement supplier in a timely manner in the event of any disruption in the supply of engines, or parts of engines, and other hardware or services provided to us by Ford or the Ford-PSA Joint Venture and such disruption could have a material adverse impact on our business, prospects, financial condition and results of operation.

A change in requirements under long-term supply arrangements committing Jaguar Land Rover to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller, could have a material adverse impact on our business, prospects, financial condition and results of operation. We have entered into a number of long-term supply contracts that require Jaguar Land Rover to purchase a fixed quantity of parts to be used in the production of Jaguar Land Rover vehicles (e.g., “take-or-pay” contracts). If the need for any of these parts were to lessen, including as a result of the COVID-19 pandemic or otherwise, Jaguar Land Rover could still be required to purchase a specified quantity of the part or pay a minimum amount to the seller pursuant to the take-or-pay contract, which could have a substantial adverse effect on our business, prospects, financial condition and results of operation.

Tata Motors Limited has also entered into agreements for the purchase of components from certain suppliers. If we have to procure lower quantities than committed hence our costs of procurement thereby increase, we may have to record provisions towards such contracts, thereby impacting our financial condition and results of operation. In Fiscal 2020, Tata Motors Limited recognized a provision of Rs. 7,770 million towards certain supplier contracts.

We are exposed to liquidity risks, including risks related to changes in our credit rating, which could adversely affect the value of our debt securities, finance costs and our ability to obtain future financing.

Our main sources of liquidity are cash generated from operations, existing notes, external debt in the form of factoring discount facilities and other revolving credit facilities. However, prevailing conditions in credit markets reflecting negative global economic conditions (resulting from result of higher oil prices, excessive public debt, the COVID-19 pandemic or for any other reasons) and lower consumer demand may adversely affect both consumer demand and the cost and availability of finance for our business and operations. See Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Sources of Funding Liquidity—Loan Covenants.”

We are also subject to various types of restrictions or impediments on the ability of our companies in certain countries to transfer cash across our companies through loans or dividends. These restrictions or impediments are caused by exchange controls, withholding taxes on dividends and distributions and other similar restrictions in the markets in which we operate. The transfer of cash is also subject to certain restrictions on cash pooling, intercompany loan arrangements or interim dividends in certain jurisdictions. We may face significant liquidity risks due to squeezed credit lines for non-banking financial companies (“NBFCs”) following the Infrastructure Leasing & Financial Services Limited crisis in 2018 and its impact on the Indian lending sector.

The COVID-19 pandemic may increase pressure on liquidity of the Company and its subsidiaries. (see “—We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and results of operations.”)

Any credit ratings assigned to us or our debt securities may not reflect the potential impact of all risks related to structural, market, additional risk factors discussed and other factors that may affect the value of our debt securities. Credit rating agencies continually review the ratings they have assigned and their ratings may be subject to revision, suspension or withdrawal by the rating agency at any time. A downgrade in our credit rating may negatively affect our ability to obtain future financing to fund our operations and capital needs, which may affect our liquidity. It may also increase our financing costs by increasing the interest rates of our outstanding debt or the interest rates at which we are able to refinance existing debt or incur additional debt. A credit rating is not a recommendation to buy, sell or hold securities.

 

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The ongoing COVID-19 pandemic and economic slowdown in certain geographic areas have led to Standard & Poor’s Rating Group (“S&P”) downgrading the credit ratings of Tata Motors Limited and its subsidiary Jaguar Land Rover from B+ to B in April 2020 and Moody’s Investors Service (“Moody’s”) downgrading the credit rating of Tata Motors Limited from BA3 to B1 and changing the outlook of Jaguar Land Rover from B1/ Under Review to B1/ Negative in June 2020. If disruption to the business as a result of the COVID-19 pandemic continues and increases further or the impact is worse than anticipated, the Company and its subsidiary may see further downgrades in credit ratings (see “—We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and results of operations.”)

Intensifying competition could materially and adversely affect our business, prospects, financial condition and results of operations.

The global automotive industry is highly competitive, and competition is likely to further intensify, including from new industry entrants. Competition is especially likely to increase in the premium automotive categories as each market participant intensifies its efforts to retain its position in established markets while also developing a presence in other key markets. Some of our competitors based in the European Union may gain a competitive advantage that would enable them to benefit from their access to the European Union single market post-Brexit. There is no assurance that we will be able to compete successfully in the global automotive industry in the future.

We also face strong competition in the Indian market from domestic and foreign automobile manufacturers. Improving infrastructure and growth prospects in India, compared to those of other mature markets, have attracted a number of international companies to India, either through joint ventures with local partners or through independently owned operations in India. International competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources. Consequently, domestic competition is likely to further intensify in the future. There is no assurance that we will be able to implement our future strategies in a way that will mitigate the effects of increased competition in the Indian automotive industry.

If our competitors consolidate or enter into other strategic partnerships or joint ventures, they may be able to take better advantage of economies of scale. Some of our competitors have formed such strategic alliances in recent years including the Renault–Nissan–Mitsubishi Alliance, which further included Mitsubishi as a partner in 2017, and the merger between Fiat Chrysler and Peugeot in accordance with the combination agreement entered into on December 18, 2019. If competitors are able to benefit from the cost savings offered by consolidation or strategic partnerships, it could adversely affect our competitiveness. Further, our growth strategy relies on the expansion of our operations in less mature markets abroad, where we may face significant competition and higher than expected costs to enter and establish ourselves.

A significant reliance on key markets by both TML and Jaguar Land Rover increases the risk of a negative impact from reduced customer demand in those countries.

We rely on certain key markets, including the United Kingdom, China, North America, India and continental Europe, from which we derive the substantial majority of our revenues. A decline in demand for our vehicles in these major markets may, in the future, significantly impair our business, financial position and results of operations. For example, the recent adverse public perception towards diesel powered vehicles, resulting from emissions scandals and tax increases on diesel vehicles, has precipitated a sharp fall in diesel sales, primarily in the United Kingdom and Europe, and created uncertainty for customers that could further impact our sales of diesel vehicles in the future. The ongoing COVID-19 pandemic has had a significant impact across our key markets worldwide. Additionally, in China, the economy is experiencing a tempering of industry growth and increased pricing pressures due to macroeconomic volatility, regulatory and policy changes, softening consumer demand and increasing competition. Softening of the Chinese economy would likely impact our growth opportunities in China, an important market for us. In addition, our strategy, which includes new product launches and expansion into growing markets, may not be sufficient to mitigate a decrease in demand for our products in mature markets in the future, which could have a significant adverse impact on our financial performance.

Our future success depends on our ability to satisfy changing customer demands by offering innovative products in a timely manner and maintaining product competitiveness and quality.

New technologies, climate change concerns, increases in fuel prices and certain government regulations have resulted in changes in customer preferences and have encouraged customers to look beyond standard purchasing factors (such as price, design, performance, brand image and features). Customer preferences in certain more mature markets have trended towards smaller and more fuel-efficient and environmentally-friendly vehicles. Such consumer preferences could materially affect our ability to sell premium Passenger Cars and large or medium-sized all-terrain vehicles at current or target volume levels, and could have a material adverse effect on our general business activity, net assets, financial position and results of operations.

 

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In contrast to other mature markets, consumer preferences in the United States have shifted towards increased demand for pickup trucks and larger SUVs. A shift in consumer demand away from these vehicles within the United States towards compact and mid-size Passenger Cars, whether in response to higher fuel prices or other factors, could adversely affect our profitability. Conversely, if the trend in U.S. consumer preferences for SUVs holds, we could face increased competition from other carmakers as they adapt to the market shift and introduce their own SUV models, which could materially and adversely impact our business, financial position or results of operations. Our operations may be significantly impacted if we fail to develop, or experience delays in developing, fuel-efficient vehicles and certain technologies that reflect changing customer preferences and meet the specific requirements of government regulations. Our competitors may gain significant advantages if they are able to offer products satisfying customer needs or government regulations earlier than we are able to, which could adversely impact our business, prospects, financial condition and results of operation.

Further, there is no assurance that our new models will meet our sales expectations, in which case we may be unable to realize the intended economic benefits of our investments, which would materially affect our business, results of operations and financial condition. In addition, there is a risk that our quality standards can be maintained only by incurring substantial costs for monitoring and quality assurance. A decrease in the quality of our vehicles (or public perception of such a decrease) could damage our image and reputation as a premium automobile manufacturer and materially affect our business, prospects, financial condition and results of operation.

There is also a risk that the capital invested on researching and developing new technologies, including autonomous, connected and electrification technologies, or the capital invested in mobility solutions to overcome and address future travel and transport challenges, will, to a considerable extent, have been spent in vain, because the technologies developed or the products derived therefrom are unsuccessful in the market or exhibit failures that are impracticable or too costly to remedy or because competitors have developed better or less expensive products. It is possible that we could then be compelled to make new investments in researching and developing other technologies to maintain our existing market share or to win back the market share lost to competitors.

In addition, product development cycles can be lengthy, and there is no assurance that new designs will lead to revenues from vehicle sales, or that we will be able to accurately forecast demand for our vehicles, potentially leading to inefficient use of our production capacity. Additionally, our high proportion of fixed costs, due to our significant investment in property, plants and equipment, further exacerbates the risks associated with incorrectly assessing demand for our vehicles.

Our production facilities are highly regulated and we may incur significant costs to comply with, or address liabilities under, environmental, health and safety laws and regulations applicable to them.

Our production facilities are subject to a wide range of increasingly strict environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, releases into the environment, human exposure to hazardous materials, the storage, treatment, transportation and disposal of wastes and hazardous materials, the investigation and clean-up of contamination, process safety and the maintenance of health and safety conditions in the workplace. Many of our operations require permits and controls to monitor or reduce pollution. We have incurred, and will continue to incur, substantial on-going capital and operating expenditures to ensure compliance with current and future environmental, health and safety laws and regulations or their more stringent enforcement. Violations of these laws and regulations could result in the imposition of significant fines and penalties, the suspension, revocation or non-renewal of our permits, production delays or limitations, imprisonment, or the closure of our plants. Other environmental, health and safety laws and regulations could impose restrictions or onerous conditions on the availability or the use of raw materials we need for our manufacturing process. Violations of these laws and regulations may occur, among other ways, from errors in monitoring emissions of hazardous or toxic substances from our vehicles or production sites into the environment, such as our use of incorrect methodologies or defective or inappropriate measuring equipment, errors in manually capturing results, or other mistaken or unauthorized acts of our employees, suppliers or agents.

Our manufacturing units must ensure compliance with various environmental statutes. Significant statutes for our business include the Water (Prevention and Control of Pollution) Act, 1974 and the Rules thereunder, the Air (Prevention and Control of Pollution) Act, 1981 and the Rules thereunder, the Environment Protection Act, 1986 and the Rules thereunder and the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, pollution control boards (“PCBs”), which are vested with diverse powers to deal with water and air pollution and hazardous waste disposal, have been set up in each state. The PCBs are responsible for establishing standards for maintenance of clean air and water, directing the installation of pollution control devices in industries and undertaking inspection to ensure that units or plants are functioning in compliance with the standards prescribed. These authorities also have the power of search, seizure and investigation.

 

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The Corporate Average Fuel Economy (“CAFÉ”) standards are applicable to M1 category vehicles from April 1, 2017. As a result, we are required to demonstrate CAFE compliance for our Passenger Vehicles, Commercial Vehicles and EV M1 models. TML has successfully complied with the Phase 1 CAFE requirements for Fiscal 2017 and Fiscal 2018. Through the use of the CAFE calculator, we regularly monitor production volumes and process to ensure that organizational level CAFE compliance (which will require us to produce enough fuel-efficient models to compensate for those models having higher CO2 emissions in g/km) is established at all times during the year. Any non-compliance could lead to penalties, product recalls and/or other punitive measures. To support our compliance obligations, our overall product portfolio needs to be enhanced with the incorporation of electric and hybrid vehicles as well as the inclusion of environmental-friendly technological features in existing and forthcoming models.

In 2016, the Ministry of Environment, Forests & Climate Change (“MoEFCC”) under the Government of India re-vamped several national level legislations governing waste management. Specifically the Plastic Waste Management Rules 2016, the Bio-Medical Waste (BMW) Management Rules 2016, e-waste Management Rules-2016, and the Construction and Demolition (C&D) Waste Management Rules 2016. All our plants have analyzed these new regulations for its applicability and aligned their compliance practices accordingly.

Our business and manufacturing processes result in the emission of greenhouse gases such as carbon dioxide. We expect legal requirements to reduce greenhouse gases to become increasingly more stringent and costly to address over time. For example, the European Union Emissions Trading Scheme (“EU ETS”), a European Union-wide system in which allowances to emit greenhouse gases are issued and traded, is now in Phase IV and currently applies to three manufacturing facilities in the United Kingdom, and is in the process of being applied for our Slovakia manufacturing facility. The free allocation of EUETS carbon allowances significantly reduces in Phase 4 of the scheme (from end of 2020) and, as a result, we will be required to purchase an increased number of allowances, potentially at substantial cost. This forecast is subject to further evaluation based on the final terms of the Brexit negotiations and their impact on the regulated carbon schemes. In any event, there will be a cost to purchase credits in Slovakia and that will be covered following EUETS permit application and issue.

In response to increased public interest, carbon legislation is rapidly evolving around the globe. The implementation requirements differ, with some countries such as the United Kingdom setting targets for “Net Zero Carbon” attainment by 2050. In other countries, timeframes and the degree of commitment varies.

We have a Climate Change Agreement (“CCA”) in the United Kingdom which covers our three vehicle manufacturing plants and one of our Special Operations facilities. This requires us to deliver a 15% reduction in energy use per vehicle by 2020 compared to the 2008 baseline.

The Carbon Reduction Commitment (“CRC”) energy efficiency scheme ceased in 2019. In response to the loss of revenue for Her Majesty’s Treasury from the cessation of the CRC, the amount of Climate Change Levy that we pay has increased in the United Kingdom. There has been the development of the Streamlined Energy and Carbon Reporting Scheme (“SECR”) which will replace reporting under CRC and is compulsory for UK entities for UK operations.

The Best Available Techniques Reference Document (“BREF”) for our paint shops has been under review and in 2019 changes have been proposed, including the lowering of permissible emissions to 30g/m2. Subject to the final terms of Brexit negotiations, it is possible that our paint shops will need to adhere to the revised BREF requirements within four years from its issue date and, in any event, our paint shop in Slovakia will need to meet this requirement.

Many of our sites have an extended history of industrial activity. We may be required to investigate and remediate contamination at those sites, as well as properties we formerly operated, regardless of whether we caused the contamination or the activity causing the contamination was legal at the time it occurred. For example, some of our buildings at our Solihull plant and other plants in the United Kingdom are undergoing an asbestos removal program in connection with on-going refurbishment and rebuilding. In our overseas facilities prior to purchase, we undertook studies that informed us of the presence of contamination or otherwise in the ground prior to development. In Brazil, our manufacturing site is adjacent to a facility (the “Itatiaia West” site), where organic solvent contamination of the ground had previously occurred. We have purchased the Itatiaia West site and are currently progressing relevant permits for operation and developing plans for further remediation of the organic solvent contamination. The Itatiaia West site is listed on the Environmental Regulators site (Instituto Estadual do Ambiente) as contaminated. Some of these historical issues are being addressed in conjunction with our site development works whilst others are subject to ongoing treatment regimes.

 

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In connection with contaminated properties, as well as our operations generally, we also could be subject to claims by government authorities, individuals and other third parties seeking damages for alleged personal injury or property damage or damage to natural resources resulting from hazardous substance contamination or exposure caused by our operations, facilities or products. The discovery of previously unknown contamination, or the imposition of new obligations to investigate or remediate contamination at our facilities, could result in substantial unanticipated costs. We could be required to establish or substantially increase financial reserves for such obligations or liabilities and, if we fail to accurately predict the amount or timing of such costs, the related adverse impact on our business, propsects, financial condition or results of operations could be material.

If we are unable to effectively implement or manage our growth strategy and strategy to deliver competitive business efficiency, our business, prospects, financial condition and results of operation could be materially and adversely affected.

As part of our growth strategy, we may open new manufacturing, research or engineering facilities, expand existing facilities, add additional product lines or expand our businesses into new geographical markets that feature higher growth potential than many of the more mature automotive markets in developed countries. There is a range of risks inherent in such a strategy that could adversely affect our ability to achieve these objectives, including, but not limited to: the potential disruption of our business; the uncertainty that we may not be able to meet or anticipate consumer demand; the uncertainty that a new business will achieve anticipated operating results; the difficulty of managing the operations of a larger company; the difficulty of competing for growth opportunities with companies that have greater financial resources than we have; and other similar operational and business risks. More specifically, our international businesses face a range of risks and challenges, including, but not limited to: language barriers, cultural differences, inherent difficulties and delays in contract enforcement and the collection of receivables under the legal systems of foreign countries, the risk of non-tariff barriers, regulatory and legal requirements, environmental permits and other similar types of governmental consents, liquidity, trade financing or cash management facilities, export and import restrictions, multiple tax regimes, foreign investment restrictions, foreign exchange controls and restrictions on repatriation of funds, other restrictions on foreign trade or investment sanctions, the burden of complying with a wide variety of foreign laws and regulations and other similar operational and business risks. If we are unable to manage risks related to our expansion and growth in new geographical markets and fail to establish a strong presence in high growth markets, our business, prospects, financial condition and results of operation could be adversely affected.

Delivering on our business and strategic objectives is key to sustaining profitable and cash accretive growth. Any uncertainties that materially compromise the achievement of our objectives could unfavorably impact our operational and financial performance. With the launch of Turnaround 2.0, Tata Motors Limited intends to drive its journey towards Competitive, Consistent and Cash-accretive growth, Jaguar Land Rover has announced Project Charge + and Project Accelerate to conserve cash, reduce costs and increase operational efficiency. If we are unable to deliver these objectives, our business, prospects, financial condition and results of operation could be materially and adversely affected.

Deterioration in the performance of any of our subsidiaries, joint ventures or affiliates could materially and adversely affect our results of operations.

We have made and may continue to make capital commitments to our subsidiaries, joint ventures and affiliates. If the business or operations of any of these subsidiaries, joint ventures and affiliates deteriorate, the value of our investments may decline substantially. We are also subject to risks associated with joint ventures and affiliates wherein we retain only partial or joint control.

In joint ventures, we are required to foster our relationships with our co-owners as well as promote the overall success of the joint venture. If there is a significant change in these relationships (for example, if a co-owner changes or relationships deteriorate), our success in the joint venture may be materially adversely affected.

 

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We entered into a joint venture with Chery Automobile Company Ltd. (“Chery”) in China to develop, manufacture and sell certain Jaguar Land Rover vehicles and at least one own-branded vehicle in China (the “China Joint Venture”). Additionally, in March 2018, Jaguar Land Rover announced its strategic partnership with Waymo LLC (“Waymo”) to develop the world’s first premium self-driving electric vehicle. Joint ventures and strategic partnership projects, like our joint venture in China and partnership with Waymo, may be developed pursuant to agreements over which we only have partial or joint control. Investments in projects over which we have partial or joint control are subject to the risk that the other shareholders of the joint venture, who may have different business or investment strategies than we do or with whom we may have a disagreement or dispute, may have the ability to block business, financial or management decisions, such as the decision to distribute dividends or appoint members of management, which may be crucial to the success of the project or our investment in the project, or otherwise implement initiatives that may be contrary to our interests. Moreover, our partners may be unable, or unwilling, to fulfill their obligations under the relevant joint venture agreements and shareholder agreements or may experience financial or other difficulties that may adversely impact our investment in a particular joint venture or strategic partnership projects.

We are subject to risks associated with product liability, warranties and recalls.

We are subject to risks and costs associated with product liability, warranties and recalls in connection with performance, compliance or safety related issues affecting our vehicles. From time to time, we may be subject to investigations by governmental authorities relating to safety and other compliance issues with our vehicles. For example, there are ongoing investigations with governmental agencies in United Kingdom relating to the quality of TDV6 diesel engines installed in some of our vehicles that are already in service, which have resulted in repair actions being required. In particular, as our vehicles become more technologically advanced, we are subject to risks related to their software and operation, including our advanced driver assistance systems automation. We expend considerable resources in connection with product recalls and these resources typically include the cost of the part being replaced and the labor required to remove and replace the defective part. In addition, product recalls can cause our consumers to question the safety or reliability of our vehicles, which may harm our reputation. Any harm to our reputation may result in a substantial loss of customers. For example, regarding the Takata Corporation (“Takata”) passenger airbag safety recall announced in May 2015 in the United States by the National Highway Traffic System Administration (the “NHTSA”), we have commenced remediatory actions. Following the initial provision of GBP67.4 million, the provision held at the end of Fiscal 2020 with respect to the recall is GBP46.1 million and we intend to use it as the mandated repairs are made over the next one to two years. Scrutiny of the automotive industry by national governments remains stringent in relation to potential safety defects or compliance transgressions.

Furthermore, we may also be subject to class actions or other large-scale lawsuits pertaining to product liability or other matters in various jurisdictions in which we have a significant presence. The use of shared components in vehicle production increases this risk because individual components are deployed in a number of different models across our brands. Any costs incurred or lost sales caused by product liability, warranties and recalls could materially adversely affect our business and reputation.

Changes or uncertainty in respect of LIBOR and/or SONIA may affect some our financing arrangements.

Some of our financing arrangements are, or may in the future be, linked to LIBOR and/or SONIA (as defined below). LIBOR has been the subject of recent national, international and other regulatory guidance and proposals for reform, which may cause it to cease to exist entirely after 2021. On November 29, 2017, the Bank of England and the U.K. Financial Conduct Authority (the “FCA”) announced that the market working group on Sterling Risk-Free Rates would have an extended mandate to catalyze a broad transition from LIBOR to the Sterling Over Night Index Average rate (“SONIA”) across sterling bond, loan and derivatives markets so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021. On April 23, 2018, the Bank of England took over administration of SONIA and issued a series of reforms as part of its implementation as a replacement to LIBOR. From April 2018, the Bank of England has been setting the interest rate benchmark using SONIA, meaning that banks are no longer compelled by the FCA to submit LIBOR rates beyond 2021. These reforms and other pressures may cause LIBOR to disappear entirely or perform differently than in the past (as a result of a change in methodology or otherwise) or may create disincentives for market participants to continue to administer or participate in LIBOR or may have other consequences which cannot be predicted.

 

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Any of these reforms or pressures described above or any other changes to a relevant interest rate benchmark (including LIBOR or SONIA or any alternative or successor benchmark rate) could affect the level of the published rate, including to cause it to be higher, lower and/or more volatile than it would otherwise be. If LIBOR is discontinued, then the rate of interest applicable to our financing arrangements that are linked to LIBOR may be determined by applicable contractual fall-back provisions, although such provisions have not been tested and may not operate as intended. Additionally, SONIA and/or any other alternative or successor benchmark rates are, or will be for a period of time, largely untested, and the use of SONIA and/or such alternative or successor benchmark rates may have adverse consequences that impact our financing arrangements.

More generally, any of the above matters or any other significant change to the setting or existence of LIBOR (or any alternative or successor benchmark rates, including SONIA) could affect the amounts available to us to meet our obligations under our financing arrangements and/or could have a material adverse effect on the value or liquidity of, and the amounts payable under, our financing arrangements. Changes in the manner of administration of LIBOR (or any alternative or successor benchmark rates, including SONIA) could result in adjustment to the conditions applicable to some of our financing arrangements or other consequences as relevant to those financing arrangements. While we may seek to amend the agreements related to our financing arrangements linked to LIBOR (or any alternative or successor benchmark rates, including SONIA), we may not be able to amend such agreements before any of the risks disclosed hereby materialize or at all. No assurance can be provided that relevant changes will not be made to LIBOR or any other relevant benchmark rate and/or that such rates will continue to exist.

Potential changes to our business through acquisitions and divestments may have a material adverse effect on our future results and financial condition

We regularly examine a range of corporate opportunities, including acquisitions and divestments, with a view to determining whether those opportunities will enhance our strategic position and financial performance

We are subject to risks associated with mergers, acquisitions and divestments relating to our business. We believe that our acquisitions provide us opportunities to grow significantly in the global automobile markets including premium brands and products and provide us with access to technology, additional capabilities and potential synergies. However, the scale, scope and nature of the integration or separation required in connection with such transactions present significant challenges, and we may be unable to integrate or separate the relevant subsidiaries, divisions and facilities effectively within our expected schedule. A transaction may not meet our expectations and the realization of the anticipated benefits may be blocked, delayed or reduced as a result of numerous factors, some of which are outside our control.

Additionally, there are risks relating to the completion of any particular transaction occurring, including counterparty and settlement risk, or the non-satisfaction of any completion conditions (for example, relevant regulatory or third party approvals).We acquired the Jaguar Land Rover business from the Ford Motor Company (“Ford”) in June 2008, and since then Jaguar Land Rover has become a significant part of our business, accounting for 80% of our total revenues in Fiscal 2020. As a result of the acquisition, we are responsible for, among other things, the obligations and liabilities associated with the legacy business of Jaguar Land Rover. There can be no assurance that any legacy issues at Jaguar Land Rover or any other acquisition we have undertaken in the past or will undertake in the future will not have a material adverse effect on our business, financial condition and results of operations, as well as our reputation and prospects.

We will continue to evaluate opportunities through suitable mergers, acquisitions and divestments in the future. Such opportunities may involve risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the transaction is completed. Integration or separation of an acquired or divested business can be complex and costly, sometimes including combining or separating relevant accounting and data processing systems, and management controls, as well as managing relevant relationships with employees, customers, regulators, counterparties, suppliers and other business partners. Integration or separation efforts could create inconsistencies in standards, controls, procedures and policies, as well as diverting management attention and resources. Additionally, there can be no assurance that employees, customers, counterparties, suppliers and other business partners of newly acquired or retained businesses will remain post-acquisition or post-divestment, and the loss of employees, customers, counterparties, suppliers and other business partners may adversely affect our operations or results. If we are unable to manage any of the associated risks successfully, our business, prospects, financial condition and results of operations could be materially and adversely affected.

 

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Our strategy to grow the business through capital investments may not be successful or as successful as we expect.

Our strategic priorities to grow our business include investing in new models and modular architectures and in autonomous, connected and electric technologies, as well as shared mobility services. Jaguar Land Rover’s annual total product and other investment spending was GBP3.3 billion in Fiscal 2020 and is expected to be around GBP2.5 billion in Fiscal 2021 as we are planning to launch the first products on the new modular longitudinal architecture platform. We aim to fund total product and other investment spending out of cash flows from operating activities supported by debt capital markets and bank funding as required. We now expect the protracted business disruption as a result of COVID-19 pandemic will have a significant impact on our business in Fiscal 2021 (see “—We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, and which may significantly harm our business, prospects, financial condition and results of operations.”). As the situation is still evolving, it is not possible to quantify this impact.

The targets described above represent our strategic objectives and do not constitute capital spending and earnings projections or forecasts. These targets are based on a range of expectations and assumptions regarding, among other things, our present and future business strategies, volume growth, cost efficiencies, capital spending program and the environment in which we operate, which may prove to be inaccurate. While we do not undertake to update our targets, we may change our targets from time to time. Actual results may differ materially from our targets. Accordingly, there can be no assurance that we will achieve any of our targets, whether in the short, medium or long term. The occurrence of one or more of the risks described in this “Risk Factors” section, many of which are beyond our control and could have an immediate impact on our earnings and/or the probability of which may be exacerbated in the medium to long term, could materially affect our ability to realize the targets described above. In particular, our capital spending target could be affected by investment needs arising from, among other factors, electrification, diesel uncertainty, emissions compliance, driver assistance, connectivity and mobility trends. Our ability to achieve our targets may be materially impaired by negative geopolitical and macro-economic factors, such as the exit of the United Kingdom from the European Union (see “—The United Kingdom’s exit from the European Union may adversely impact our business, prospects, financial condition and results of operations”), industry trends, including market and competitive forces (such as higher incentives), new or the expansion of existing regulatory constraints, reduced customer demand for our vehicles, significant increases in our cost base, unexpected delays or failure in implementing or realizing the benefits of our investments and the impact of our new capitalization policy, in addition to the other factors described in this “Risk Factors” section. Furthermore, we operate in a very competitive and rapidly changing environment. We may face new risks from time to time, and it is not possible for us to predict all such risks which may affect our ability to achieve the targets described above. Given these risks and uncertainties, we may not achieve our targets at all or within the timeframe described above.

The electric vehicle market may not evolve as anticipated.

Sales of electric vehicles are hard to predict because consumer demand may fail to shift in favor of electric vehicles, and this market segment may remain small relative to the overall market for years to come. Consumers may remain or become reluctant to adopt electric vehicles due to the lack of fully developed charging infrastructure, long charging times or increased costs of purchase and fueling. In March 2018, we announced our strategic long-term partnership with Waymo to design, engineer and produce Jaguar I-PACE vehicles to be used by Waymo in their autonomous vehicle mobility service. The self-driving technology developed by Waymo is currently being tested in San Francisco and California. In addition, from 2020, we will begin the manufacture of next-generation Electric Drive Units at our Engine Manufacturing Centre in Wolverhampton which will be used to power our future battery electric and plug-in hybrid vehicles. However, there can be no assurances that the partnership will be successful in achieving its commercial objective or that Waymo will purchase the number of vehicles contemplated by our partnership or that our next-generation Electric Drive Units will be successful. In June 2019, we announced a collaboration with BMW to develop next-generation Electric Drive Units to support the advancement of electrification technologies. As with our partnership with Waymo, there can be no assurances that the partnership will be successful in achieving its commercial objective. If the value proposition of electric vehicles fails to fully materialize, this could have a material adverse effect on our business, prospects, financial condition and results of operation.

 

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We are exposed to a broad range of climate-related risks arising from both the physical and non-physical impacts of climate change and related risks, which may affect our results of operations and the markets in which we operate.

Over the past few years, the global market for automobiles, particularly in established markets, has been characterized by increasing demand for more environmentally-friendly vehicles and technologies. In light of the public discourse on climate change and volatile fuel prices, we face more stringent government regulations, including the imposition of speed limits and higher taxes on SUVs or premium automobiles. Several jurisdictions, such as Norway, Germany, the United Kingdom, France, the Netherlands, India and China, have announced their intention to substantially reduce or eliminate the sale of conventionally fueled vehicles in their markets in the coming decades.

The emissions levels of diesel technologies have also become the focus of legislators in the United States and European Union. This has led various carmakers to announce programs to retrofit diesel vehicles with software that will allow them to reduce emissions which may require us to undertake increased research and development spending. There is a risk that these research and development activities, including retrofit software upgrades, will not achieve their planned objectives or that competitors or joint ventures set up by competitors will develop better solutions and will be able to manufacture the resulting products more rapidly, in larger quantities, with a higher quality and/or at a lower cost.

Coupled with increased consumer preferences for more environmentally-friendly vehicles, failure to achieve our planned objectives or delays in developing fuel-efficient products could materially affect our ability to sell premium Passenger Cars and large or medium-sized all-terrain vehicles at current or targeted volumes and could have a material adverse effect on our general business activity, net assets, financial position and results of operations. There is a risk that our competitors or joint ventures set up by competitors will develop better solutions and will be able to manufacture the resulting products more rapidly, in larger quantities, with a higher quality and/or at a lower cost. Finally, our manufacturing operations and sales may be subject to potential physical impacts of climate change, including changes in weather patterns and an increased potential for extreme weather events, which could affect the manufacturing and distribution of our products, as well as the cost and availability of raw materials and components. Private and commercial users of transportation increasingly use modes of transportation other than the automobile, especially in connection with increasing urbanization. In addition, the increased use of car sharing services (e.g., Zipcar and DriveNow) and other innovative mobility initiatives facilitate access to alternative modes of transport, thereby reducing dependency on private automobiles. Furthermore, non-traditional market participants and/or unexpected disruptive innovations may disrupt the established business model of the industry by introducing new technologies, distribution models and methods of transportation. A shift in consumer preferences away from private automobiles would have a material adverse effect on our general business activity and on our business, prospects, financial condition and results of operations.

Underperformance of our distribution channels may adversely affect our sales and results of operations.

Our products are sold and serviced through a network of authorized dealers and service centers across India and through a network of distributors and local dealers in international markets. Any underperformance by or a deterioration in the financial condition of our dealers or distributors could materially and adversely affect our sales and results of operations.

Our distribution channel partners have been adversely affected by the COVID-19 pandemic. Their profitability has declined as customers have been refraining from or delaying vehicle purchases in light of the pandemic. Further, during lockdown period, local dealers may be required to suspend businesses while they continue to incur operating and non-operating expenses such as salaries, rent and interest on unsold inventory. Even after such dealers resume operations, they may not be able to compensate for the expenses incurred during lockdown and recovery phases, thus their operations and sales may be further affected.

In Fiscal 2020, Indian automotive industry faced multiple challenges such as liquidity crunch after the debacle of Infrastructure Leasing & Financial Services Limited, decrease in rural sales due to weak monsoon, credit tightening by banks in the automotive sector and transition from BSIV to BSVI. In light of these challenges, industry sales volumes has declined over the year, affecting the profitability of our distribution channel partners, and the COVID-19 pandemic has further accentuated such challenges. Financial institutions have further tightened financing in the automotive industry. In the absence of availability of funding, dealers may not be able to resume operations to full scale, leading to further loss of sales.

If dealers or importers encounter financial difficulties and our products and services cannot be sold or can be sold only in limited numbers, the sales of such dealers and importers may be adversely affected. Additionally, if we cannot replace the affected dealers or importers with other franchises, the financial difficulties experienced by such dealers or importers could have an indirect effect on our vehicle deliveries.

 

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Consequently, we could be compelled to provide additional support for dealers and importers and, under certain circumstances, may even take over their obligations to customers, which would adversely affect our financial position and results of operations in the short term.

Furthermore, as part of our global activities, we may engage with third-party dealers and distributors, whom we do not control, but who could nevertheless take actions that may have a material adverse impact on our reputation and business. We cannot assure you that we will not be held liable for any activities undertaken by such third parties.

We are more vulnerable to reduced demand for premium performance cars and all-terrain vehicles than automobile manufacturers with a more diversified product range.

Jaguar Land Rover operates in the premium performance car and all-terrain vehicle segments, which are very specific segments of the premium Passenger Car market, and it has a more limited range of models than some of its competitors. Accordingly, its financial performance is linked to market conditions and consumer demand in those market segments. Some other premium performance vehicle manufacturers operate in a relatively broader spectrum of market segments, which makes them comparatively less vulnerable to reduced demand for any specific segment. Any downturn or reduction in the demand for premium Passenger Cars and all-terrain vehicles, or any reduced demand for Jaguar Land Rover’s most popular models in the geographic markets in which it operates could have a substantial adverse effect on its performance and earnings.

Increases in input prices may have a material adverse effect on our results of operations.

In Fiscal 2020 and Fiscal 2019, the consumption of raw materials, components aggregates and purchase of products for sale (including changes in inventory) constituted 64.4% and 65.6%, respectively, of our revenues. Prices of commodity items used in manufacturing automobiles, including steel, aluminum, copper, zinc, rubber, platinum, palladium and rhodium, have become increasingly volatile in recent years. Further, there is an increase in the use of precious metals (including rhodium and palladium) as raw materials in vehicles due to stringent emission policies across the world. The COVID-19 pandemic has a significant impact on the supply of precious metals as certain countries where such precious metals are mined are currently under lockdown. Furthermore, prices of commodity items such as steel, non-ferrous metals, precious metals, rubber and petroleum products may rise significantly. Further price movements depend on the evolving economic scenarios across the globe. Most of these inputs are priced in U.S. dollars on international markets. The COVID-19 pandemic has led to weakening of Indian rupees against the U.S. dollar, which can significantly increase our direct material cost. While we continue to pursue cost reduction initiatives, an increase in price of input materials could severely impact our profitability to the extent such increase cannot be absorbed by the market through price increases and/or could also have a negative impact on demand. For example, BSVI vehicles are required to be registered post April 1, 2020 pursuant to recent laws in India will lead to an increase in price of input materials. In addition, because of intense price competition and fixed costs base, we may not be able to adequately address changes in commodity prices even if they are foreseeable.

In addition, we are exposed to the risk of contraction in the supply, and a corresponding increase in the price of, rare and frequently highly sought after raw materials, especially those used in vehicle electronics such as rare earth metals, which are predominantly produced in China. Rare earth metal prices and supply remain uncertain. China has, in the past, limited the export of rare earths from time to time. If we are unable to find substitutes for such raw materials or pass price increases on to customers by raising prices, or to safeguard the supply of scarce raw materials, our vehicle production, business and results from operations could be affected. We are also exposed to supply chain risks relating to lithium-ion cells which are critical for our electric vehicle production. Any disruption in the supply of battery cells from such suppliers could disrupt production of our vehicles. The severity of this risk is likely to increase as we and other manufacturers increase electric vehicle production.

We manage these risks through the use of fixed supply contracts with tenor up to 12 months and the use of financial derivatives pursuant to a defined hedging policy. We enter into a variety of foreign currency, interest rates and commodity forward contracts and options to manage our exposure to fluctuations in foreign exchange rates, interest rates and commodity price risks. These financial exposures are managed in accordance with our risk management policies and procedures. We use foreign currency forward and option contracts to hedge risks associated with foreign currency fluctuations relating to highly probable forecast transactions. We also enter into interest rate swaps and interest rate currency swap agreements, mainly to manage exposure on our fixed rate or variable rate debt. We further use interest rate derivatives or currency swaps to hedge exposure to exchange rate fluctuations on principal and interest payments for borrowings denominated in foreign currencies. Specific transactional risks include risks like liquidity and pricing risks, interest rate and exchange rate fluctuation risks, volatility risks, counterparty risks, settlement risks and gearing risks. However, the hedging transactions may not adequately protect us against these risks. In addition, if markets move adversely, we may incur financial losses on such hedging transactions, and our business, prospects, financial condition and results of operation may be adversely impacted.

 

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Exchange rate and interest rate fluctuations could materially and adversely affect our financial condition and results of operations.

Our operations are subject to risks arising from fluctuations in exchange rates with reference to countries in which we operate. We import capital equipment, raw materials and components from, manufacture vehicles in, and sell vehicles into, various countries, and therefore, our revenues and costs have significant exposure to the relative movements of the GBP, the U.S. dollar, the Euro, the Russian Ruble, the Chinese Renminbi, the Singapore dollar, the Japanese yen, the Australian dollar, the South African rand, the Thai baht, the Korean won and the Indian rupee. Brexit could also have a negative impact on the growth of the United Kingdom economy and increase volatility of the GBP. A significant proportion of our input materials and components and capital equipment are sourced overseas, in particular from Europe, and therefore we have costs in, and significant exposure to the movement of, the Euro (specifically a strengthening of the Euro) and certain other currencies relative to the GBP (Jaguar Land Rover’s reporting currency), which may result in decreased profits to the extent these are not fully mitigated by non GBP sales. The majority of our product development and manufacturing operations, as well as our global headquarters, are based in the United Kingdom, but we also have national sales companies which operate in the major markets in which we sell vehicles. As a result, we have exposure to movements of the U.S. dollar, the Euro, Chinese Renminbi, the Russian Ruble and other currencies relative to the GBP and foreign exchange volatility may affect our results of operations, profitability and financial position.

Moreover, we have outstanding foreign currency-denominated debt and are sensitive to fluctuations in foreign currency exchange rates. We have experienced and could in the future experience foreign exchange losses on obligations denominated in foreign currencies in respect of our borrowings and foreign currency assets and liabilities due to currency fluctuations. We are exposed to changes in interest rates, as we have both interest-bearing assets (including cash balances) and interest-bearing liabilities, certain of which bear interest at variable rates (including the term loan facility, the UKEF & commercial loan facilities and the UK fleet financing facility), whereas the notes and existing notes bear interest at fixed rates. We are therefore exposed to changes in interest rates. Although we engage in managing our interest and foreign exchange exposure through use of financial hedging instruments, such as forward contracts, swap agreements and option contracts, higher interest rates and a weakening of the Indian rupee against major foreign currencies could significantly increase our cost of borrowing, which could have a material adverse effect on our financial condition, results of operations and liquidity. Please see note 39(d)(i) – (b) to our consolidated financial statements included elsewhere in this annual report on Form 20-F for further detail on our exposure to fluctuations in interest rates.

Appropriate hedging lines for the type of risk exposures we are subject to may not be available at a reasonable cost, particularly during volatile rate movements, or at all. Moreover, there are risks associated with the use of such hedging instruments. While hedging instruments may mitigate our exposure to fluctuations in currency exchange rates to a certain extent, we potentially forego benefits that might result from market fluctuations in currency exposures. These hedging transactions can also result in substantial losses. Such losses could occur under various circumstances, including, without limitation, any circumstances in which a counterparty does not perform its obligations under the applicable hedging arrangement (despite having international swaps and derivatives association agreements in place with each of our hedging counterparties), there are currency fluctuations, the arrangement is imperfect or ineffective, or our internal hedging policies and procedures are not followed or do not work as planned. In addition, because our potential obligations under the financial hedging instruments are marked to market, we may experience quarterly and annual volatility in our operating results and cash flows attributable to our financial hedging activities.

A decline in retail customers’ purchasing power, consumer confidence or in corporate customers’ financial condition and willingness to invest could materially and adversely affect our business.

Demand for vehicles for personal use generally depends on consumers’ net purchasing power, their confidence in future economic developments and changes in fashion and trends, while demand for vehicles for commercial use by corporate customers (including fleet customers) primarily depends on the customers’ financial condition, their willingness to invest (motivated by expected future business prospects) and available financing. A decrease in potential customers’ disposable income, their financial flexibility, reductions in the availability of consumer financing and used car valuations or an increase in the cost of financing will generally have a negative impact on demand for our products. A weak macroeconomic environment, combined with restrictive lending and a low level of consumer sentiment generally, may reduce consumers’ net purchasing power and lead existing and potential customers to refrain from purchasing new vehicles, to defer a purchase further or to purchase a smaller model with less equipment at a lower price. A deteriorating macroeconomic environment may disproportionately reduce demand for luxury vehicles. It also could lead to reluctance by corporate customers to invest in vehicles for commercial use and/or to lease vehicles, resulting in a postponement of fleet renewal contracts.

 

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To stimulate demand, the automotive industry has offered customers and dealers price reductions on vehicles and services, which has led to increased price pressures and sharpened competition within the industry. We are a provider of numerous high-volume models, so our profitability and cash flows are significantly affected by the risk of rising competitive and price pressures. In recent years, incentive spending in the automotive industry has been increasing to stimulate demand for vehicles, which has impacted us and has ultimately led to an increase in the cost of sales attributable to those incentives.

Special sales incentives and increased price pressures in the new car business also influence price levels in the used car market, with a negative effect on vehicle resale values. This may have a negative impact on the profitability of the used car business in our dealer organization.

We may be adversely affected by labor unrest.

All of our permanent employees in India, other than officers and managers, and most of our permanent employees in our automotive business in South Korea and the United Kingdom, including certain officers and managers, are members of labor unions and are covered by our wage agreements, where applicable, with those labor unions.

In general, we consider our labor relations with all of our employees to be good. However, in the future we may be subject to labor unrest, which may delay or disrupt our operations in the affected regions, including impacting the acquisition of raw materials and parts, the manufacture, sales and distribution of products and the provision of services. If work stoppages or lock-outs at our facilities or at the facilities of our major vendors occur or continue for a long period of time, our business, prospects, financial condition and results of operations may be materially and adversely affected. During Fiscal 2018, we faced two standalone incidents of labor unrest in India, one at our Jamshedpur plant and the other at our Sanand plant. Although these particular issues were amicably resolved, there is no assurance that additional labor issues could not occur, or that any future labor issues will be amicably resolved.

In addition, we engage in bi-annual negotiations in relation to wage agreements, covering approximately 17,000 of our unionized employees, the most recent of which resulted in a one year wage agreement covering the period from November 2018 to October 2019 and we expect to negotiate a new labor agreement with the trade unions in 2020. There is a risk, however, that future negotiations could escalate into industrial action ranging from “work to rule” to a strike before a settlement is ultimately reached.

We are exposed to operational risks, including cybersecurity risks, in connection with our use of information technology.

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This includes, among other things, losses that are caused by a lack of controls within internal procedures, violation of internal policies by employees, disruption or malfunction of information technology (“IT”) systems, computer networks and telecommunications systems, mechanical or equipment failures, human error, natural disasters, security breaches or malicious acts by third parties (including, for example, hackers), whether affecting our systems or affecting those of third party providers. We are generally exposed to risks in the field of information technology, since unauthorized access to or misuse of data processed on our IT systems, human errors associated therewith or technological failures of any kind could disrupt our operations, including the manufacturing, design and engineering processes. In particular, as vehicles become more technologically advanced and connected to the Internet, our vehicles may become more susceptible to unauthorized access to their systems. As a business with complex manufacturing, research, procurement, sales and marketing and financing operations, we are exposed to a variety of operational risks and, if the protection measures put in place prove insufficient, our results of operations and financial condition can be materially adversely affected. In addition, we would likely experience negative press and reputational impacts. Cybersecurity incidents could lead to loss of productivity, negative impact on our reputation, and, in extreme cases, financial loss due to business disruptions.

Our business and prospects could suffer if we lose one or more key personnel or if we are unable to attract and retain our employees.

Our business and future growth depend largely on the skills of our workforce, including executives and officers, and automotive designers and engineers. The loss of the services of one or more of our personnel could impair our ability to implement our business strategy. In view of intense competition, any inability to continue to attract, retain and motivate our workforce could materially and adversely affect our business, financial condition, results of operations and prospects.

 

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We may be adversely impacted by political instability, wars, terrorism, multinational conflicts, countries resorting to protectionism, natural disasters, fuel shortages and prices, epidemics and labor strikes.

Our products are exported to a number of geographical markets, and we plan to further expand our international operations in the future. Consequently, we are subject to various risks associated with conducting our business both within and outside our domestic market and our operations in markets abroad may be subject to political instability, wars, terrorism, civil disturbances, regional or multinational conflicts, natural disasters and extreme weather, fuel shortages, epidemics and pandemics (such as the ongoing COVID-19 pandemic) and labor strikes. Any disruption of the operations of our manufacturing, design, engineering, sales, corporate and other facilities could materially and adversely affect our business, prospects, financial condition and results of operations. In addition, conducting business internationally, especially in emerging markets, exposes us to additional risks, including adverse changes in economic and government policies, unpredictable shifts in regulation, inconsistent application of existing laws and regulations, unclear regulatory and taxation systems and divergent commercial and employment practices and procedures. If any of these events were to occur, there can be no assurance that we would be able to shift our manufacturing, design, engineering, sales, corporate and other operations to alternate sites in a timely manner, or at all. Any deterioration in international relations, especially between India and its neighboring countries, may result in investor concern regarding regional stability. Any significant or prolonged disruption or delay in our operations related to these risks could materially and adversely affect our business, prospects, financial condition and results of operations. See – “We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and results from operations”.

Terrorist attacks, civil disturbances, regional conflicts and other acts of violence, particularly in India, may disrupt or otherwise adversely affect the markets in which we operate, our business and our profitability. India has from time to time experienced social and civil unrest and hostilities and adverse social, economic or political events, including terrorist attacks and local civil disturbances, riots and armed conflict with neighboring countries. Events of this nature in the future could influence the Indian economy and could have a material adverse effect on our business, as well as the market for securities of Indian companies, including the Company’s Shares and ADSs. Such incidents could also create a greater perception that investment in Indian companies involves a higher degree of risk and could have a material adverse effect on our business, prospects, results of operations and financial condition, and also the market price of the Company’s Shares and ADSs.

We are vulnerable to supply chain disruptions resulting from natural disasters, pandemics (such as the COVID-19 pandemic) or accidents. A significant delay or sustained interruption in the supply of key inputs sourced from areas affected by disasters or accidents could materially and adversely affect our ability to maintain our current and expected levels of production, and therefore negatively affect our revenues and increase our operating expenses.

We are a global organization, and are therefore vulnerable to shifts in global trade and economic policies and outlook. Policies that result in countries withdrawing from trade pacts, increasing protectionism and undermining free trade could substantially affect our ability to operate as a global business. Additionally, negative sentiments towards foreign companies among our overseas customers and employees could adversely affect our sales as well as our ability to hire and retain talented people. A negative shift in either policies or sentiment with respect to global trade and foreign businesses could have a material adverse effect on our business, prospects, results of operations and financial condition.

Our business is seasonal in nature and a substantial decrease in our sales during certain quarters could have a material adverse impact on our financial performance.

The sales volumes and prices for our vehicles are influenced by the cyclicality and seasonality of demand for these products. The automotive industry has been cyclical in the past, and we expect this cyclicality to continue.

In the Indian market, demand for our vehicles generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian fiscal budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards, with a decline in December as customers defer purchases to the new year.

 

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Our Jaguar Land Rover business is impacted by the biannual registration of vehicles in the United Kingdom where the vehicle registration number changes every March and September, which leads to an increase in sales during these months, and, in turn, impacts the resale value of vehicles. This leads to an increase in sales during the period when the aforementioned change occurs. Most other markets, such as the United States, are influenced by the introduction of new-model-year products, which typically occurs in the autumn of each year. Furthermore, in the United States, there is some seasonality in the purchasing pattern of vehicles in the northern states for Jaguar when there is a concentration of vehicle sales in the spring and summer months and for Land Rover, where the trend for purchasing 4x4 vehicles is concentrated in the autumn and winter months. Markets in China tend to experience higher demand for vehicles around the Lunar New Year holiday in either January or February, the Chinese National Day and the Golden Week holiday in October. In addition, demand in Western European automotive markets tends to be softer during the summer and winter holidays. Jaguar Land Rover’s cash flows are impacted by the temporary shutdown of four of their manufacturing plants in the United Kingdom (including the EMC at Wolverhampton) during the summer and winter holidays, as well as shutdowns resulting from the COVID-19 pandemic and Brexit.

Restrictive covenants in our financing agreements could limit our operations and financial flexibility and materially and adversely impact our financial condition, results of operations and prospects.

Some of our financing agreements and debt arrangements set limits on and/or require us to obtain lender consent before, among other things, pledging assets as security. In addition, certain financial covenants may limit our ability to borrow additional funds or to incur additional liens. In the past, we have been able to obtain required lender consent for such activities. However, there can be no assurance that we will be able to obtain such consents in the future. On June 30, 2020, we notified one of our Indian lenders in respect of our US$425 million loan facility that as at June 30, 2020, the Company failed to maintain one of the financial ratios under the terms of the loan facility. On July 30, 2020, the Company received confirmation from the lender that it has approved an increase in such threshold and has given waiver of the Company’s failure to maintain the relevant financial ratio for Fiscal 2021. If our liquidity needs or growth plans require such consents and such consents are not obtained, we may be forced to forego or alter our plans, which could materially and adversely affect our business, prospects, financial condition and results of operation.

In the event we breach these covenants, the outstanding amounts due under such financing agreements could become due and payable immediately and/or result in increased costs. A default under one of these financing agreements may also result in cross-defaults under other financing agreements and result in the outstanding amounts under such other financing agreements becoming due and payable immediately. Defaults under one or more of our financing agreements could have a material adverse effect on our business, prospects, financial condition and results of operation.

Future pension obligations may prove more costly than currently anticipated and the market value of assets in our pension plans could decline.

We provide post-retirement and pension benefits to our employees, including defined benefit plans. Our pension liabilities are generally funded. However, lower returns on pension fund assets, changes in market conditions, interest rates or inflation rates, and adverse changes in other critical actuarial assumptions, may impact our pension liabilities or assets and consequently increase funding requirements. Further, any changes in government regulations, may adversely impact the pension benefits payable to the employees, which could materially decrease our net income and cash flows.

Jaguar Land Rover provides post-retirement and pension benefits to its employees, some of which are defined benefit plans. As part of Jaguar Land Rover’s strategic business review process, Jaguar Land Rover closed its defined benefit pension plans to new joiners as of April 19, 2010. All new Jaguar Land Rover employees from April 19, 2010 join a new defined contribution pension plan. Under the arrangements with the trustees of the defined benefit pension schemes, an actuarial valuation of the assets and liabilities of the schemes is undertaken every three years in order to determine cash funding rates. As a result of the April 2018 valuation process, a funding deficit of GBP 554 million was disclosed and we agreed to a schedule of contributions with the trustee which, together with the expected investment performance of the assets of the schemes, is expected to eliminate the deficit by 2028. Cash contributions towards the deficit will be GBP 60 million each year until Fiscal 2024 followed by GBP 25 million each year until the fiscal year ending March 31, 2028. The revised schedule of contributions also reflects the reduced ongoing cost of benefit accrual of approximately 22% for Fiscal 2020 and approximately 21% for Fiscal 2021 and ongoing benefits from changes implemented on April 5, 2017 (compared to a previous rate of 31%). As of March 31, 2020, Jaguar Land Rover’s UK defined benefit pension improved to a surplus of GBP 380 million, as compared to a deficit of GBP 667 million as of March 31, 2019. This improvement was primarily due to an increase in the discount rate used to value the liabilities, as well as asset increases due to interest rate hedges and contributions paid.

 

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We may be materially and adversely affected by the divulgence of confidential information.

Although we have implemented policies and procedures to protect confidential information, such as key contractual provisions, future projects, financial information and customer records, such information may be divulged as a result of internal leaks, hacking, other threats from cyberspace or other factors. If confidential information is divulged, we could be subject to claims by affected parties, regulatory penalties, negative publicity and loss of proprietary information, all of which could have an adverse and material impact on our reputation, business, financial condition, results of operations and cash flows.

Our business could be negatively affected by the actions of activist shareholders.

Certain shareholders of the Company may from time to time advance shareholder proposals or otherwise attempt to effect changes at the Company, influence elections of the directors of the Company (“Directors”) or acquire control over our business. Our success largely depends on the ability of our current management team to operate and manage effectively. Campaigns by shareholders to effect changes at publicly listed companies are sometimes led by investors seeking to increase short-term shareholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or even sales of assets or the entire company, or by voting against proposals put forward by the board of directors of the Company (the “Board”) and our management. If faced with actions by activist shareholders, we may not be able to respond effectively to such actions, which could be disruptive to our business.

We rely on licensing arrangements with Tata Sons Private Limited to use the “Tata” brand. Any improper use of the associated trademarks by our licensor or any other third parties could materially and adversely affect our business, financial condition and results of operations.

Our rights to our trade names and trademarks are a crucial factor in marketing our products. Establishment of the “TATA” word mark and logo mark in and outside India is material to our operations. We have licensed the use of the “TATA” brand from our Promoter, Tata Sons Private Limited (“Tata Sons”). If Tata Sons, or any of its subsidiaries or affiliated entities, or any third party uses the trade name “TATA” in ways that adversely affect such trade name or trademark, our reputation could suffer damage, which, in turn, could have a material adverse effect on our business, prospects, financial condition and results of operations.

We are subject to risks associated with the automobile financing business.

The sale of our Commercial Vehicles and Passenger Vehicles is heavily dependent on funding availability for our customers. Rising delinquencies and early defaults have contributed to a reduction in automobile financing, which, in turn, has had an adverse effect on funding availability for potential customers. This reduction in available financing may continue in the future and have a material adverse effect on our business, prospects, financial condition and results of operations.

Default by our customers or inability to repay installments as due could materially and adversely affect our business, prospects, financial condition, results of operations and cash flows. In addition, any downgrade in our credit ratings may increase our borrowing costs and restrict our access to the debt markets. Over time, and particularly in the event of any credit rating downgrade, market volatility, market disruption, regulatory changes or otherwise, we may need to reduce the amount of financing receivables we originate, which could severely disrupt our ability to support the sale of our vehicles.

The Reserve Bank of India (the “RBI”) has announced several measures to ease the financial system stress resulting from the COVID-19 pandemic, including a moratorium of three months for dues falling between March 1, 2020 to May 31, 2020 on loan repayments for specific borrower segments and an asset classification standstill benefit to overdue accounts where a moratorium has been granted. On May 23, 2020 the RBI permitted extension of the moratorium for further three months until August 31, 2020. Such regulatory measures are temporary in nature, and there is considerable uncertainty around the COVID-19 pandemic and further relief measures may be required. These moratorium policies would impact debt collections in the short run. Once relief measures are lifted, there is a possibility of increase in non-performing assets. While the TMF group has taken certain asset classification benefits and holds provisions as at March 31, 2020 against the potential impact of COVID-19 pandemic based on the information available, there is significant uncertainty around debt collections in the future, and we may further be required to provide for loan allowances which may impact our results of operation and profitability.

 

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Jaguar Land Rover has consumer finance arrangements in place with Black Horse Limited (part of the Lloyds Banking Group) in the United Kingdom, FCA Bank S.p.A. (a joint venture between Fiat Auto and Crédit Agricole) in major European markets and Chase Auto Finance in the United States and have similar arrangements with local providers in a number of other key markets. Any reduction in the supply of available consumer financing for the purchase of new vehicles or an increase in the cost thereof would make it more difficult for some of its customers to purchase its vehicles, which could put Jaguar Land Rover under commercial pressure to offer new (or expand existing) retail or dealer incentives to maintain demand for its vehicles, thereby materially and adversely affecting our sales and results of operations. For example, during the global financial crisis, several providers of customer finance reduced their supply of consumer financing for the purchase of new vehicles. Additionally, base interest rates in developed economies are at historic lows. Base interest rates in developed economies, specifically the United States and the United Kingdom, are still relatively low, despite recent increases, due to, among other things, expansive government monetary policies. As interest rates rise generally, market rates for new vehicle financing are expected to rise as well, which may make our vehicles less affordable to retail consumers or steer consumers to less expensive vehicles that tend to be less profitable for us, adversely affecting our business, prospects, financial condition and results of operations. Additionally, if consumer interest rates increase substantially or if financial service providers tighten lending standards or restrict their lending to certain classes of credit, consumers may not desire to or be able to obtain financing to purchase or lease our vehicles. An increase in interest rates due to tightening monetary policy or for any other reason would result in increased costs for us to the extent we decided to absorb the impact of such increase and/or consumers. As a result, a substantial increase in consumer interest rates or tightening of lending standards could have a material adverse effect on the Group’s business, prospects, financial condition and results of operations.

Furthermore, Jaguar Land Rover offers residual value guarantees on the purchase of certain leases in some markets. The value of these guarantees is dependent on used car valuations in those markets at the end of the lease, which is subject to change. Consequently, we may be adversely affected by movements in used car valuations in these markets.

Inability to protect or preserve our intellectual property could materially and adversely affect our business, financial condition and results of operations.

We own or otherwise have rights in respect of a number of patents and trademarks relating to the products we manufacture, which have been obtained over a period of years. In connection with the design and engineering of new vehicles and the enhancement of existing models, we seek to regularly develop new technical designs for use in our vehicles. We also use technical designs that are the intellectual property of third parties with such third parties’ consent. These patents and trademarks have been of value in the growth of our business and may continue to be of value in the future. Although we do not regard any of our businesses as being dependent upon any single patent or related group of patents, an inability to protect this intellectual property generally, or the illegal breach of some or a large group of our intellectual property rights, may have a materially adverse effect on our operations, business and/or financial condition. We may also be affected by restrictions on the use of intellectual property rights held by third parties, and we may be held legally liable for the infringement of the intellectual property rights of others in our products. Moreover, intellectual property laws of some foreign countries may not protect our intellectual property rights to the same extent as U.S. or UK laws.

We may incur significant costs to comply with, or face civil and criminal liability for infringements of, the European General Data Protection Regulation.

In April 2016, the European Union enacted the General Data Protection Regulation (the “GDPR”). The GDPR is a uniform framework setting out the principles for legitimate data processing and came into force on May 25, 2018. The new regime may impose a substantially higher compliance burden on us and limit our rights to process personal data, lead to cost intensive administration processes, oblige us to provide the personal data that we record to customers in a form that would require additional administrative processes or require substantial changes in our IT environment. Additionally, there are much greater sanctions in case of violations of the GDPR requirements compared to the previous regime. These sanctions depend on the nature of the infringed provision and may consist of civil liabilities and criminal sanctions. Our failure to implement and comply with the GDPR could significantly affect our reputation and relationships with our customers and suppliers, and civil and criminal liabilities for the infringement of data protection rules could have a significant negative effect on our financial position.

Some of our vehicles will make use of lithium-ion battery cells, which have been observed in some non-automotive applications to catch fire or vent smoke and flames, and such events have raised concerns, and future events may lead to additional concerns, about the safety of the batteries used in automotive applications.

The battery packs that we use, and will use, in our electric vehicles make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells.

 

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While we have designed the battery pack to passively contain any single cell’s release of energy without spreading to neighboring cells, there can be no assurance that a field or testing failure of our vehicles will not occur, which could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, or any future incident involving lithium-ion cells such as a vehicle fire, even if such incident does not involve our vehicles, could seriously harm our business.

In June 2019, we announced that we plan to manufacture a range of new electrified vehicles at our manufacturing plant in Castle Bromwich, United Kingdom, and we expect to open a new battery assembly center in Hams Hall (North Warwickshire, United Kingdom) in 2020, with an installed capacity of 150,000 units. In addition, we store a significant number of lithium ion cells at various warehouses and at some of our manufacturing facilities. Any mishandling of or accidents involving battery cells may cause disruption to the operation of our facilities. While we have implemented safety procedures related to the handling of the cells, there can be no assurance that a safety issue or fire related to the cells would not disrupt our operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle may cause indirect adverse publicity for us and our products, which could harm our business, prospects, financial condition and operating results.

Any failures or weaknesses in our internal controls could materially and adversely affect our financial condition and results of operations.

As discussed in Item 15. “Controls and Procedures,” upon an evaluation of the effectiveness of the design and operation of our internal controls, we concluded that there was a material weakness such that our internal controls over financial reporting were not effective as of March 31, 2020. Although we have instituted remedial measures to address the material weakness identified and continually review and evaluate our internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal controls over financial reporting. Further, the Company’s management continually improves, simplifies and rationalizes the Company’s internal control framework where possible within the constraints of existing IT systems. However, any additional weaknesses or failure to adequately remediate the existing weakness could materially and adversely affect our financial condition or results of operations and/or our ability to accurately report our financial condition and results of operations in a timely and reliable manner.

Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, which may have a material adverse effect on our business, financial condition and results of operations.

While we believe that the insurance coverage we maintain is reasonably adequate to cover all normal risks associated with the operation of our business. There can be no assurance that any claim under our insurance policies will be honored fully or timely, our insurance coverage will be sufficient in any respect or our insurance premiums will not change substantially. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or that exceeds our insurance coverage, or are required to pay higher insurance premiums, our business, prospects financial condition and results of operations could be materially and adversely affected.

Political and Regulatory Risks

India’s obligations under the World Trade Organization Agreement could materially affect our business.

India’s obligations under its World Trade Organization agreement could reduce the present level of tariffs on imports of components and vehicles. Reductions of import tariffs could result in increased competition, which in turn could materially and adversely affect our sales, business, prospects, financial condition and results of operations.

 

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New or changing laws, regulations and government policies regarding increased fuel economy, reduced greenhouse gas and other emissions, vehicle safety and taxes, tariffs or fiscal policies may have a significant impact on our business.

As an automobile company, we are subject to extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of pollutants generated by our production facilities. We expect the number and extent of legal and regulatory requirements and our related costs of compliance to continue to increase significantly in the future. In Europe and the United States, for example, governmental regulation is primarily driven by concerns about the environment (including greenhouse gas emissions), fuel economy, energy security and vehicle safety. In particular, the increasingly stringent regulatory environment in our industry, particularly with respect to vehicle emission regulations, is leading to heightened regulatory scrutiny and more investigations into vehicle manufacturers, including randomized testing. We are subject to randomized testing and similar enquiries by regulatory authorities with a focus on emissions and environmental performance. In China, increasingly stringent tailpipe emissions and other regulations have been introduced by the Chinese government in the short-to-medium term future to reduce greenhouse gas emissions and improve air quality standards. Requirements to optimize vehicles in line with these governmental actions could significantly affect our plans for global product development and may result in substantial costs, including significant fines and penalties in cases of non-compliance. These requirements may also result in limiting the types and amounts of vehicles we sell and where we sell them, which may affect our revenue.

To comply with current and future environmental norms, we may have to incur additional capital expenditures and research and development expenditures to upgrade products and manufacturing facilities, install new emission controls or reduction technologies and purchase or otherwise obtain allowances to emit greenhouse gases, which would have an impact on our cost of production. If we are unable to develop commercially viable technologies or otherwise unable to attain compliance within the time frames set by the new standards, we could face significant civil penalties or be forced to restrict product offerings drastically to remain in compliance. For example, in the United States, manufacturers are subject to substantial civil penalties if they fail to meet federal CAFE standards. Please see Item 4.B “Information on the Company—Business Overview—Governmental Regulations—Environmental, fiscal and other governmental regulations around the world—Greenhouse gas/CO2/fuel economy legislation” for additional detail on these standards. These penalties are calculated at US$5.50 for each tenth of a mile below the required fuel-efficiency level for each vehicle sold in a model year in the U.S. market. Since 2010, Jaguar Land Rover has paid total penalties of US$46 million for its failure to meet CAFE standards. Since 2011, we have purchased approximately US$71 million in credits from third party original equipment manufacturers (“OEMs”) to offset our NHTSA, EPA and California Air Resources Board (“CARB”) penalties. Additionally, we expect to buy approximately US$12 million in credits in Fiscal 2020 from third party OEMs to offset our expected NHTSA and EPA penalties for model year 2019 vehicles. We could incur a substantial increase in these penalties, including as a result of increases in CAFE civil penalties to adjust for inflation. Moreover, environmental and safety standards may at times impose conflicting imperatives, which pose engineering challenges and would, among other things, increase our costs. While we are pursuing the development and implementation of various technologies in order to meet the required standards in the various countries in which we sell our vehicles, the costs for compliance with these required standards could be significant to our operations and may materially and adversely affect our business, prospects, financial condition and results of operations.

Moreover, safety and environmental standards may at times impose conflicting imperatives, which pose engineering challenges and would, among other things, increase our costs. While we are pursuing the development and implementation of various technologies in order to meet the required standards in the various countries in which we sell our vehicles, the costs for compliance with these required standards could be significant to our operations and may materially and adversely affect our business, prospects, financial condition and results of operations. The Motor Vehicle (Amendment) Act 2019 has been published on August 9, 2019. This Act addresses vehicle recalls, road safety, traffic management and accident insurance, among other matters. The Act imposes civil and criminal liability on manufacturers selling vehicles in contravention of the standards specified in the Act, or required by the government to recall their vehicles. The Act also proposes the creation of the National Road Safety Board to provide advice to the central and state governments on all aspects of road safety and traffic management.

Commencing July 1, 2017, the Indian tax regime underwent a systemic change. The Government of India, in conjunction with the state governments, implemented a comprehensive national goods and services tax (“GST”) regime to subsume a large number of central government and state government taxes into one unified tax structure. It is a dual GST with central government and state government simultaneously levying it on the common base. The tax is called Central GST, if levied by the central government; state union territory GST, in instances where the state or union territory levy the tax; and integrated GST, in instances where the GST is levied on the inter-state supply of goods and services. While both the central and state governments have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information or alignment of industrial policy of various state government to cover GST or to protect the quantum of incentive available to industries in pre-GST regime, we are unable to provide any assurance as to this or any other aspect of the tax regime, or guarantee that the implementation of GST will not materially or adversely affect our business, prospects, financial condition and results of operation.

 

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Imposition of any additional taxes and levies designed to limit the use of automobiles and changes in corporate and other taxation policies, as well as changes in export and other incentives given by various governments or import or tariff policies, could adversely affect the demand for our vehicles and our results of operations. For instance, the United Kingdom’s exit from the European Union would result in material changes to the United Kingdom’s tax, tariff and fiscal policies. In addition, the current U.S. presidential administration has called for changes to laws and policies governing international trade to further restrict free trade, including imposing tariffs on certain goods imported into the United States. For example, the announcement of unilateral tariffs on imported products by the United States has triggered retaliatory actions from certain foreign governments and may trigger retaliatory actions by other foreign governments, potentially resulting in a “trade war”. A “trade war” of this nature or other governmental action related to tariffs or international trade agreements, the impact of which cannot yet be fully assessed, could negatively affect the economics of the end-markets in which we operate (such as the United States and China), including regional or global demand for automobiles and automobile-components as well as our customers’ ability to purchase our cars.

Recently, the United Kingdom announced that, from April 2020, a 2% digital services tax could be imposed on the UK revenue of digital services businesses (such as social media networks, search engines and online marketplaces) that are considered to derive significant value from the participation of their UK users. As a response to this proposal, the United States Treasury indicated that such digital services tax could have a discriminatory effect on U.S. multinational digital companies and warned that the United States could take retaliatory actions, such as in the form of a tax on UK car exports to the United States, should the new digital services tax be imposed. In addition, in a report submitted to the President of the United States on February 17, 2019, the U.S. Department of Commerce recommended a potential 25% tariff on automobiles and auto-parts imported into the United States. Following the expiration of the subsequent 90-day decision period, the President of the United States announced that the imposition of such additional tariffs would be delayed by another six months. Considering the fact that the additional extension has expired without the U.S. government taking any decision regarding additional tariffs and without a new extension to the decision period being announced, it remains uncertain whether the U.S. government will indeed impose a 25% tariff on automobiles and auto-parts in the future, but should such tariffs or similar trade barriers be imposed by the U.S. government, this would increase the cost of our vehicles in the United States (as we have no manufacturing operations in the United States), which is likely to have a material adverse effect on our sales in the United States and our results of operation. Moreover, any countermeasures to such additional tariffs by regional or global trading partners, including the European Union and China, could slow down global economic growth and decrease global demand for automobiles and automobile components. Additional developments may also occur that we cannot currently know about or anticipate, or that may be impossible to plan for or protect against. Furthermore, in recent years, Brazil has increased import duty on foreign vehicles, along with related exemptions provided certain criteria are met.

Evaluating and estimating our provision and accruals for our taxes requires significant judgment. As we conduct our business, the final tax determination may be uncertain. We operate in multiple geographical markets and our operations in each market are susceptible to additional tax assessments and audits. Our collaborations with business partners are similarly susceptible to such tax assessments.

Authorities may engage in additional reviews, inquiries and audits that disrupt our operations or challenge our conclusions regarding tax matters. Any resulting tax assessment may be accompanied by a penalty or additional fee for failing to make the initial payment. Our tax rates may be affected by earnings estimation errors, losses in jurisdictions that do not grant a related tax benefit, changes in currency rates, acquisitions, investments, or changes in laws, regulations or practices. Additionally, government fiscal pressures may increase the likelihood of adverse or aggressive interpretations of tax laws or regulations or the imposition of arbitrary or onerous taxes, interest charges and penalties. Tax assessments may be initiated even where we consider our practices to be in compliance with tax laws and regulations. Should we challenge such taxes or believe them to be without merit, we may nonetheless be required to pay them. These amounts may be materially different from our expected tax assessments and could additionally result in expropriation of assets, attachment of additional securities, liens, imposition of royalties or new taxes and requirements for local ownership or beneficiation.

Regulations in the areas of investments, taxes and levies may also have an impact on Indian securities, including the Company’s Shares and ADSs. For more information, see Item 4.B “Information on the Company—Business Overview—Governmental Regulations” of this annual report on Form 20-F.

The Petroleum Ministry of India in consultation with Public Oil Marketing Companies brought forward the date of BSVI grade auto fuels in National Capital Territory of Delhi with effect from April 1, 2018 instead of April 1, 2020. The shortage of BSVI fuel across India in the future could impact our business, prospects, results of operations and financial condition. We could be impacted by the change of emission standards in India from BSIV to BSVI, effective April 1, 2020, as BSIV vehicles will not be allowed to be registered after that date. The change in emission standards may also increase the cost of BSVI vehicles and impact our profitability.

 

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Any future potential or real unexpected change in law could have could have a material adverse effect on our business prospects, results of operations and financial condition.

We may be affected by competition law in India and any adverse application or interpretation of the Competition Act could adversely affect our business.

The Indian Competition Act, 2002 (the “Competition Act”) oversees practices having an appreciable adverse effect on competition (“AAEC”) in a given relevant market in India. Under the Competition Act, any formal or informal arrangement, understanding or action in concert, which causes or is likely to cause an AAEC, is considered void and results in imposition of substantial penalties. Consequently, all agreements entered into by us could be within the purview of the Competition Act. Furthermore, any agreement among competitors which directly or indirectly involves determination of purchase or sale prices, limits or controls production, sharing the market by way of geographical area or number of subscribers in the relevant market or which directly or indirectly results in bid-rigging or collusive bidding is presumed to have an AAEC in the relevant market in India and is considered void. The Competition Act also prohibits abuse of a dominant position by any enterprise. We cannot predict with certainty the impact of the provisions of the Competition Act on our agreements at this stage.

On March 4, 2011, the Government of India issued and brought into force the combination regulation (merger control) provisions under the Competition Act with effect from June 1, 2011. These provisions require acquisitions of shares, voting rights, assets or control or mergers or amalgamations that cross the prescribed asset- and turnover-based thresholds to be mandatorily notified to and pre-approved by the Competition Commission of India (the “CCI”). Additionally, on May 11, 2011, the CCI issued the Competition Commission of India (Procedure for Transaction of Business Relating to Combinations) Regulations, 2011 (as amended), which sets out the mechanism for the implementation of the merger control regime in India.

Furthermore, the CCI has extraterritorial powers and can investigate any agreements, abusive conduct or combination occurring outside India if such agreement, conduct or combination has an AAEC in India. The CCI has initiated an inquiry against us and other car manufacturers pursuant to an allegation that genuine spare parts of automobiles manufactured by the OEMs were not made freely available in the open market in India and, accordingly, anti-competitive practices were carried out by the OEMs.

If we are adversely affected, directly or indirectly, by the application or interpretation of any provision of the Competition Act, or any enforcement proceedings initiated by the CCI, or any adverse publicity that may be generated due to scrutiny or prosecution by the CCI or if any prohibition or substantial penalties are levied under the Competition Act, it could adversely affect our business, prospects, financial condition and results of operations.

Compliance with new or changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

We are subject to a complex and continuously changing regime of laws, rules, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and U.S. Securities and Exchange Commission (the “SEC”) regulations, Securities and Exchange Board of India (the “SEBI”) regulations, New York Stock Exchange (the “NYSE”) listing rules, and the Companies Act, as well as Indian stock market listing regulations. New or changed laws, rules, regulations and standards may lack specificity and are subject to varying interpretations. Under applicable Indian laws, for example, remuneration packages may, in certain circumstances, require shareholders’ approval. New guidance and revisions may be provided by regulatory and governing bodies, which could result in continuing uncertainty and higher costs of compliance. We are committed to maintaining high standards of corporate governance and public disclosure. However, our efforts to comply with evolving regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management resources and time. In addition, there can be no guarantee that we will always succeed in complying with all applicable laws, regulations and standards.

 

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The Companies Act has effected significant changes to the existing Indian company law framework, such as in the provisions related to the issue of capital, disclosures in offering documents, corporate governance, accounting policies and audit matters, related party transactions, class action suits against companies by shareholders or depositors, prohibitions on loans to directors and insider trading, including restrictions on derivative transactions concerning a company’s securities by directors and key managerial personnel. The Companies Act may subject us to higher compliance requirements, increase our compliance costs and divert management’s attention. We are also required to spend, in each financial year, at least 2% of our average net profits during the three immediately preceding financial years, calculated for Tata Motors Limited on a standalone basis under Ind AS, toward corporate social responsibility activities. Furthermore, the Companies Act imposes greater monetary and other liability on the Company and its Directors for any non-compliance. Due to limited relevant jurisprudence, in the event that our interpretation of the Companies Act differs from, or contradicts with, any judicial pronouncements or clarifications issued by the Government of India in the future, we may face regulatory actions or be required to undertake remedial steps. In addition, some of the provisions of the Companies Act overlap with other existing laws and regulations (such as corporate governance provisions and insider trading regulations issued by SEBI). SEBI promulgated the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”) which are applicable to all Indian companies with listed securities or companies intending to list its securities on an Indian stock exchange, and the Listing Regulations became effective on December 1, 2015. Pursuant to the Listing Regulations, the Company is required to establish and maintain a vigilance mechanism for Directors and employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company’s code of conduct (the “Tata Code of Conduct”) or ethics policy under our whistleblower policy (the “Whistleblower Policy”), to implement increased disclosure requirements for price sensitive information, to conduct detailed director familiarization programs and comprehensive disclosures thereof, in accordance with the Listing Regulations. The Company may face difficulties in complying with any such overlapping requirements. Furthermore, the Company cannot currently determine the impact of certain provisions of the Companies Act and the revised SEBI corporate governance standards. Any increase in the Company’s compliance requirements or in the Company’s compliance costs may have a material and adverse effect on the Company’s business, prospects, financial condition and results of operations.

We are subject to risks associated with legal proceedings and governmental investigations, including potential adverse publicity as a result thereof.

We are and may be involved from time to time in civil, labor, administrative or tax proceedings arising in the ordinary course of business. It is not possible to predict the potential for, or the ultimate outcomes of, such proceedings, some of which may be unfavorable to us. In such cases, we may incur costs and any mitigating measures (including provisions taken on our balance sheet) adopted to protect against the impact of such costs may not be adequate or sufficient. In addition, adverse publicity surrounding legal proceedings, government investigations or allegations may also harm our reputation and brands.

In 2014, the antitrust regulator in China, the Bureau of Price Supervision and Anti-Monopoly of the National Development and Reform Commission (the “NDRC”), launched an investigation into the pricing practices of more than 1,000 Chinese and international companies in the automotive industry, including Jaguar Land Rover and many of our competitors. The NDRC has reportedly imposed fines on certain of our international competitors as a result of anti-competitive practices pertaining to vehicle and spare-part pricing. In response to this investigation, we established a process to review our pricing in China and announced reductions in the manufacturer’s suggested retail price for the 5.0-litre V8 models, which include the Range Rover, Range Rover Sport and F-TYPE and the price of certain of our spare parts. Imposition of price reductions and other actions taken in the future in relation to our products may significantly reduce our revenue and profits generated by operations in China and have a material adverse effect on our business, prospects, financial condition and results of operation. As a result, our attempts to offset the potential decline in revenue and profits by increasing operational efficiencies and leveraging economies of scale (for example, through local production in China) may fail or not be as successful as expected. Furthermore, any regulatory action taken or penalties imposed by regulatory authorities may have significant adverse financial and reputational consequences on our business and have a material adverse effect on our results of operations and financial condition.

In any of the geographical markets in which we operate, we could be subject to additional tax liabilities.

Evaluating and estimating our provision and accruals for our taxes requires significant judgement. As we conduct our business, the final tax determination may be uncertain. We operate in multiple geographical markets and our operations in each market are susceptible to additional tax assessments and audits. Our collaborations with business partners are similarly susceptible to such tax assessments. Authorities may engage in additional reviews, inquiries and audits that disrupt our operations or challenge our conclusions regarding tax matters. Any resulting tax assessment may be accompanied by a penalty (including revocation of a benefit or exemption from tax) or additional fee for failing to make the initial payment.

 

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Our tax rates may be affected by earnings estimation errors, losses in jurisdictions that do not grant a related tax benefit, changes in currency rates, acquisitions, investments, or changes in laws, regulations, or practices. Additionally, government fiscal or political pressures may increase the likelihood of adverse or aggressive interpretations of tax laws or regulations or the imposition of arbitrary or onerous taxes, interest charges and penalties. Tax assessments may be levied even where we consider our practices to be in compliance with tax laws and regulations. Should we challenge such taxes or believe them to be without merit, we may nonetheless be required to pay them. These amounts may be materially different from our expected tax assessments and could additionally result in expropriation of assets, attachment of additional securities, liens, imposition of royalties or new taxes and requirements for local ownership or beneficiation.

We may have to comply with more stringent foreign investment regulations in India in the event of an increase in shareholding of non-residents or if we are considered as engaged in a sector in which foreign investment is restricted.

Indian companies, which are owned or controlled by non-resident persons, are subject to investment restrictions specified in the Consolidated Foreign Direct Investment Policy (“Consolidated FDI Policy”). Under the Consolidated FDI Policy issued in 2017, an Indian company is considered to be “owned” by non-resident persons if more than 50% of its equity interest is beneficially owned by non-resident persons. The non-resident equity shareholding in the Company may, in the near future, exceed 50%, thereby resulting in the Company being considered as being “owned” by non-resident entities under the Consolidated FDI Policy. In such an event, any investment by the Company in existing subsidiaries, associates or joint ventures and new subsidiaries, associates or joint ventures will be considered as indirect foreign investment and shall be subject to various requirements specified under the Consolidated FDI Policy, including sectoral limits, approval requirements and pricing guidelines, as may be applicable.

Furthermore, as part of our automotive business, we supply, and have in the past supplied, vehicles to Indian military and paramilitary forces and in the course of such activities have obtained an industrial license from the Department of Industrial Policy. The Consolidated FDI policy applies different foreign investment restrictions to companies based upon the sector in which they operate. While we believe we are an automobile company by virtue of the significance of our automobile operations, in the event that foreign investment regulations applicable to the defense sector (including under the Consolidated FDI Policy) are made applicable to us, we may face more stringent foreign investment restrictions and other compliance requirements compared to those applicable to us presently, which, in turn, could materially affect our business, prospects, financial condition and results of operations.

We require certain approvals or licenses in the ordinary course of business, and the failure to obtain or retain them in a timely manner, or at all, could materially and adversely affect our operations.

We require certain statutory and regulatory permits, licenses and approvals to carry out our business operations and applications for their renewal need to be made within certain time frames. For some of the approvals that may have expired, we have either made, or are in the process of making, an application for obtaining the approval or its renewal. While we have applied for renewal for such approvals, registrations and permits, we cannot assure you that we will receive them in a timely manner, or at all. We can make no assurances that the approvals, licenses, registrations and permits issued to us would not be suspended or revoked in the event of non-compliance or alleged non-compliance with any terms or conditions thereof, or pursuant to any regulatory action. Furthermore, if we are unable to renew or obtain necessary permits, licenses and approvals on acceptable terms in a timely manner, or at all, our business, prospects, financial condition and results of operations could be materially and adversely affected.

Risks Associated with Investments in an Indian Company

Political changes in the Government of India could delay and/or affect the further liberalization of the Indian economy and materially and adversely affect economic conditions in India, generally, and our business, in particular.

Our business could be significantly influenced by economic policies adopted by the Government of India. Since 1991, successive governments have pursued policies of economic liberalization and financial sector reforms. The Government of India has at various times announced its general intention to continue India’s current economic and financial liberalization and deregulation policies. However, protests against such policies, which have occurred in the past, could slow the pace of liberalization and deregulation. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. While we expect any new government to continue the liberalization of India’s economic and financial sectors and deregulation policies, there can be no assurance that such policies will be continued.

 

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The Government of India has traditionally exercised and continues to exercise influence over many aspects of the economy. Our business and the market price and liquidity of the Company’s Shares and ADSs may be affected by interest rates, changes in policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India.

A change in the Government of India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India generally, and specifically our business and operations, as a substantial portion of our assets are located in India. This could have a material adverse effect on our business, prospects, financial condition and results of operation.

Any downgrading of India’s debt rating by a domestic or international rating agency could negatively impact our business.

Any adverse revisions to India’s credit ratings for domestic and international debt by domestic or international rating agencies could adversely impact our ability to raise additional financing, as well as the interest rates and other commercial terms at which such additional financing is available. This could have a material adverse effect on our financial results, business prospects, ability to obtain financing for capital expenditures and the price of the Company’s Shares and ADSs.

We may be materially and adversely affected by Reserve Bank of India policies and actions.

The Indian stock exchanges are vulnerable to fluctuations based on changes in monetary policy formulated by the RBI. We can make no assurances about future market reactions to RBI announcements and their impact on the price of the Company’s Shares and ADSs. Furthermore, our business could be significantly impacted were the RBI to make major alterations to monetary or fiscal policy. Certain changes, including the raising of interest rates, could negatively affect our sales and consequently our Revenue, any of which could have a material adverse effect on our business, prospects, financial condition and results of operation. While the RBI has initiated several relief measures, such as providing moratorium on loans, relaxing provisioning norms towards certain loans and taking other measures to enhance liquidity for NBFCs, there is a considerable uncertainty evolving around COVID-19 pandemic and further relief measures and policy actions may be needed to assist economic recovery. The impact of COVID-19 pandemic on our business and financial performance remains highly uncertain and dependent on spread of COVID-19 pandemic and further steps taken by the Government of India and the RBI to mitigate the economic impact.

Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.

The memorandum and articles of association of the Company (the “Articles of Association”) and Indian law govern the Company’s corporate affairs. Legal principles relating to these matters and the validity of corporate procedures, directors’ fiduciary duties and liabilities, and shareholders’ rights may differ from those that would apply to a company incorporated in another jurisdiction. Shareholders’ rights under Indian law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions, including the United States. You may also have more difficulty in asserting your rights as a shareholder of the Company than you would as a shareholder of a corporation organized in another jurisdiction.

The market value of your investment may fluctuate due to the volatility of the Indian securities market.

Stock exchanges in India, including BSE Limited (the “BSE”) have, in the past, experienced substantial fluctuations in the prices of their listed securities. Such fluctuations, if they continue or recur, could affect the market price and liquidity of the securities of Indian companies, including the Company’s Shares and ADSs. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. Volatility in other stock exchanges, including, but not limited to, those in the United Kingdom and China, may affect the prices of securities in India, including the Company’s Shares, which may in turn affect the price of the Company’s ADSs. In addition, the governing bodies of the stock exchanges in India have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.

There may be a differing level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants, than in the United States. SEBI received statutory powers in 1992 to assist it in carrying out its responsibility for improving disclosure and other regulatory standards for the Indian securities markets. Subsequently, SEBI has prescribed regulations and guidelines in relation to disclosure requirements, insider dealing and other matters relevant to the Indian securities market. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in the United States.

 

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Investors may have difficulty enforcing judgments against us or our management.

The Company is a public limited company incorporated in India. The majority of the Company’s Directors and executive officers are residents of India and substantially all of the assets of those persons and a substantial portion of the Company’s assets are located in India. As a result, it may not be possible for you to effect service of process within the United States upon those persons or the Company. In addition, you may be unable to enforce judgments obtained in courts of the United States against those persons outside the jurisdiction of their residence, including judgments predicated solely upon U.S. federal securities laws. Moreover, it is unlikely that a court in India would award damages on the same basis as a foreign court if an action were brought in India or that an Indian court would enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with public policy.

Section 44A of the Indian Code of Civil Procedure, 1908, as amended (the “Civil Code”) provides that where a foreign judgment has been rendered by a superior court (within the meaning of the section) in any country or territory outside of India which the Government of India has by notification declared to be a reciprocating territory, such foreign judgment may be enforced in India by proceedings in execution as if the judgment had been rendered by an appropriate court in India. However, the enforceability of such judgments is subject to the exceptions set forth in Section 13 of the Civil Code.

Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of amounts payable in respect of taxes or other charges of a similar nature or in respect of fines or other penalties and does not include arbitration awards.

If a judgment of a foreign court is not enforceable under Section 44A of the Civil Code as described above, it may be enforced in India only by a suit filed upon the judgment, subject to Section 13 of the Civil Code and not by proceedings in execution. Accordingly, as the United States has not been declared by the Government of India to be a reciprocating territory for the purposes of Section 44A, a judgment rendered by a court in the United States may not be enforced in India except by way of a suit filed upon the judgment.

The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. Generally, there are considerable delays in the resolution of suits by Indian courts.

A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the RBI, under the Foreign Exchange Management Act, 1999 (“FEMA”) to repatriate any amount recovered pursuant to such enforcement. Any judgment in a foreign currency would be converted into Indian rupees on the date of judgment and not on the date of payment.

Risks Associated with the Company’s Shares and ADSs

Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar may have a material adverse effect on the market value of the Company’s ADSs and Shares, independent of our operating results.

The exchange rate between the Indian rupee and the U.S. dollar has changed materially in the last two decades and may materially fluctuate in the future. Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will affect, among others things, the U.S. dollar equivalents of the price of the Company’s Shares in Indian rupees as quoted on stock exchanges in India and, as a result, may affect the market price of the ADSs. Such fluctuations will also affect the U.S. dollar equivalent of any cash dividends in Indian rupees received on the Shares represented by the ADSs and the U.S. dollar equivalent of the proceeds in Indian rupee of a sale of Shares in India.

 

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Holders of ADSs have fewer rights than shareholders and must act through the depository to exercise those rights.

Although ADS holders have a right to receive any dividends declared in respect of the Shares underlying the ADSs, they cannot exercise voting or other direct rights as a shareholder with respect to the Shares underlying the ADSs. Citibank, N.A. as depository (the “depository”) is the registered shareholder of the deposited Shares underlying the Company’s ADSs, and only the depository may exercise the rights of shareholders in connection with the deposited Shares. The depository will notify ADS holders of upcoming votes and arrange to deliver our voting materials to ADS holders only if requested by the Company. The depository will try, insofar as practicable, subject to Indian laws and the provisions of the Articles of Association, to vote or have its agents vote the deposited securities as instructed by the ADS holders. If the depository receives voting instructions in time from an ADS holder which fails to specify the manner in which the depository is to vote the Shares underlying such ADS holder’s ADSs, such ADS holder will be deemed to have instructed the depository to vote in favor of the items set forth in such voting instructions. If the depository has not received timely instructions from an ADS holder, such ADS holder shall be deemed to have instructed the depository to give a discretionary proxy to a person designated by us, subject to the conditions set forth in the deposit agreement. If requested by the Company, the depository is required to represent all Shares underlying ADSs, regardless of whether timely instructions have been received from such ADS holders, for the sole purpose of establishing a quorum at a meeting of shareholders.

In addition, in your capacity as an ADS holder, you will not be able to examine the Company’s accounting books and records, or exercise appraisal rights. Registered holders of the Company’s Shares withdrawn from the depository arrangements will be entitled to vote and exercise other direct shareholder rights in accordance with Indian law. However, a holder may not know about a meeting sufficiently in advance to withdraw the underlying Shares in time. Furthermore, an ADS holder may not receive voting materials, if the Company does not instruct the depository to distribute such materials, or may not receive such voting materials in time to instruct the depository to vote.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement (as defined below), or for any other reason.

For further details on the terms and conditions of the Company’s ADSs and the rights and obligations of the Company’s ADS holders, please see the amended and restated deposit agreement, dated as of September 27, 2004 among the Company, Citibank, N.A., as depository, and all holders and beneficial owners of ADSs issued thereunder, as amended and supplemented by Amendment No. 1, dated as of December 16, 2009, hereinafter referred to as the “deposit agreement,” which is incorporated by reference into this annual report on Form 20-F.

Moreover, pursuant to Indian regulations, the Company is required to offer its shareholders preemptive rights to subscribe for a proportionate number of Shares to maintain their existing ownership percentages prior to the issue of new Shares. These rights may be waived by a resolution passed by at least 75% of the shareholders of the Company present and voting at a general meeting. ADS holders may be unable to exercise preemptive rights for subscribing to these new Shares unless a registration statement under the Securities Act is effective or an exemption from the registration requirements is available to us. The Company’s decision to file a registration statement would be based on the costs, timing, potential liabilities and the perceived benefits associated with any such registration statement and the Company does not commit that it would file such a registration statement. If any issue of securities is made to the shareholders of the Company in the future, such securities may also be issued to the depository, which may sell such securities in the Indian securities market for the benefit of the holders of ADSs. There can be no assurance as to the value, if any, the depository would receive upon the sale of such rights or securities. To the extent that ADS holders are unable to exercise preemptive rights, their proportionate ownership interest in our company would be reduced.

The Government of India’s regulation of foreign ownership could materially reduce the price of the ADSs.

Foreign ownership of Indian securities is regulated and is partially restricted. In addition, there are restrictions on the deposit of Shares into the Company’s ADS facilities. ADSs issued by companies in certain emerging markets, including India, may trade at a discount to the market price of the underlying Shares, in part because of the restrictions on foreign ownership of the underlying Shares and in part because ADSs are sometimes perceived to offer less liquidity than underlying Shares that can be traded freely in local markets by both local and international investors. See Item 10.D “Additional Information—Exchange Controls.”

 

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There are restrictions on daily movements in the price of the Shares, which may constrain a shareholder’s ability to sell, or the price at which a shareholder can sell, Shares at a particular point in time.

The Shares are subject to a daily circuit breaker imposed by stock exchanges in India on publicly listed companies, that includes the Company, which does not allow transactions causing volatility in the price of the Shares above a certain threshold. This circuit breaker operates independently from the index-based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on the Company’s circuit breaker is set by the stock exchanges in India based on the historical volatility in the price and trading volume of the Company’s Shares. The stock exchanges in India are not required to inform the Company of the percentage limit of the circuit breaker from time to time, and may change it without the Company’s knowledge. This circuit breaker effectively acts to limit the upward and downward movements in the price of the Company’s Shares. As a result of this circuit breaker, the Company cannot make any assurance regarding the ability of the shareholders of the Company to sell their Shares or the price at which such shareholders may be able to sell their Shares.

With effect from April 1, 2018, any gain realized on the sale of the Shares will be subject to capital gains tax in India. See Item 10.E “Additional Information—Taxation—Taxation of Capital Gains and Losses—Indian Taxation—Capital Gains” of this annual report on Form 20-F for further information on the application of capital gains tax in India to the shareholders of the Company and ADS holders of the Company.

 

Item 4.

Information on the Company

A. History and Development of the Company

The Company was incorporated on September 1, 1945 as a public limited company under the Indian Companies Act VII of 1913 as Tata Locomotive and Engineering Company Limited, and it received a certificate of commencement of business on November 20, 1945. The Company’s name was changed to Tata Engineering and Locomotive Company Limited on September 24, 1960, and to Tata Motors Limited on July 29, 2003. Tata Motors Limited is incorporated and domiciled in India. We commenced operations as a steam locomotive manufacturer, but this business was discontinued in 1971. Since 1954, we have been manufacturing automotive vehicles. The automotive vehicle business commenced with the manufacture of Commercial Vehicles under financial and technical collaboration with Daimler-Benz AG (now Daimler AG) of Germany. This agreement ended in 1969. We produced only Commercial Vehicles until 1991, thereafter we started producing Passenger Vehicles as well. Together with its consolidated subsidiaries, the Company forms the Tata Motors Group.

In March 2004, we acquired Daewoo Commercial Vehicle Co. Ltd., (now known as Tata Daewoo Commercial Vehicle Co. Ltd. (“TDCV”)) at Gunsan in South Korea. TDCV is engaged in the business of manufacturing heavy vehicles such as cargo, trucks, dump trucks, tractor trailers and special purpose vehicle mixers.

In September 2004, the Company became the first company from India’s automotive sector to be listed on the NYSE. The Company’s ADSs are traded on the NYSE under the symbol “TTM”. The Company’s Ordinary Shares and ‘A’ Ordinary Shares are traded on the BSE under the codes 500570 and 570001, respectively, and the National Stock Exchange of India Ltd. (the “NSE”) under the symbols “TATAMOTORS” and “TATAMTRDVR”, respectively.

In June 2008, we acquired the Jaguar Land Rover business from Ford. Jaguar Land Rover is a global automotive business, which designs, manufactures and sells Jaguar luxury sedans, sports cars and luxury performance SUVs and Land Rover premium all-terrain vehicles, as well as related parts, accessories and merchandise. The Jaguar Land Rover business has internationally recognized brands, a product portfolio of award-winning luxury performance cars, luxury performance SUVs and premium all-terrain vehicles, brand-specific global distribution networks and research and development capabilities. As a part of our acquisition of the Jaguar Land Rover business, we acquired three major manufacturing facilities located in Halewood, Solihull and Castle Bromwich and two advanced design and engineering facilities located at Whitley and Gaydon, all in the United Kingdom, together with national sales companies in several countries.

We are one of the leading global automobile manufacturers in the world, providing integrated and smart e-mobility solutions to customers in over 125 countries. With an employee base of over 75,000, our top-of-the-line manufacturing facilities are located across India, the United Kingdom, the United States, Italy and South Korea. We are the only OEM in India that offers an extensive range of mobility solutions for our automotives, covering cars, Utility Vehicles, trucks, and buses. We have a strong global network of 134 subsidiaries, associate companies and joint ventures, including the Jaguar Land Rover in the United Kingdom and the Tata Daewoo in South Korea. We offer a broad portfolio of automotive products, ranging from sub-1 ton to 55 ton GVW trucks (including pickup trucks) to small, medium, and large buses and coaches to Passenger Cars, premium luxury cars and SUVs.

 

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We operate six principal automotive manufacturing facilities in India, including at: (i) Jamshedpur in the state of Jharkhand, (ii) Pune in the state of Maharashtra, (iii) Lucknow in the state of Uttar Pradesh, (iv) Pantnagar in the state of Uttarakhand, (v) Sanand in the state of Gujarat and (vi) Dharwad in the state of Karnataka. We also operate four principal automotive manufacturing facilities in the United Kingdom through our Jaguar Land Rover business, including at: (i) Solihull in the West Midlands (ii) Castle Bromwich also in the West Midlands, (iii) Halewood in Liverpool and (iv) engine plant at Wolverhampton in the West Midlands. In Fiscal 2015, Jaguar Land Rover opened its inaugural overseas manufacturing facility in China, the China Joint Venture. In June 2016, Jaguar Land Rover opened a new manufacturing plant in Itatiaia, Brazil, with an annual production capacity of 24,000 units. Jaguar Land Rover now produces the I-PACE battery electric vehicle and the new Jaguar E-PACE in Graz, Austria under its manufacturing partnership with Magna Steyr. Furthermore, Jaguar Land Rover’s new 150,000 units per annum manufacturing plant in Nitra, Slovakia opened in October 2018 and is currently producing the Land Rover Discovery. In Fiscal 2019 Jaguar Land Rover announced that next-generation Electric Drive Units (“EDU”), developed in collaboration with BMW, will be produced at the company’s EMC in Wolverhampton. At the same time Jaguar Land Rover announced that these EDUs will be powered by batteries assembled at a new Jaguar Land Rover Battery Assembly Centre located at Hams Hall, North Warwickshire.

We expanded our international operations through mergers and acquisitions, and in India we have made strategic alliances involving non-Indian companies in recent years, including, but not limited to, the following:

 

   

We have a joint venture agreement with FCA Italy Spa (previously known as Fiat Group Automobiles S.p.A., Italy), which is part of the Fiat Chrysler Automobiles Group (“FCA”). Together with the FCA, we operate a facility located at Ranjangaon in Maharashtra to manufacture Passenger Cars, engines and transmissions for the Indian and overseas markets. Established in April 2008, the plant currently manufactures the Fiat Linea, Fiat Punto, Tata Indica, Jeep, Nexon, Tata Bolt and Tata Zest vehicles, as well as components for such vehicles, such as engines and transmissions. During May 2012, both the joint-venture partners decided to re-align their Indian joint venture. Accordingly, in March 2013, we and Fiat Group signed a restructuring framework agreement (the “RFA”). Under the RFA:

 

     

The joint arrangement to manufacture and assemble Fiat-branded products, Tata products and any new products (including for third parties) in accordance with the terms and conditions settled in the RFA. The current third-party orders to continue in accordance with current terms.

 

     

The distribution company, owned by FCA, is responsible for distribution of the Fiat vehicles and parts from April 1, 2013.

 

   

In December 2006, we entered into a joint venture agreement with Thonburi Automotive Assembly Plant Co. Ltd. (the “Thonburi Group”) to manufacture pickup trucks in Thailand. As of March 31, 2020, we own 97.17% of the joint venture, while the Thonburi Group owns the remaining 2.83%. The joint venture, which began vehicle production in March 2008, enabled us to access the Thailand market, which is a major market for pickup trucks, as well as other potential markets in the ASEAN region.

 

   

In October 2010, TML acquired an 80% equity interest in Trilix Srl. (“Trilix”), a design and engineering company, in line with our objective to enhance our styling and design capabilities to meet global standards. With effect from December 6, 2018, TML increased its equity interest in Trilix to 100%. Trilix offers design and engineering services in the automotive sector, including styling, architecture, packaging, surfacing, macro and micro-feasibility studies and detailed engineering development. Trilix continues to implement a strategic growth policy and in March 2013 moved to a new facility as part of its ongoing implementation of this growth policy.

 

   

Jaguar Land Rover opened a manufacturing plant for the China Joint Venture in Changshu, China in October 2014 and began manufacturing the Range Rover Evoque shortly thereafter. Manufacture of the Land Rover Discovery Sport commenced in the third quarter of Fiscal 2016 followed by the long wheel base Jaguar XFL in the first half of Fiscal 2017 that went on sale in September 2016 and subsequently the long wheel base XEL that went on sale in December 2017. Total phase one investment in the joint venture was approximately RMB10.9 billion, which contributed toward the establishment of the manufacturing plant, research and development center and engine production facility. Jaguar Land Rover committed to invest RMB3.5 billion of equity capital in the China Joint Venture, representing 50% of the share capital and voting rights of the joint venture company. Investment to support phase two, which will add additional manufacturing capacity, may be supported by further capital injections from Jaguar Land Rover and Chery. In July 2017, the China Joint Venture opened an engine manufacturing facility to produce the Jaguar Land Rover 2.0-Liter petrol Ingenium engine for installation into vehicles produced locally at the joint venture plant in Changshu.

 

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In July 2015, Jaguar Land Rover agreed to a manufacturing partnership with Magna Steyr, an operating unit of Magna International Inc, to build certain future Jaguar Land Rover models in Graz, Austria to support Jaguar Land Rover’s growth plans. We believe that Magna Steyr has extensive contract manufacturing expertise working with many other car manufacturers globally. The Jaguar I-PACE battery electric vehicle and the Jaguar E-PACE are currently manufactured at the plant in Graz, Austria.

 

   

In December 2015, Jaguar Land Rover concluded an agreement with the Government of the Slovak Republic for the development of a new manufacturing plant in western Slovakia with the first cars expected to be produced in 2018. The facility represents an investment of GBP1 billion and initial annual capacity of up to 150,000 units. The plant opened in October 2018 and currently produces the Land Rover Discovery.

 

   

On March 30, 2017, the Board approved a scheme of merger and arrangement between TML and TML Drivelines Limited (“TMLDL”), a wholly-owned subsidiary of TML. The merger was completed on April 30, 2018. The merger had no impact on our consolidated financial statements.

 

   

On May 23, 2018, the Board approved the sale of TML’s shareholding in its wholly-owned subsidiary, TAL Manufacturing Solutions Limited, to Tata Advanced Systems Ltd., a Tata group company. The divestment of TAL Manufacturing Solutions Limited was closed on March 29, 2019 and TML has received Rs.5,334 million, and has acquired the non-aerospace business of TAL Manufacturing Solutions Limited for Rs.1 million. The acquisition of non-aerospace business had no impact on our consolidated financial statements.

 

   

Brabo Robotics and Automation Limited (“BRAL”) was incorporated on July 17, 2019, as a-wholly owned subsidiary of Tata Motors Limited with an operating plan to take-over the robotics and factory automation (“RAB”) division of TML as a going concern. The RAB business of TAL Manufacturing Solutions Limited was transferred to TML with effect from April 30, 2019. Presently, BRAL is operational and engaged in RAB business and envisages to explore opportunities within the RAB avenue.

Please see Item 4.B “Information on the Company—Business Overview—Our Strategy—Capital and Product Development Expenditures” and Item 5.B “Operating and Financial Review and Prospect—Liquidity and Capital Resources—Capital Expenditures” of this annual report on Form 20-F for details on our principal capital expenditures.

Through our subsidiary and associate companies, we are engaged in providing engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. Tata Technologies Limited (“TTL”) is engaged in providing specialized engineering and design services, product lifecycle management (“PLM”) and product-centric IT services to leading global manufacturers. TTL’s customers are among the world’s premier automotive, aerospace, industrial heavy machinery and consumer durables manufacturers. As of March 31, 2020, we held 72.48% stake in TTL, and TTL had twelve subsidiaries and one joint venture.

TML Distribution Company Limited (“TDCL”), TML’s wholly-owned subsidiary, was incorporated on March 28, 2008. TDCL provides distribution and logistics support for distribution of our products throughout India. TDCL commenced its operations in Fiscal 2009.

TML’s subsidiary, Tata Motors Finance Limited (“TMFL”), was incorporated on June 1, 2006, with the objective of becoming a preferred financing provider for our dealers’ customers by capturing customer spending over the vehicle life-cycle relating to vehicles sold by us. In India, TMFL is registered with the RBI as a systemically important non-deposit taking NBFC and is classified as an asset finance company under the RBI’s regulations on NBFCs. In Fiscal 2015, TMFL acquired 100% shareholding of Rajasthan Leasing Private Ltd., which subsequently changed its name to Tata Motors Finance Solutions Private Ltd., an NBFC registered with the RBI. On June 4, 2015, Tata Motors Finance Solutions Private Ltd. was converted into a public limited company, named Tata Motors Finance Solutions Limited (“TMFSL”). TMFSL focuses on the used vehicle financing business. On March 31, 2016, TMFL acquired 100% shareholding in Sheba, a wholly-owned subsidiary of TML and an NBFC-registered entity with the RBI, as a part of restructuring and consolidation of financial services companies under TMFL. Pursuant to restructuring arrangements, TMFL transferred its new vehicle finance business to Sheba on January 31, 2017. During Fiscal 2018, TMFL changed its name to TMF Holdings Limited (“TMFHL”) and Sheba changed its name to TMFL. During Fiscal 2019, TMFHL had acquired 26% of the share capital of Loginomic Tech Solutions Pvt. Limited, a technology-based freight aggregator.

 

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TML’s wholly-owned subsidiary, Tata Motors Insurance Broking and Advisory Services Limited (“TMIBASL”) is a licensed composite insurance broker with the Insurance Regulatory and Development Authority of India that services customers across the country with its expertise in insurance brokerage and consultancy services. TMIBASL commenced business in Fiscal 2008 and provides end-to-end insurance solutions in direct insurance and reinsurance businesses. With the fast-evolving global risk trends, TMIBASL focuses its expertise and efforts to effectively deliver a wide range of products and services for its clients.

In May 2018, the Board approved the sale of TML’s defense business, to Tata Advanced Systems Limited, a Tata group company. TML will receive an upfront consideration of Rs.1,000 million and a deferred consideration of 3% of the revenue generated from certain projects for up to 15 years, starting in Fiscal 2020, subject to a maximum deferred consideration of Rs.17,500 million. The scheme of arrangement in respect of the above (“Scheme”) has been approved by the shareholders at the National Company Law Tribunal (“NCLT”) convened shareholders meeting held on July 30, 2019 and sanctioned by the Honorable NCLT, Mumbai bench and the Honorable NCLT Hyderabad bench vide its orders dated December 12, 2019 and December 20, 2019 respectively. As per Clause 21 of the Scheme, the Scheme would be effective on receipt of necessary approvals from authorities, including the Ministry of Defense.

On July 31, 2020, pursuant to the provisions of sections 230 to 232 and other applicable provisions of Companies Act, 2013 and subject to the requisite regulatory approvals, the Board approved a scheme of arrangement between the Company and TML Business Analytics Services Limited (“TMLBASL”) and their respective shareholders, inter alia, for the transfer of the Company’s Passenger Vehicles business including electric vehicle business as a going concern, on a slump sale basis as defined under section 2(42C) of the Income-tax Act 1961, to TMLBASL. Pursuant to such scheme, the Board also approved the reduction of the Company’s share capital without extinguishing or reducing its liability on any of its Shares by writing down a portion of its securities premium account amounting to Rs11,173.59 crores, with a corresponding adjustment to the accumulated losses of the Company. Upon such scheme becoming effective, the name of the TMLBASL shall be changed to ‘Tata Motors Passenger Vehicles Limited’.

As of March 31, 2020, our operations included 103 consolidated subsidiaries, 2 joint operations, 4 joint ventures and 28 equity method affiliates, in respect of which we exercise significant influence. As of March 31, 2020, we had approximately 78,906 permanent employees, including approximately 51,104 permanent employees at our consolidated subsidiaries and joint operations.

Tata Incorporated serves as the Company’s authorized U.S. representative. The address of Tata Incorporated is 101 Park Avenue, New York, NY 10178, the United States of America.

The Company’s registered office is located at Bombay House, 24, Homi Mody Street, Mumbai 400 001, India. The Company’s telephone number is +91-22-6665-8282 and the Company’s website address is www.tatamotors.com. The Company’s website does not constitute a part of this annual report on Form 20-F. The SEC maintains a web site www.sec.gov that contains reports, proxy statements and other information regarding registrants, including Tata Motors Limited, that file electronically with the SEC.

Over the last three years, from June 30, 2017 to June 30, 2020, the holdings of the Company’s largest shareholder, Tata Sons along with its subsidiaries, have increased from 28.66% to 36.29%. Please see Item 7.A “Major Shareholders and Related Party Transactions—Major Shareholders” for further details of recent changes in major shareholders’ shareholding in the Company.

B. Business Overview

We primarily operate in the automotive segment. Our automotive segment includes all activities relating to the development, design, manufacture, assembly and sale of vehicles, including financing thereof, as well as sale of related parts and accessories. The acquisition of the Jaguar Land Rover business has enabled us to enter the premium car market in developed markets, such as the United Kingdom, the United States, Europe and China, as well as several emerging markets, such as Russia, Brazil and South Africa, amongst others. Going forward, we expect to focus on profitable growth opportunities in our global automotive business, through new products and market expansion. Within our automotive operations, we continue to focus on integration and synergy through sharing of resources, platforms, facilities for product development and manufacturing, sourcing strategy and mutual sharing of best practices.

A core initiative of ours was the implementation of the Organization Effectiveness program, a strategic program designed to overhaul and transform the Tata Motors Group. Pursuant to the changes implemented as a result of the OE program, the Tata Motors Group has drawn separate strategies for Commercial Vehicles, Passenger Vehicles and financing business from Fiscal 2019. Commencing Fiscal 2019, the reportable segments are as follows:

 

   

Automotive operations: Our automotive segment consists of the following four reportable sub-segments:

 

     

Tata Commercial Vehicles”: Includes Commercial Vehicles (SCV & Pickups, Medium and Heavy Commercial Vehicles and Intermediate Light Commercial Vehicle and CV Passenger Vehicles) manufactured under the Tata and Daewoo brands (and excludes vehicles manufactured under the Jaguar Land Rover brand);

 

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Tata Passenger Vehicles”: Includes Passenger Vehicles and Utility Vehicles manufactured under the Tata and Fiat brands (and excludes vehicles manufactured under the Jaguar Land Rover brand);

 

     

Jaguar Land Rover: Includes vehicles manufactured under the Jaguar Land Rover brand (and excludes vehicles manufactured under the Tata, Fiat, Daewoo and other brands); and

 

     

Vehicle Financing”: Includes financing of TML and Jaguar Land Rover new vehicles, pre-owned vehicles including other OEMs brands and corporate lending to our channel partners,

 

   

Other operations: Other operations consist of IT services and machine tools and factory automation solutions.

We believe that this structure improves speed, agility and simplicity within our business units, and enable strong functional leadership, improved decision-making, quicker responses to changing market conditions and clear accountability.

We produce a wide range of automotive products, including:

 

   

Passenger Vehicles: Our range of Tata-branded Passenger Cars includes the Tiago (compact) and the Altroz (premium) in the hatchback category, and the Tigor and the Tigor EV (mid-sized) in the sedan category. We have expanded our Passenger Car range with several variants and fuel options designed to suit various customer preferences. Our Jaguar Land Rover operations have an established presence in the premium Passenger Car market under the Jaguar brand name. There are six car lines currently manufactured under the Jaguar brand name, including the F-TYPE two-seater sports coupe and convertible, the XF sedan (including the long wheel base XFL at the China Joint Venture), the XE sports saloon (including long wheel base XEL at the China Joint Venture), the F-PACE Jaguar’s luxury performance SUV), the Jaguar E-PACE compact SUV (manufactured in Graz, Austria under its manufacturing partnership with Magna Steyr and also manufactured at the China Joint Venture plant), and the Jaguar I-PACE (an all-electric performance SUV and Jaguar’s first battery electric vehicle manufactured in Graz, Austria under its manufacturing partnership with Magna Steyr).

 

   

Utility Vehicles: We manufacture a range of Tata brand Utility Vehicles, including the Harrier, the Nexon, the Nexon (EV). There are six car lines under the Land Rover brand, comprising the Range Rover, Range Rover Sport, Range Rover Evoque, the Land Rover Discovery, Land Rover Discovery Sport and the Range Rover Velar.

 

   

SCVs & Pickups: We manufacture a variety of small Commercial Vehicles (less than 3.5 ton), including pickup trucks. This includes the Tata Ace, India’s first indigenously developed mini-truck, with a 0.75 ton payload with different fuel options (including the newly launched Petrol variant) and the Tata Intra, with different payload options. In addition, we launched the Tata Yodha pickup range with single cab and double cab variants and 4X2 and 4X4 options.

 

   

MHCVs and ILCVs: We manufacture a variety of MHCVs and ILCVs, which include trucks, tractors, tippers, multi-axle vehicles and pickups with GVWs (including payload) of between 3.5 tons and 55 tons. We also provide fully-built solutions for special applications like garbage compactors, containers, tankers, reefers, and diesel bowser to customers and various government organizations including solutions related to national defense. In addition, through TDCV, we manufacture a wide array of trucks ranging from 215 horsepower to 560 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles. Our signature product is the Prima and Prima LX range of trucks, which are sold in India and South Korea as well as exported to a number of countries in South Asia, the Middle East and Africa. The SIGNA range of new MHCV trucks launched in 2016 has been extended to several additional tractor and tipper variants. The newest addition to this portfolio is the Ultra range panning from 5-ton Light Commercial Vehicles (“LCV”) to 30-ton tractors.

 

   

CV Passenger Vehicles: We manufacture a variety of passenger carriers including buses. Our products include Magic Express, including an electric variant and a passenger variant for commercial transportation developed on the Tata Ace platform; and the Winger. We also offer a range of buses, which includes the Semi Deluxe Starbus Ultra Contract Bus and the new Starbus Ultra. Our range of buses is intended for a variety of uses, including as intercity coaches (with both air-conditioned and non-air-conditioned luxury variants), as school transportation and as ambulances. We also offer a range of electric buses in different configurations for every application. Our range of diesel and CNG buses complies with the prevalent BSVI norms.

 

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Our Strategy

We intend to further strengthen our position in the Indian automobile industry by investing in new products that exceed customer expectations, improving customer experiences across all our touchpoints, making rigorous cost improvements across our product range, and optimizing our manufacturing and distribution strategy. We have pursued a strategy of increasing our presence in the global automotive markets and enhancing our product range and capabilities through strategic acquisitions and alliances. Building on the success of our ‘Turnaround’ action plan, we have introduced ‘Turnaround 2.0’. Turnaround 2.0 aims at ‘Winning Decisively’ in the Commercial Vehicle business, ‘Winning Sustainably’ in the Passenger Vehicle business and embedding ‘Turnaround’ into our corporate culture. We aim to achieve consistent, competitive, cash accretive growth. In January 2020, we launched a range of new BSVI Passenger Vehicles and Utility Vehicles. In addition to emission migration, our commercialized BSVI products are streamlined and developed with enhanced features, superior performance and value-added enhancers. Jaguar Land Rover is committed to achieving sustainable, profitable growth with positive cash flows in the medium to long term with the strong focus on cost reduction and affordability of capital investments, supported by the Project Charge + and Project Accelerate. Our goal is to position ourselves as a major international automotive company, offering the widest range of products across product segments and applications. Our strategy to achieve these goals consists of the following elements:

Continued focus on new product development

To meet the fast evolving business needs and expectations of customers, each and every BSVI product has been conceptualized and developed to deliver on the key purchasing criteria of our customers, including best in class operating economics, comfort and convenience, and enhanced connectivity to assist our customers in better management of their fleet and transportation businesses utilizing our connected vehicle platform.

The adoption of BSVI norm by the Government of India has provided us with an opportunity to enhance the value and quality of our vehicles. Our BSVI range goes beyond mere regulatory compliance and delivers enhanced value proposition for customers, either by improving total cost of ownership (“TOC”) or increasing the revenue earning potential. We unveiled the entire range of BSVI trucks, buses and powertrains at Auto Expo 2020, ranging from Ace to 55 ton Prima in goods transportation, 15 seater winger to 55 (+D) Seater LNG bus in passenger mobility, and two next generation Turbotron engines.

In January 2020, we launched all-new BSVI range of products with Passenger Cars and Utility Vehicles. In addition to emission migration, our commercialized BSVI products are streamlined and developed with enhanced features, superior performance and value-added enhancers. Our recent product launches and anticipated product launches include the following:

 

   

Several new variants across the Prima and Signa ranges of medium and heavy trucks were launched during Fiscal 2020. These included focused introduction of key products in Ultra 1918.T, Prima Lx 5530.S, C Series in 16T, 40T & 5L in 28T, 35T, Signa 2823.K, Signa 1923, Signa 4223.TK, Prima 2825.K. New trucks included Prima 4623 S, E-series 19T and 30T across tractors, Signa 2818, Signa 3521, 2521 5L, Forza C, 48T and 49T LDL across trucks and on Tippers – Prima Lx 2825 K HRT, Prima LX 3125, Signa 3518 TK and Signa 4225 TK. Application specific launches included Prima 4030.S for LPG Application, Signa 4018.S TFT, Signa 4923.S TFT on Tractor; LPT 2818 TFT, Signa 2818 Refueler, LPT 2818 60WB IOCL, Signa 3518 Tanker application across Trucks and LPK 1918 42WB South Market, LPK 2518 G950 Sainik Mining, Ultimax with DAC, Prima Lx 2530.K 16 Box HD LB for Tippers. We also unveiled the M&HCV range of BSVI products at Auto Expo 2020.

 

   

In our Ultra range of ILCVs, in Fiscal 2020, we launched the Ultra T.16 Sleeper, Ultra T.11, Ultra T.12, Ultra T.7 with smaller cabin design suitable for intercity operations in domestic and international market. While in the regular ILCV range SFC 407/33 RJ, LPT 407/34 EX PS HT, LPT 1512 CRX SLP, LPT 1412 CRX 13.8T, LPK 1212 HD FET, were launched. We also developed various applications as per the need of government and customers such as road sweeper, refuse compactors on CNG, hoper tipper, diesel bowser, CNG cascade carrier and cash van.

 

   

Intra V10 BSIV and V20 BSIV was launched in Q1 Fiscal 2020 in maxi truck segment with increased body load sizes, more powerful engine and larger cabins. These models, with payloads from 1 ton to 2 ton for one way distance up to 200 kilometers are well suited for transportation in semi-urban and city areas for individual owners and market loaders.

 

   

Extended range of Tigor EV was launched in October 2019.

 

   

Nexon, our subcompact SUV, was launched in September 2017. Nexon EV was launched in January 2020.

 

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H5X and 45X, our two models, unveiled in February 2018, are based on the new Optimal Modular Efficient Global Advanced (“Omega”) architecture, which is derived from Land Rover’s D8 platform and Agile, Light, Flexible and Advanced (“ALFA”) platform.

 

   

Harrier, the first model from Omega architecture, was launched in January 2019. The new Harrier 2020 range was launched at the Auto Expo 2020.

 

   

Our collaboration with BMW to develop next generation electronic drive units to power the next generation of all-electric vehicles was announced in June 2019.

 

   

In July 2019, Jaguar Land Rover revealed plans to manufacture a range of new electrified vehicles at its Castle Bromwich manufacturing plant in the UK.

 

   

JLR will open a new battery assembly centre near Birmingham in the UK and will begin the manufacture of next-generation electric drive units at the EMC in Wolverhampton in the UK by the end of 2020.

 

   

Sales and production of the all-new Range Rover Evoque ramped up significantly during Fiscal 2020.

 

   

The refreshed Land Rover Discovery Sport was launched in May 2019 and recently went on sale through our China Joint Venture in March 2020.

 

   

Production of a 6 cylinder Ingenium 3.0-litre petrol engine started in 2020 at the EMC in Wolverhampton, UK.

 

   

In September 2019, Jaguar Land Rover unveiled new facilities at its Gaydon site in Warwickshire, creating the UK’s largest automotive creation and development center.

 

   

Software updates over the air included in all new models was announced in November 2019.

 

   

JLR’s first battery electric vehicle, the Jaguar I-PACE won the golden steering wheel award for best SUV in November 2019.

 

   

Jaguar Land Rover acquired Bowler Motors Limited, the all-terrain performance specialist, in December 2019.

 

   

Refreshed Jaguar F-TYPE was launched in December 2019.

 

   

Altroz, the first model from new ALFA architecture, was launched in January 2020.

 

   

Production of the all-new Land Rover Defender began in January 2020 at the manufacturing plant in Nitra, Slovakia, with first retail sales in March 2020.

 

   

In February 2020 the National Automotive Innovation Centre at the University of Warwick was officially opened, one of Europe’s largest automotive R&D hubs.

 

   

Jaguar Land Rover unveiled its bold new concept vehicle, Project Vector, in February 2020 as part of the company’s Destination Zero journey, offering its vision of an autonomous, electric, connected future for urban mobility.

 

   

Project Charge/Charge+ delivered GBP 3.5 billion(1) of cost, cash and profit improvements by the end of Fiscal 2020 and is expected to deliver GBP 5 billion of savings by March 31, 2021

 

   

Plug-in hybrid versions of the Range Rover Evoque and the Land Rover Discovery Sport were recently launched in April 2020 supported by a new 1.5-litre 3-cylinder Ingenium petrol engine.

We have plans to expand the range of our product base further, supported by our strong brand recognition in India, understanding of local consumer preferences, in-house engineering capabilities and extensive distribution network. Facing growing competition, changing technologies and evolving customer expectations, we understand the importance of bringing new platforms to address market gaps and further enhance our existing range of vehicles to ensure customer satisfaction. Our capital expenditures totaled Rs.302,945 million, Rs.342,236 million and Rs.415,103 million during Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively, and we currently plan to invest approximately of Rs.249 billion in Fiscal 2021 in capacity, new products and technologies.

 

(1) 

Pro-forma analytically derived unaudited estimate consisting of GBP 1.9 billion of investment savings (compared to original planning targets), GBP 0.6 billion improvement in inventory (since Q3 FY19) and GBP 1.0 billion cost efficiencies (primarily SG&A, employee and material costs and other)

 

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Jaguar Land Rover continues to invest in enhancing its technological strengths through in-house research and development activities, including the development of its engineering and design centers which centralize Jaguar Land Rover’s capabilities in product design and engineering. In September 2019, Jaguar Land Rover unveiled new facilities at its Gaydon site in Warwickshire, which was the largest automotive creation and development center in the UK. Jaguar Land Rover also participates in advanced research consortia that bring together leading manufacturers, suppliers or academic specialists in the United Kingdom and are supported by funding from the UK Government’s Technology Strategy Board.

Leveraging our capabilities

We have manufacturing facilities across five locations in India, which deliver mobility solutions to four product lines with products ranging from 0.5 tons to 55 tons. These state-of-art facilities cater to not the only domestic and international market but also defense markets. To date, over a history of 65 years, we have manufactured more than 9.6 million Commercial Vehicles. In Fiscal 2020, we have delivered more than 0.5 million vehicles while driving our operating costs towards benchmark levels through various initiatives and levers. We also endeavor to make our operations sustainable in terms of safety and health, corporate responsibility, and environment with stringent targets in these areas enabled by various initiatives and guided by strong governance committees.

Our product portfolio of Tata-brand vehicles includes the Tiago, Altroz, Tigor, Tigor (EV), Nexon, Nexon (EV), Harrier, which enable us to compete in various Passenger Vehicle market categories. We also offer alternative fuel vehicles. We also intend to expand our sales reach and volumes in rural areas, where an increase in wealth has resulted in a declining difference between urban and rural automobile purchase volumes.

We believe that the foundation of our growth over the last five decades has been a deep understanding of economic conditions and customer needs, and the ability to translate this understanding into desirable products though research and development. In India, our engineering research center (the “ERC”), established in 1966, has enabled us to successfully design, develop and produce our own range of vehicles. Jaguar Land Rover’s research and development operations are built around state-of-the-art engineering facilities, extensive test tracks, testing centers, design hubs and a virtual innovation center. The ERC in India and Jaguar Land Rover engineering and development operations in the United Kingdom have identified areas to leverage the facilities and resources to enhance the product development process and achieve economies of scale. Furthermore, the Company has a wholly-owned subsidiary, Tata Motors European Technical Centre PLC (“TMETC”), in the United Kingdom, which is engaged in automobile research and engineering.

We believe that our in-house research and development capabilities, including those of our subsidiaries Jaguar Land Rover, TDCV and Trilix in Italy, TMETC in the United Kingdom and our joint ventures with Marcopolo S.A. of Brazil in India, with Thonburi in Thailand and Tata Africa Holdings (SA) (Proprietary) Ltd. in South Africa, will enable us to expand our product range and extend our geographical reach. We continually strive to achieve synergy wherever possible with our subsidiaries and joint ventures.

We have continued modernizing our facilities to meet demand for our vehicles. Our Jamshedpur plant, which manufactures our entire range MHCVs, including the Prima, both for civilian and defense uses, was our first plant, set up in 1945 to manufacture steam locomotives. It led our entry into Commercial Vehicles in 1954. The Jamshedpur plant has been modernized over the years and in Fiscal 2015, we celebrated 60 years of truck manufacturing at our first manufacturing and engineering facility in Jamshedpur.

Jaguar Land Rover invests in the development of new and refreshed products for new and existing segments by introducing new powertrains and technologies, including CO2 reduction and electrification that satisfy both customer preferences and regulatory requirements. Jaguar Land Rover expects investment spending of up around GBP 2.5 billion in Fiscal 2021. Around half of that investment is expected to be spent on research and development with the other half expected to be spent on tangible fixed assets such as facilities, tools and equipment as well as other investments.

 

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In October 2014, Jaguar Land Rover opened its EMC at Wolverhampton, in the West Midlands. The plant currently manufactures Jaguar Land Rover’s own in-house 2.0-Liter diesel and gasoline engines which are now available across the majority of models as well as the new 6 cylinder 3.0-litre Ingenium gasoline engine. Jaguar Land Rover’s in-house engines have been engineered to ensure maximum manufacturing efficiency, flexibility to increase the number of engine variants and consistently high quality. In July 2017, the China Joint Venture opened its engine manufacturing facility which produces Jaguar Land Rover own in-house 2.0-Liter petrol Ingenium engine for installation into vehicles produced locally at the joint venture plant in Changshu. In January 2019, Jaguar Land Rover announced that next-generation EDU, developed in collaboration with BMW, will be produced at the company’s EMC in Wolverhampton. At the same time Jaguar Land Rover announced that these EDUs will be powered by batteries assembled at a new Jaguar Land Rover Battery Assembly Centre located at Hams Hall, North Warwickshire

The Jaguar E-PACE and the all-electric Jaguar I-PACE battery electric vehicle are produced under the manufacturing partnership with Magna Steyr, in Graz, Austria. Jaguar Land Rover’s new manufacturing facility in Nitra, Slovakia, with annual capacity of 150,000 units, opened in October 2018 and is currently producing the Land Rover Discovery and production of the all-new Land Rover Defender started in January 2020. Subject to feasibility studies, Jaguar Land Rover has the option to invest a further GBP500 million to expand capacity to 300,000 units annually. In June 2016, Jaguar Land Rover opened its first wholly-owned international manufacturing plant in Brazil, which manufactures Land Rover Discovery Sport for the local market.

Continuing focus on high quality and enhancing customer satisfaction

We place strong emphasis on customer comfort, and had launched Sampoorna Seva in 2018, which is a comprehensive package that addresses all after-sales needs of our customers. This has now been upgraded to Sampoorna Seva 2.0, leveraging our extensive network of more than three times our competitors. The key highlights include guaranteed turnaround time at all our workshops and unique breakdown assistance service “TATA Alert”, under which we promise to reach our customers in 2 hours anywhere across the country and put their vehicles on-road within 24 hours. Consistent delivery on these services have led to high level of customer satisfaction.

We recognize that Commercial Vehicle drivers, whom we call Saarthis, form the backbone of our industry and therefore we have launched three novel flagship programs to improve their quality of life. Tata Samarth program offers a comprehensive insurance package tailor made for the Saarthis and their families. Our Saarthi Aaram Kendras program aims to improve the ‘on-road quality of life of our Saarthi’s by providing access to basic necessities and our Desh ke Saarthi program offers a platform for commercial vehicle drivers to find jobs based on their skills and preferences. These programs have proven successful with the positive responses we received from our customers.

In 2019, we collaborated with a major automobile oil manufacturer, Indian Oil Corporation Limited, to launch Tata Motors Genuine Oil, a single brand of affordable lubricating oils that is suitable for use across our entire range of products. Tata Motors Genuine Oil is now widely available in different packaging sizes for the needs of small customers with single or fewer vehicles. For Commercial Vehicle customers, one of their key considerations when purchasing vehicles is the total cost of ownership. Hence Tata Motors Limited is committed to provide accessible products with good value, for instance we provide competitively priced Tata Genuine Parts and DuraFit parts which are widely available via off line and online channels. Fiscal 2020 saw significant jump in satisfaction scores of channel partners, retailers and mechanics on spare parts availability based on survey results of the Metric Global Spares Parts influencers engine mechanics satisfaction survey 2020 and Spares parts influencers non engine mechanics satisfaction survey 2020.

Our various efforts to improve customer satisfaction levels continued to be reflected in numerous recognitions we received. In a recent Net Promoter Score Brand Health Track survey conducted by Millward Brown Market Research Services India Pvt. Ltd., TML Commercial Vehicles scored at 65, an increase of 2 points from 63 in last survey which is an improvement of 8 points from 57 in Fiscal 2018. In addition, the Company stood first amongst the competition in both sales and service satisfaction scores in the Sales Satisfaction Study survey conducted by Nielsen (India) Private Limited in Fiscal 2020. Further, Tata Motors Commercial Vehicle Business Unit was awarded the Customer Obsession Award for two consecutive years by the Confederation of Indian Industry (“CII”), with a special award for “Digital journey”.

During Fiscal 2020, we won many prestigious awards at various commercial vehicle forums. Tata Motor’s Commercial Vehicle Business Unit (“CVBU”) was awarded in the Exemplary Category in Total Cost Management assessment by the CII. We won six awards at the Apollo CV Awards 2020 including the CV maker of the year award. Girish Wagh, President, CVBU received CV Man of the Year award at Apollo CV Awards 2020. We also received eight prestigious awards at ET Now CV awards.

 

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One of our principal goals is to achieve international quality standards for our products and services. We have established a comprehensive purchasing and quality control system that is designed to consistently deliver quality products and superior service. We also have a program for assisting vendors from whom we purchase raw materials or components to maintain quality. Each vendor is reviewed on a quarterly basis on parameters of quality, cost and delivery, and preference is given to vendors with TS 16949 certification. Through close coordination supported by our IT systems, we monitor quality performance in the field and implement corrections on an ongoing basis to improve the performance of our products, thereby improving customer satisfaction. We believe our extensive sales and service network has also enabled us to provide quality and timely customer service. We are encouraging focused initiatives at both sales and service touch points to enhance customer experience and strive to be the best in class, and we believe that the reach of our sales, service and maintenance network provides us with a significant advantage over our competitors. We ranked a clear second for the consecutive third year in the J.D. Power Asia Pacific 2019 India customer service index study score.

In our Passenger Vehicle segment, we received a strong response and accolades with 13 awards during the year.

 

No.

  

Media

  

Category

  

Product

1.    The Tech and Auto Awards    Design of the year    Tata Harrier
2.    Autoportal Best Car Awards    Most Stylish Car Award    Tata Harrier
3.    Autocar Awards    Manufacturer of the Year    Tata Harrier
4.    Car&Bike - Auto Expo Excellence Awards    Best Design    Tata Sierra Concept EV
5.    Motor Vikatan Awards    Best Design    Tata Harrier
6.    Flywheel Auto Awards    Best Design    Tata Harrier
7.    Quarter Mile Awards   

Design of the year

Premium SUV of the year

   Tata Harrier
8.    Car India Awards    Design of the year    Tata Harrier
9.    Exhibit Auto Tech Awards   

Disruptive Design of the Year

Most Awaited Car of the Year

   Tata Harrier
10.    Motorbeam Awards    Car Manufacturer of the Year    Tata Harrier
11.

12.

13.

  

MotorOctane Awards 2020

Jagran Hi Tech Awards 2019

Namaste Car Awards

  

Best Mid-level Premium Vehicle

Best Update of the Year

2019 SUV of the year

Car of the Year

  

Tata Harrier

Tata Tiago

Tata Harrier

Tata Harrier

During Fiscal 2020, the TML CVBU won numerous awards, including:

ET NOW RETAILS AWARDS

 

No.

  

Award Category

  

Awarded Model/campaign

1.   

CV of the Year

  

Tata Intra

2.   

LCV Cargo Mover of the Year:

  

Tata Ultra T.7

3.   

HCV Rigid Cargo of the Year

  

Tata Signa 4823 T

4.   

Small People Mover of the Year

  

Tata 407/29 - 20 Seater

5.   

ICV People Mover of the Year

  

Tata Ultra 9/9 Electric Bus

6.   

Promising Debut of the Year

  

Tata Prima Lx 5530.S

7.   

Social Media Campaign of the Year

  

Photo OK Please

APOLLO CV AWARDS

 

No.

  

Award Category

  

Awarded Model/OEM

1.   

CV Maker of the Year

  

Tata Motors Limited

2.   

SCV of the Year

  

Tata Intra V10/V20

3.   

LCV cargo carrier of the Year

  

Tata Ultra T.7

4.   

HCV Rigid Cargo Carrier of the Year

  

Tata Signa 4823.T

5.   

ICV Tipper of the Year

  

Tata LPK 1212 HD FET

 

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Jaguar and Land Rover has received over 200 awards from leading international motoring writers, magazines and opinion leaders during Fiscal 2020, reflecting the strength of its model line-up, design and engineering capabilities. A selection of recent awards is listed below.

 

Award

  

Model

  

Awarding Institution

  

Date

Best SUV    Jaguar I-PACE    Golden Steering Wheel    November 2019
World Green Car of the Year    Jaguar I-PACE    World Car of the Year Awards    April 2019
World Car Design of the Year    Jaguar I-PACE    World Car of the Year Awards    April 2019
World Car of the Year    Jaguar I-PACE    World Car of the Year Awards    April 2019

Environmental performance

Jaguar Land Rover’s strategy is to invest in products and technologies that are ahead of expected stricter environmental regulations and ensure that it benefits from a shift in consumer awareness of the environmental impact of their vehicles. Jaguar Land Rover’s environmental vehicle strategy focuses on developing new propulsion technology, overall vehicle weight reduction and reducing parasitic losses through the driveline. It has developed plug-in hybrid electric vehicle (“PHEV”) versions of the Range Rover and Range Rover Sport and PHEV variants of the Range Rover Evoque and Land Rover Discovery Sport, without compromising the vehicles’ off-road capability or load space.

Jaguar Land Rover uses aluminum and other lightweight materials to reduce overall vehicle weight and improve fuel and CO2 efficiency. For example, the Jaguar XE is the only vehicle in its class that uses an aluminium-intensive monocoque. Jaguar Land Rover plans to continue to build on this expertise and extend the application of aluminum construction as they develop a range of new products. The aluminum body architecture introduced on the Jaguar XE is also used in the lightweight Jaguar XF, Jaguar F-PACE and Range Rover Velar. The Land Rover Discovery and the all-new Land Rover Defender use the same lightweight architecture as the Range Rover and Range Rover Sport. Jaguar Land Rover is developing a new modular longitudinal architecture for future models.

Jaguar Land Rover has also developed more efficient powertrains and other related technologies. These include smaller and more efficient 2.0-Liter Ingenium diesel and gasoline engines (now available across the majority of its models range), as well as a new 6 cylinder 3.0-litre ingenium gasoline engine, stop-start, PHEVs and battery electric propulsion technologies. Jaguar Land Rover’s smaller and more efficient Ingenium diesel and gasoline engines, as well as the Range Rover, Range Rover Sport, Range Rover Evoque and Land Rover Discovery Sport PHEVs, alternative powertrains such as the Jaguar I-PACE battery electric vehicle and the further rollout of electrification across the model range are anticipated to contribute to improved environmental performance of our vehicles.

Jaguar Land Rover is also taking measures to reduce emissions, waste and the use of natural resources in all of its operations.

Mitigating cyclicality

The automobile industry is impacted by cyclicality. To mitigate the impact of cyclicality, we plan to continually strengthen our operations through gaining market share across different segments, and offering a wide range of products in diverse geographies. We also plan to continue to strengthen our business operations other than vehicle sales, such as financing of our vehicles, spare part sales, service and maintenance contracts, sales of aggregates for non-vehicle businesses, reconditioning of aggregates and sale of castings, production aids and tooling and fixtures in order to reduce the impact of cyclicality of the automotive industry.

 

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Expanding our international business

Our international expansion strategy involves entering into new markets where we have an opportunity to grow and introduce new products to existing markets in order to grow our presence in such markets. Our international business strategy has already resulted in the growth of our international operations in select markets and chosen segments over the last five years. Based on our internal assessments, in recent years, we have grown our market share across various African markets such as Tanzania, Kenya, Uganda and Nigeria, in addition to strengthening our dominant market position in the South Asian markets of Bangladesh, Nepal and Sri Lanka based on data compiled by our country managers. In keeping with our strategy to enter and grow in new regions, we have focused on business in the ASEAN countries. We have also expanded our international presence through acquisitions and joint ventures. Our acquisition of Jaguar Land Rover significantly expanded our presence in overseas markets. Through Jaguar Land Rover, we offer products in the premium performance car and premium all-terrain vehicle categories with globally recognized brands, and we have diversified our business across markets and product categories as a result. We intend to build upon the internationally recognized brands of Jaguar Land Rover. The production of the Range Rover Evoque commenced at the China Joint Venture in October 2014 and went on general retail sale in China in February 2015. Production of the Discovery Sport was also added as the second vehicle to be manufactured at the China Joint Venture in Fiscal 2016, which went on general retail sale in November 2015. In September 2016, the long wheelbase Jaguar XFL went on sale followed by the long wheel base Jaguar XEL in December 2017. The E-PACE also went on sale in November 2017 and commenced sales from the China Joint Venture in September 2018. The all new Land Rover Discovery went on sale in February 2017 and the new Range Rover Velar went on sale in July 2017 with the refreshed 18 model year Range Rover and Range Rover Sport (including PHEV models) going on sale from November 2017. The multi award winning Jaguar I-PACE went on sale in June 2018 and the all new Evoque went on sale in February 2019. The new refreshed Jaguar XE was launched in March 2019 and the refreshed Land Rover Discovery Sport was revealed in May 2019 and was launched in China (through our China Joint Venture) in March 2020. The refreshed Jaguar F-TYPE was launched in December 2019 and the production of the all-new Land Rover Defender began in January 2020 at the manufacturing plant in Nitra, Slovakia, with first retail sales in March 2020. Plug-in hybrid versions of the Range Rover Evoque and the Land Rover Discovery Sport, supported by a new 1.5-litre 3-cylinder Ingenium petrol engine, were recently launched in April 2020.

During Fiscal 2008, we established a joint venture company to undertake manufacture and assembly operations in South Africa, which has been one of our largest export markets from India in terms of unit volume. The joint venture company, Tata Motors (SA) (Proprietary) Limited, commenced operations in July 2011. Currently, Tata Motors (SA) (Proprietary) Limited caters to the South African, Zambia and Mozambique markets and, in Fiscal 2020, sold 860 units.

Reducing operating costs

We believe that our scale of operations provides us with a significant advantage in reducing costs and we plan to continue to sustain and enhance this cost advantage.

Our ability to leverage our technological capabilities and our manufacturing facilities among our Commercial Vehicles and Passenger Vehicles businesses enables us to reduce cost. For example, the diesel engine used in our Indica was modified to engineer a new variant for use in the Ace platform, which helped to reduce the project cost. Similarly, platform sharing for the manufacture of pickup trucks and UVs enables us to reduce capital investment that would otherwise be required, while allowing us to improve the utilization levels at our manufacturing facilities. Where appropriate, we intend to apply our existing low-cost engineering and sourcing capability to Jaguar Land Rover vehicles.

Passenger Vehicle business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies and as the aspiration levels of the Indian consumer continue to rise, requiring stepped up investments in contemporary products in a competitive market. We are taking steps towards subsidiarization of the PV business to secure mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new age technologies and capital and is likely to optimize the operating cost base further into Fiscal 2021.

We are working towards the consolidation of our future Passenger Vehicles on two architectures: the ALFA architecture and the Omega architecture. With all products coming out of these two platforms, we plan to utilize cost benefits coming out of common parts and economies of scale to continue our Passenger Vehicles turnaround. Similar efforts are being taken with our Commercial Vehicles as well.

 

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Our vendor relationships also contribute to our cost reductions. For example, we believe that the vendor rationalization program that we are undertaking will provide economies of scale to our vendors, which would benefit our cost programs. We are also undertaking various internal and external benchmarking exercises that would enable us to improve the cost effectiveness of our components, systems and sub-systems.

As part of our Project Charge and Project Charge+ programmes Jaguar Land Rover achieved GBP3.5 billion of cost and cash efficiencies as at March 31, 2020, with a further GBP1.5 billion saving targeted in the 12 months until March 31, 2021. We anticipate to have total savings of GBP5 billion under the Charge and Charge + programmes.

Enhancing capabilities through the adoption of superior processes

Tata Sons and the entities promoted by Tata Sons, including us, aim at improving quality of life through leadership in various sectors of national economic significance. In pursuit of this goal, Tata Sons and the Tata Sons-promoted entities have institutionalized an approach, called the ‘Tata Business Excellence Model’, which has been formulated along the lines of the Malcolm Baldridge National Quality Award to enable us to improve performance and attain higher levels of efficiency in our businesses and in discharging our social responsibility. The model aims to nurture core values and concepts embodied in various focus areas such as leadership, strategic planning, customers, markets and human resources, and to translate them to operational performance. Our adoption and implementation of this model seeks to ensure that our business is conducted through superior processes.

We have deployed a balance score card system for measurement-based management and feedback. We have also deployed a new product introduction process for systematic product development and a PLM system for effective product data management across our organization. We have adopted various processes to enhance the skills and competencies of our employees. We have also enhanced our performance management system, with appropriate mechanisms to recognize talent and sustain our leadership base. We believe these will enhance our way of doing business, given the dynamic and demanding global business environment.

Expanding customer financing activities

Vehicles sales embedded with financing expedite purchases and sales. As part of our efforts to achieve this objective, we have teamed up within Tata Motors Group to introduce various consumer programs, which increases sales and improves consumer satisfaction. We are servicing consumers in more than 11,000 postal codes in the country through a network of 275 physical branches and digital presence. To facilitate increased sale and retention of clients, we have launched lifecycle products. Additionally, we also offer various customized funding solutions to dealers and vendors, thereby supporting the entire ecosystem.

Continuing to invest in technology and technical skills

We believe we are one of the most technologically advanced indigenous vehicle manufacturers in India. Over the years, we have enhanced our technological strengths through extensive in-house research and development activities. Further, our research and development facilities at our subsidiaries, such as TMETC, TDCV, TTL, and Trilix, together with the two advanced engineering and design centers of Jaguar Land Rover, have increased our capabilities in product design and engineering. In our Jaguar Land Rover business, we are committed to investments in new technologies to develop products that meet the challenges and opportunities of the premium market, including developing sustainable technologies, like electric propulsion, to improve fuel economy and reduce CO2 emissions and new modular longitudinal architecture. We consider technological leadership to be a significant factor in continued success, and therefore intend to continue to devote significant resources to upgrade our technological base.

Maintaining financial strength

Our cash flow from operating activities in Fiscal 2020 and Fiscal 2019 was Rs.266,329 million and Rs.188,890 million, respectively. Our operating cash flows are primarily due to implementation of cost reduction programs, and prudent working capital management. We have established processes for project evaluation and capital investment decisions with an objective to enhance our long-term profitability.

 

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Leveraging brand equity

We introduced our Go to Market Excellence (“GTME”) initiative in Fiscal 2020 for our three product lines, MHCV, ILCV and buses with a varied approach suitable to the product segment and market. GTME is designed to improve lead generation, management and conversion through organized process and digital interventions. Our initiative integrates digital and human channels and capabilities to strengthen customer relationships continuously and meet the rising expectations of the industry. GTME started in Q2 of Fiscal 2019 in South India region for ILCV and MHCV where core sales and service processes were analyzed and re-designed to address the gaps with focus on setting up a scalable digitized process for market share and realization improvement. Presently GTME has been horizontally deployed across India to assist in shaping and digitizing our sales process.

In May 2019, the Company launched a market-leading vehicle Tata Intra in the new compact truck segment. Over 800 key customers, financiers and manufacturers witnessed the launch at Chennai which was covered widely in the national media. For our CV Passenger Vehicles, we displayed our promising range of buses including electric bus at Prawas 2019 and we showcased our ready-to-use fully-built vehicles in form of reefer range of trucks at the Cold Chain Industry Expo (Refcold 2019). Thousands of key stake holders from the industry and the ministry were present in both these events. The company launched the Saarthi Aaram Kendra on national highways to uplift the conditions of on-road commercial vehicle drivers by providing them driver rest area, canteens, doctor’s facility, vehicle service facility, driver training room amongst other things. This was done in association with Indian Oil Corporation Limited, the largest commercial oil company in the country.

Tata Motors Limited introduced its new range of BSVI vehicles at the Auto Expo 2020, a bi-annual auto show held in India which all leading Indian and international auto brands participate. Going beyond compliance, we have redesigned and re-engineered to bring in the new range of BSVI vehicles based on the strategy of product attribute leadership standing on four pillars - lower total cost of ownership, comfort, safety and connectivity. Built on the theme of Connected India, Tata Motors Limited was also awarded the best CV stall design at the Auto Expo 2020.

For pre-owned vehicles, Tata Motors Limited has a brand named TATA OK. Under this brand, we promote exchange of vehicles in the India market, for which customers can exchange a pre-owned vehicle and buy a new vehicle in similar segment. This helps us to retain our existing customers and also capture new customers.

We offer a variety of support products and services for our customers. In order to improve customer experience and business prospects of our BSVI vehicles, we have decided to upgrade ther connected vehicle solution on our existing connected vehicle platform. Our new connected vehicle solution aims to address the existing difficulties faced by customers in their trip management, fleet management and business management by improving efficiency and productivity through our cutting-edge automotive connectivity services. Our connected vehicle solution, which will be launched in phases, seeks to introduce new features, including connected diagnostics, maintenance module and ecosystem integration. Each of our BSVI MHCV vehicles will be assembled with a telematic control unit and equipped with the basic version of our connected vehicle solution.

Since 2019, Tata Motors Limited has increased emphasis on digitally-led work and campaigns as more and more semi-urban and rural customers adopt digital technology as a medium for their businesses. Our digital initiatives gained recognition in the industry, with more than 20 awards won in the last financial year.

We believe customers associate the Tata name with reliability, trust and ethical value, and that our brand name is gaining significant international recognition due to the international growth strategies of various Tata companies. The Tata brand is used and its benefits are leveraged by Tata companies to their mutual advantage. We recognize the need for enhancing our brand recognition in highly competitive markets in which we compete with internationally recognized brands. We, along with Tata Sons and other Tata companies, will continue to promote the Tata brand and leverage its use in India, as well as in various international markets where we plan to increase our presence. Supported by the Tata brand, we believe our product brands, such as the Tiago, Tigor, Tigor (EV), Altroz, Nexon, Nexon (EV), Harrier, Ace, Magic, Prima, Daewoo, Jaguar, Range Rover and Land Rover are highly regarded, which we intend to continue to nurture and promote.

 

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Overview of Automotive Operations

We sold 961,463, 1,274,072 and 1,221,124 units worldwide in Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively, consisting of 485,511 units of Tata Commercial Vehicles and Tata Passenger Vehicles and 475,952 units (excluding wholesales from the China Joint Venture) of Jaguar Land Rover vehicles in Fiscal 2020. In terms of units sold, our largest market was India where we sold 448,614 and 693,756 units during Fiscal 2020 and Fiscal 2019, respectively (constituting 46.7% and 54.5% of total sales in Fiscal 2020 and Fiscal 2019, respectively), followed by North America, where we sold 135,766 units and 133,237 units in Fiscal 2020 and Fiscal 2019, respectively (constituting 14.1% and 10.5% of total sales in Fiscal 2020 and Fiscal 2019, respectively).

Our total sales worldwide (including international business sales, Jaguar Land Rover sales and excluding sales by our China Joint Venture) in Fiscal 2020, Fiscal 2019 and Fiscal 2018 are set forth in the table below:

 

Category

   Year ended March 31  
     2020     2019     2018  
     Units      %     Units      %     Units      %  

Passenger Cars

     202,010        21.0     286,730        22.5     291,299        23.9

Utility Vehicles

     411,866        42.8     460,056        36.1     473,273        38.7

Commercial Vehicles

     347,587        36.2     527,286        41.4     456,552        37.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     961,463        100.0     1,274,072        100.0     1,221,124        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Tata Commercial Vehicles and Tata Passenger Vehicles

India is the primary market for Tata and other brand vehicles (including vehicle financing). During Fiscal 2020, Indian automotive sector was impacted by subdued demand, weak consumer sentiment, economic slowdown, impact in credit flows due to spillovers from the NBFC crisis and transition to BSVI. Other geographic markets were also affected by various macro and industry headwinds.

The following table sets forth our total sales worldwide of Tata Commercial Vehicles and Tata Passenger Vehicles:

 

Category

   Year ended March 31  
     2020     2019     2018  
     Units      %     Units      %     Units      %  

Tata Passenger Cars

     137,924        28.4     234,500        30.8     219,274        32.4

Tata Commercial Vehicles

     347,587        71.6     527,286        69.2     456,552        67.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     485,511        100.0     761,786        100.0     675,826        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Please see Item 5.A “Operating and Financial Review and Prospects—Operating Results—Geographical Breakdown” for a breakdown of the Company’s total revenue by geographic market in Fiscal 2020, Fiscal 2019 and Fiscal 2018.

Of the 485,511 units sold overall in Fiscal 2020, the Company sold 448,614 units of Tata Commercial Vehicles and Tata Passenger Vehicles in India and 36,897 units outside of India, compared to 693,756 units and 68,030 units respectively in Fiscal 2019.

We maintained our leadership position in the Commercial Vehicle category in India, which was characterized by increased competition during the year. The Passenger Vehicle market also continued to be subject to intense competition.

The following table sets forth our market share in various categories in the Indian market based on wholesale volumes:

 

Category

   Year ended March 31  
     2020     2019     2018  

Passenger Cars

     4.2     5.9     6.2

Utility Vehicles

     5.6     7.0     4.6

Medium and Heavy Commercial Vehicles

     57.4     55.0     54.3

Intermediate and Light Commercial Vehicles

     47.2     45.4     44.9

SCVs & Pickups

     37.9     40.1     39.6

CV Passenger Vehicles

     40.9     44.0     45.3

Total Four-Wheel Vehicles

     12.7     15.5     14.1
  

 

 

   

 

 

   

 

 

 

 

Source: Society of Indian Automobile Manufacturers Report and our internal analysis.

 

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Passenger Vehicles in India

Industry-wide sales of Passenger Vehicles in India decreased by 17.3% in Fiscal 2020, compared to a 2.8% growth in Fiscal 2019, while Utility Vehicles sales remained flat during Fiscal 2020 as a result of weak consumer sentiment, rising cost of vehicle ownership, liquidity stress and general economy slowdown. Our Passenger Vehicle sales in India decreased by 37.4% to 131,796 units in Fiscal 2020 from 210,500 units in Fiscal 2019, due to macro headwinds impacting the industry and our focus on retail sales for seamless transition to BSVI. During Fiscal 2020, the Passenger Vehicle retail sales were 13% higher than Passenger Vehicle wholesales. For a smooth transition to BSVI, the Company focused on stock reduction through retail acceleration. We have achieved seamless transition to BSVI with our “New Forever” range.

Passenger Cars in India

We sold 71,719 units in the Passenger Cars category (Tata-brand vehicles in India) in Fiscal 2020, compared to 131,035 units in Fiscal 2019. In January 2020, we launched Altroz (a premium hatchback and the first model from ALFA platform) and we sold 8,412 units. Our market share for Passenger Cars in India was lower at 4.2% in Fiscal 2020, as compared to 5.9% in Fiscal 2019.

Utility Vehicles in India

In the Utility Vehicles category, we sold 60,077 units in Fiscal 2020, representing a decrease of 24.4% from 79,465 units in Fiscal 2019. Our market share of Utility Vehicles in India decreased and currently stands at 5.6% in Fiscal 2020, compared to 7.0% in Fiscal 2019.

Commercial Vehicles in India

Industry sales of Commercial Vehicles decreased by 30.0% to 726,762 units in Fiscal 2020 from 1,038,834 units in Fiscal 2019. Industry sales in the MHCVs segment has declined the most, by 51.9% at 132,272 units in Fiscal 2020, as compared to 274,750 in Fiscal 2019. Industry sales of ILCV reported a decrease of 29.0% to 89,066 units in Fiscal 2020, from 125,471 units in Fiscal 2019. Industry sales of SCV & Pickups reported a decrease of 20.2% to 411,352 units in Fiscal 2020, from 515,491 units in Fiscal 2019. Industry sales of CV Passenger reported a decrease of 23.6% to 94,072 units in Fiscal 2020, from 123,122 units in Fiscal 2019.

The sales of our Commercial Vehicles in India underperformed the industry with a decline rate of 33.4% to 312,267 units in Fiscal 2020 from 468,788 units in Fiscal 2019. Despite several challenges, through focused management efforts we achieved seamless transition into BSVI. As a result, our BSIV inventory in the ecosystem was near zero as at March 31, 2020.

MHCVs in India

Our sales in the MHCVs category in India decreased by 49.7% to 75,918 units in Fiscal 2020, as compared to sales of 151,004 units in Fiscal 2019. The decline was witnessed on account of higher capacity arising from axle load regulations, poor freight availability, falling freight rates, slowdown in the infrastructure developments, delayed payments to contractors, liquidity stress and overall sharp decline in the economy.

ILCVs in India

Our sales in the ILCVs in India segment decreased by 26.2% to 42,077 units in Fiscal 2020, from 57,015 units in Fiscal 2019. The ILCV industry in India declined mainly due to lack of replacement demand, slowdown in economy, liquidity constraints and decline in discretionary spending.

SCVs & Pickups in India

Our sales in SCVs & Pickups segment in India decreased by 24.6% to 155,790 units in Fiscal 2020 from 206,655 units in Fiscal 2019. The SCV segment is heavily dependent on the ‘First Time User’ category of customers and thus has been impacted due to the liquidity crunch, higher interest rates and difficulty in funding from the NBFCs.

CV Passenger Vehicles in India

Our sales in CV Passenger Vehicles segment in India decreased by 28.9% to 38,482 units in Fiscal 2020 from 54,114 units in Fiscal 2019, due to overall decline in industry volume.

 

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Tata Commercial Vehicles and Tata Passenger Vehicles—Exports

International business has consistently expanded since its inception in 1961. We have a global presence in more than 46 countries, including Southern Asia, South Africa, Africa, Middle East, Southeast Asia and Ukraine. We market a range of products including MHCV trucks, LCV trucks, buses, pickups and small Commercial Vehicles.

Our overall sales in international markets decreased by 41.4% to 31,144 units in Fiscal 2020 as compared to 53,140 units in Fiscal 2019. Our top five export destinations for vehicles manufactured in India, were Bangladesh, Nepal, Sri Lanka, Kuwait and Tanzania, which accounted for 73% of the exports of Commercial Vehicles, while Nepal, Bangladesh, Tanzania, Bhutan and Sri Lanka were top 5 export destinations for Passenger Vehicles and accounted for 99% of exports of Passenger Vehicles. We intend to strengthen our position in the geographic areas we are currently operating in and explore possibilities of entering new markets with similar market characteristics to the Indian market. Commercial Vehicles exports were 29,664 units in Fiscal 2020, as compared to 51,119 units in Fiscal 2019. Global economic slowdown and liquidity crunch impacted the industry volumes across most of our major markets, for instance Southern Asia, Middle East and African markets witnessed a decline in volumes in Fiscal 2020 as compared to Fiscal 2019. Our market shares in almost all focus markets have either improved or sustained as compared to Fiscal 2019. We also corrected our distributor stocks which had built up due to the sudden drop in demand and completed many prestigious orders with major municipalities and government bodies across the globe. Passenger Vehicles exports were 1,480 units in Fiscal 2020, compared to 2,021 units in Fiscal 2019. 200 Units of Hexa were supplied to Bangladesh army.

TDCV, our subsidiary company which engages in the design, development and manufacturing of MHCVs, witnessed a decrease in overall sales by 22.2% to 5,190 units in Fiscal 2020 from 6,672 units in Fiscal 2019. In its domestic market (South Korea), TDCV’s sales decreased by 18.1% from 4,371 units in Fiscal 2019 to 3,581 units in Fiscal 2020, primarily due to lower industry volumes, aggressive discounting and marketing strategies of importers and impact of the COVID-19 pandemic in the fourth quarter of Fiscal 2020. The combined market share was 20.5% in Fiscal 2020 as compared to 21.1% in Fiscal 2019. The export market scenario continued to remain challenging in Fiscal 2020 due to factors such as continuing statutory regulations to reduce imports, global economic downturn and the COVID-19 pandemic which has adversely impacted overall sales. The export sales showed reduction of 30.1% from 2,301 units in Fiscal 2019 to 1,609 units in Fiscal 2020.

Tata Commercial Vehicles and Tata Passenger Vehicles—Sales and Distribution

Our sales and distribution network in India as at March 2020 comprised approximately over 5,528 touch points for sales and service for its Passenger Vehicles and Commercial Vehicles businesses. We use a network of service centers on highways and a toll-free customer assistance center to provide 24-hour roadside assistance, including replacement of parts, to vehicle owners.

We have customer relations management system, or CRM, at all of our dealerships and offices across the country, which supports users both at our company and among our distributors in India and abroad.

We market our Commercial Vehicles and Passenger Vehicles in several countries in Africa, the Middle East, South East Asia, South Asia, Australia, Latin America, Russia and the Commonwealth of Independent States countries. We have a network of distributors in all such countries, where we export our vehicles. Such distributors have created a network of dealers and branch offices and facilities for sales and after-sales servicing of our products in their respective markets. We have also stationed overseas resident sales and service representatives in various countries to oversee our operations in the respective territories.

Tata Commercial Vehicles and Tata Passenger Vehicles—Competition

We face competition from various domestic and foreign automotive manufacturers in the Indian automotive market. Improving infrastructure and robust growth prospects compared to other mature markets have attracted a number of international companies to India who have either formed joint ventures with local partners or have established independently owned operations in India. Global competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources, and as a result, competition is likely to further intensify in the future. We have designed our products to suit the requirements of the Indian market based on specific customer needs, such as safety, driving comfort, fuel-efficiency and durability. We believe that our vehicles are suited to the general conditions of Indian roads and the local climate. The vehicles have also been designed to comply with applicable environmental regulations currently in effect. We also offer a wide range of optional configurations to meet the specific needs of our customers. We intend to develop and are developing products to strengthen our product portfolio in order to meet the increasing customer expectation of owning world-class products.

 

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Tata Commercial Vehicles and Tata Passenger Vehicles—Seasonality

Demand for our vehicles in the Indian market is subject to seasonal variations. Demand generally peaks between January and March, although there is a decrease in demand in February just before release of the Government of India’s fiscal budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards, with a decline in December due to year end.

Tata Commercial Vehicles and Tata Passenger Vehicles—Vehicle Financing

Through our wholly owned subsidiary TMFHL and its step down subsidiaries Tata Motors Finance Ltd (“TMFL”) and Tata Motors Finance Solutions Ltd (“TMFSL”), collectively referred to as “TMF group” we provide financing services to purchasers of our vehicles through independent dealers, who act as our agents for financing transactions, and through our branch network. TMF group disbursed Rs.150,290 million and Rs.219,930 million in vehicle financing during Fiscal 2020 and Fiscal 2019, respectively. During Fiscal 2020 and Fiscal 2019, approximately 30% and 26%, respectively, of our vehicle unit sales in India were made by the dealers through financing arrangements with Company’s captive financing subsidiary. As at March 31, 2020 and 2019, TMF group’s customer finance receivable portfolio comprised 624,354 and 577,399 contracts, respectively. TMF group follows specified internal procedures, including quantitative guidelines, for selection of the finance customers and assists in managing default and repayment risk in the portfolio. We originate all of the contracts through our authorized dealers and direct marketing agents with whom we have agreements. All of our marketing, sales and collection activities are undertaken through dealers or by TMF group.

TMFL securitizes or sells our finance receivables on the basis of the evaluation of market conditions and funding requirements. The constitution of these pools is based on criteria that are decided by credit rating agencies and/or based on the advice that we receive regarding the marketability of a pool. TMFL undertakes these securitizations of our receivables due from purchasers by means of private placement.

TMFL acts as the collection agent on behalf of the investors, representatives, special purpose vehicles or banks, in whose favor the receivables have been assigned, for the purpose of collecting receivables from the purchasers on the terms and conditions contained in the applicable deeds of securitization, in respect of which pass-through certificates are issued to investors in case of special purpose vehicles, or SPVs. TMFL also secures the payments to be made by the purchasers of amounts constituting the receivables under the loan agreements to the extent specified by rating agencies by any one or all of the following methods:

 

   

furnishing collateral to the investors, in respect of the obligations of the purchasers and the undertakings to be provided by TMFL;

 

 

   

furnishing, in favor of the investors, 15% of the future principal in the receivables as collateral, for securitizations done through Fiscal 2020, either by way of a fixed deposit or bank guarantee or subordinate tranche to secure the obligations of the purchasers and our obligations as the collection agent, based on the quality of receivables and rating assigned to the individual pool of receivables by the rating agency (ies); and

 

 

   

by way of over-collateralization or by investing in subordinate pass-through certificates to secure the obligations of the purchasers.

 

TMF Group also undertakes direct assignment where there is no support provided to the investors of the pool in the form of credit enhancement. TMF Group realigned its strategy in Fiscal 2020, by adopting the asset-lite model. It meant disbursing in the form of financial warehousing, subsequently curating the eligible assets for specific period and then selling to market participants which are mostly public and private sector banks by way of direct assignments.For further details, see Note 39(b) to our consolidated financial statements included elsewhere in this annual report on Form 20-F.

Jaguar Land Rover

Total wholesales of Jaguar Land Rover vehicles (excluding the China Joint Venture) with a breakdown between Jaguar and Land Rover brand vehicles, in Fiscal 2020 and Fiscal 2019 are set forth in the table below:

 

     Fiscal 2020     Fiscal 2019  
     Units      %     Units      %  

Jaguar

     125,820        26.4     153,757        30.3

Land Rover

     350,132        73.6     354,138        69.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     475,952        100.0     507,895        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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In Fiscal 2020, Jaguar Land Rover wholesale volumes (excluding our China Joint Venture) were 475,952 units down 6.3%, compared to Fiscal 2019, and wholesale volumes of China Joint Venture were 49,450 units, reflecting a 13.9% decrease compared to the 57,428 units in Fiscal 2019. The decrease in wholesale volumes (excluding China Joint Venture) in Fiscal 2020 primarily reflects the decline in sales in the fourth quarter (a decrease of 20.3% as compared to Fiscal 2019) as a result of the COVID-19 pandemic. By region, Jaguar Land Rover wholesale volumes (excluding our China Joint Venture) were 135,766 in North America (an increase of 1.9% as compared to Fiscal 2019), but decreased in other regions at 14.2%, 8.8%, 7.3% and 4.6%, respectively in other overseas markets, Europe, the UK and China. Wholesale volumes recovered well in the 9 months to December 31, 2019 (an increase of 8.5% as compared to the same period in Fiscal 2019), before the COVID-19 pandemic impacted sales in the fourth quarter of Fiscal 2020. By model, the increase of sales in our all-new Range Rover Evoque (an increase of 44.2% year-on-year), the commencement of sales of our all-new Land Rover Defender and the award-winning Jaguar I-PACE (an increase of 2.0% year-on-year) were offset by the decline in sales of other models, including the Land Rover Discovery Sport.

Jaguar wholesale volumes were 125,820 units, down 18.2% compared to Fiscal 2019, with increased sales of the all-electric I-PACE (up 2.0% compared to Fiscal 2019), were offset by lower sales of other models.

Land Rover wholesale volumes were 350,132 units, down slightly 1.1% compared to Fiscal 2018, as significantly higher sales of the all-new Range Rover Evoque (an increase of 44.2% as compared to Fiscal 2019) and the start of sales of the all-new Land Rover Defender largely offset lower sales of other models.

Jaguar Land Rover’s Performance in Key Geographical Markets on a Retail Basis

Retail volumes (including retail sales from the China Joint Venture) in Fiscal 2020 declined by 12.1% to 508,659 units from 578,915 units in Fiscal 2019 with over two-thirds of that volume decline occurring in the fourth quarter as the COVID-19 pandemic impacted sales and the supply of vehicles across all regions.

United Kingdom

Industry vehicle sales fell 10.9% in Fiscal 2020 in the United Kingdom as diesel vehicle sales declined 28.5% year-on-year due to continued volatility in the run up to the general election in December 2019 and uncertainty related to Brexit and the subsequent transition period which is currently scheduled to end on December 31, 2020. Jaguar Land Rover retail volumes decreased by 9.6% to 106,612 units in Fiscal 2020 compared to 117,915 units in Fiscal 2019. By brand, Jaguar retails were 32,533 vehicles in Fiscal 2020, down 15.5% compared to 38,515 vehicles in Fiscal 2019, and Land Rover retails were 74,079 vehicles, down 6.7% compared to 79,400 vehicles in Fiscal 2019.

North America

Economic performance in North America weakened in Fiscal 2020, with interest rate reductions and monetary policy actions implemented to combat the economic impact of the COVID-19 pandemic, and industry vehicle sales down 3.9% year-on-year. Jaguar Land Rover retails also decreased, down 7.5% year on year, to 129,346 units in Fiscal 2020 compared to 139,778 units in Fiscal 2019. By brand, Jaguar retails were 30,095 vehicles in Fiscal 2020, down 18.1% compared to 36,768 vehicles in Fiscal 2019, and Land Rover retails, were 99,251, down 3.6% compared to 103,010 last year.

Europe

Economic growth in Europe was low in Fiscal 2020 due to the negative impacts of Brexit and rising protectionism with economic activity in the EU, including Germany and Italy. Further, uncertainty in diesel regulations, the reduction in subsidies for electric vehicles (notably in the Netherlands) have impacted our sales in Europe. Industry volumes in Europe were down 4.8% but Jaguar Land Rover retail sales declined further, down 16.1% year on year to 107,037 vehicles in Fiscal 2020 from 127,566 in Fiscal 2019, By brand, Jaguar retails were 35,335 vehicles in Fiscal 2020, down 28.6% compared to 49,474 vehicles in Fiscal 2019, and Land Rover retails were 71,702 in Fiscal 2020, down 8.2% compared to 78,092 vehicles in Fiscal 2019.

 

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China

Economic growth continued to slow in China during Fiscal 2020 as weaker market conditions and trade tension with the US continued. Further, the COVID-19 pandemic has resulted in nationwide shutdown in China for most of the fourth quarter. As a result industry vehicle sales declined by 16.6% year-on-year however Jaguar Land Rover retail volumes (including sales from the China Joint Venture) decreased by less than the industry, down 8.9% (despite a strong recovery in the second and third quarter, with double digit year-on-year growth) to 90,124 units in Fiscal 2020 from 98,922 units in Fiscal 2019. By brand, Jaguar retails were 26,061 vehicles in Fiscal 2020, down 20.5% compared to 32,797 vehicles in Fiscal 2019, and Land Rover retails were 64,063 vehicles in Fiscal 2020, down 3.1% compared to 66,125 vehicles in Fiscal 2019.

Other Overseas markets

Conditions in other overseas markets remained challenging in Fiscal 2020 with bushfires in Australia, tensions and conflict in the Middle East, stagnant growth in Russia and the trade tensions between the US and China impacting sales in Asia (notably South Korea). Jaguar Land Rover’s retail volumes in other overseas markets decreased by 20.3% to 75,540 vehicles in Fiscal 2020 compared to 94,734 units in the Fiscal 2019. By brand, Jaguar retails were 16,569 vehicles in Fiscal 2020, down 26.8% compared to 22,644 vehicles in Fiscal 2019, and Land Rover retails were 58,971 vehicles in Fiscal 2020, down 18.2% compared to 72,090 vehicles in Fiscal 2019.

Jaguar Land Rover’s Sales and Distribution

As at March 31, 2020, Jaguar Land Rover distribute its vehicles in 124 markets for Jaguar and 128 markets for Land Rover globally. Sales locations for vehicles are operated as independent franchises. Jaguar Land Rover are represented in its key markets through its National Sales Companies (“NSC”) as well as third party importers. Jaguar and Land Rover have regional offices in certain select countries that manage customer relationships and vehicle supplies and provide marketing and sales support to their regional importer markets. The remaining importer markets are managed from the United Kingdom.

Jaguar Land Rover products are sold through a variety of sales channels: through its dealerships for retail sales; for sale to fleet customers, which include daily rental car companies, commercial fleet customers, leasing companies and governments. Jaguar Land Rover do not depend on a single customer or small group of customers to the extent that the loss of such a customer or group of customers would have a material adverse effect on its business.

As at March 31, 2020, Jaguar Land Rover global sales and distribution network comprised 23 NSCs, 77 importers, 2 export partners and 2,874 franchise sales dealers, of which 1,323 are joint Jaguar and Land Rover dealers.

Jaguar Land Rover — Competition

Jaguar Land Rover operates in a globally competitive environment and faces competition from established premium and other vehicle manufacturers who aspire to move into the premium performance car and premium SUV markets, some of which are much larger than they are. Jaguar vehicles compete primarily against other European brands such as Audi, Porsche, BMW and Mercedes Benz as well as Tesla. Land Rover and Range Rover vehicles compete largely against SUVs from companies such as Audi, BMW, Infiniti, Lexus, Mercedes Benz, Porsche, Volvo and Volkswagen.

Jaguar Land Rover — Seasonality

Jaguar Land Rover volumes are impacted by the biannual change in age related registration plates of vehicles in the United Kingdom, where new age related plate registrations take effect in March and September. This has an impact on the resale value of the vehicles because sales are clustered around the time of the year when the vehicle registration number change occurs. Seasonality in most other markets is driven by the introduction of new model year vehicles and derivatives. Furthermore, Western European markets tend to be impacted by summer and winter holidays, and the Chinese market tends to be affected by the Lunar New Year holiday in either January or February, the PRC National Day holiday and the Golden Week holiday in October. The resulting sales profile influences operating results on a quarter to quarter basis.

 

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Other Operations

In addition to our automotive operations, we are also involved in other business activities, including IT services, machine tools and factory automation services. The Company’s revenue from other operations before inter-segment eliminations was Rs.30,376 million in Fiscal 2020, a decrease of 14.0% from Rs.35,324 million in Fiscal 2019. Revenues from other operations represented 1.2% of total revenues, before inter-segment eliminations, in Fiscal 2020 and Fiscal 2019.

IT Services

As of March 31, 2020, TML owned a 72.48% equity interest in our subsidiary, TTL. TTL, founded in 1994 and a part of the Tata Motors Group, provides product development IT services solutions for PLM and enterprise risk management (“ERM”) to automotive, aerospace, industrial heavy machinery and consumer durables manufacturers and their suppliers. TTL’s services include product design, analysis and production engineering, knowledge-based engineering, PLM, ERM and CRM systems. TTL also distributes, implements and supports PLM products from leading solution providers in the world, such as Dassault Systems and Autodesk.

TTL is headquartered in India with regional headquarters in the United States, the United Kingdom and Singapore. In Fiscal 2014, TTL acquired Cambric Corporation, an engineering services organization, to achieve greater domain expertise and presence in the industrial equipment sector. In Fiscal 2018, TTL acquired Escenda Engineering AB, a Sweden based design company to strengthen its offering to existing clients and expand its footprint in Scandinavian countries. TTL has a combined global workforce of around 8,623 professionals (including 923 contractors) serving clients worldwide from facilities in the North America, Europe, and Asia Pacific regions. As of March 31, 2020, TTL had 12 subsidiary companies and one joint venture, as well as offshore development centers in India, Thailand and Romania.

The consolidated revenues of TTL decreased by 3.1% in Fiscal 2020 to Rs.28,521 million (including sales to Tata Motors Limited and its consolidated subsidiaries) from Rs.29,422 million in Fiscal 2019, primarily due to overall slowdown in auto industry generally and particularly in China. TTL recorded profit after tax of Rs.2,516 million in Fiscal 2020, reflecting an increase of 28.7% over Rs.3,526 million in Fiscal 2019.

Research and Development

Our research and development focuses on developing and acquiring the technology, core competencies and skill sets required for the timely delivery of our envisaged future product portfolio with industry-leading features across our range of Commercial Vehicles and Passenger Vehicles. For the Passenger Vehicles product range, our focus is on design, driving pleasure and connected car technologies. For the Commercial Vehicle product range, our focus is on enhancing fuel-efficiency, minimizing the TOC and providing maximum overall value. We continue to endeavor to adopt technologies for our product range to meet the requirements of a globally competitive market. We have also undertaken programs for development of vehicles, which run on alternative fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen.

Our research and development activities involve product development, environmental technologies and vehicle safety. In India, the ERC, established in 1966, is one of the few in-house automotive research and development centers in India recognized by the Government of India. The ERC is headquartered at Pune with branches at Jamshedpur and Lucknow in India, Trilix in Italy and TMETC in United Kingdom.

In Fiscal 2020, we played a leading role in proactively driving electric mobility in India. To build a sustainable future for India, we have been working collaboratively on various electric and hybrid vehicle solutions. As the only OEM with an end-to-end extensive product portfolio across its Passenger Vehicles and Commercial Vehicles businesses, we intend to play a complementary role in the smart cities of the future. From public transport to personal cars, from last-mile connectivity to bus rapid transit systems, from emergency response vehicles to commercial Utility Vehicles, from green and sustainable solutions to vehicles designed to amplify the driving experience, we strive to carry a product portfolio to connect the aspirations and needs of our customers. To build on an enabling ecosystem of sustainable technology, we have worked on zero emission electric variant of vehicles that have redefined the automotive landscape worldwide. We are also actively working on innovation by bringing ingenuity into the areas of vehicle engineering and development. We have developed a comprehensive approach to address the barriers and ‘Winning proactively in e-Mobility’. We have clearly prioritized our electric vehicles capabilities and today we are one of the frontrunners in this industry. We aim for our electric vehicle business to contribute 10-15% to our overall Passenger Vehicle business in the next 4-5 years.

 

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Our focus on digitization, connectivity, automation and advanced regulations compliance is helping us deliver exciting innovations to our customers worldwide. On current product portfolio, we offer enhancements through an approach of modular architecture strategy, enhanced powertrain solution, light weighting and system efficiency improvement strategies. With a new vision set for the Company, by Fiscal 2024, we strive to become the most aspirational Indian auto brand, leading the industry by delivering superior financial returns, driving sustainable mobility solutions, exceeding customer expectations and creating highly engaged work force.

In addition, we are looking at product rationalization, product upgrade with enhanced features, accelerated testing and validation for product competitiveness for our engines and vehicles. This is targeted through base powertrain enhancement, application specific technology for exhaust after-treatment, customer value propositions such as best-in-class fuel-efficiency, superior performance, better total low cost of ownership, increased service intervals, reduced downtime and turn-around time. Enhanced fuel-efficiency and thereby reduction in carbon footprint is promoted through various powertrain as well as vehicle level technology interventions.

Looking at short lead time for BSVI implementation, we continued our focus on timely development and ensuring production readiness of BSVI products in the Indian market. It entailed migration of more than 20 engine platforms covering small commercial vehicles to heavy commercial vehicles, passenger cars, and utility vehicles covering gasoline, diesel and alternate fuel segments. A state-of-art advanced powertrain development center was commissioned in a record span of 15 months and the facility could be utilized for ongoing BSVI development. The compliance and sustenance of various legislations (including FE regulations in passenger vehicles, commercial vehicles and electric vehicles, BSIV new type approvals and noise levels) affecting existing products at BSIV level and with some limited launches in select segments continued as per business needs. BSVI in India is bringing the paradigm shift in emission control technology measures across vehicles segments in which Tata Motors Limited operates. Extensive class room and online trainings were developed and imparted across the value chain to ensure sufficient training is promoted for all employees. For our current product portfolio, the enhancements are offered through automated manual transmission, introduction of fuel efficient lube oil and higher drain intervals, improved filtration technology and connectivity solutions on platforms. The trend will continue as we implement value-added new launches and carry over products in BSVI regime as well. Enhanced fuel efficiency and thereby reduction in carbon footprint has been achieved through various powertrain as well as vehicle level measures. Simultaneous investments in production facilities upgrade, BSIV ramp down and BSVI ramp up strategy throughout supply chain was also effectively implemented. We have been at the forefront in the domain of electric vehicles (buses and cars) through launches demonstrated till date.

We monitor changes in regulatory and customer requirement scenarios. It responded to changes in regulations and market demands resulting from the CAFE standards for Passenger Cars (irrespective of fuel type including electric), increased axle load (assessment and recertification of all affected models and variants), and heavy duty fuel economy for 12 tons and above GVW diesel vehicles. We work to ensure the emission roadworthiness of its entire vehicle portfolio by investing significantly in design and development efforts, associated capital equipment and in infrastructure over BSVI program duration.

In passenger vehicles business, our continued efforts have translated into successful product launches and concept unveils. After launch of Tata Nexon, the first engineered and manufactured car in India car with 5-Star Global NCAP compliant for adult occupant protection and 3-Start for child occupant protection in Fiscal 2019, we marked our entry into the premium hatchback segment with the launch of Tata Altroz. Altroz is GNCAP 5 star rated car that enters the premium hatch category with BSVI ready powertrain. In addition, three fully refreshed BSVI ready cars - Tiago, Tigor, and Nexon along with the all New Harrier 2020 were launched in Fiscal 2020. Tata Harrier offers class leading performance with a host of design, technology and feature upgrade along with BSVI engine and automatic transmission.

In the electric vehicle portfolio, we added the Tata Nexon EV, an aspirational SUV for personal car buyers who are looking for a thrilling and connected drive experience with zero emissions. Tata Nexon is powered by the cutting-edge Ziptron technology, which offers performance with range of 312 km on a single charge as certified by ARAI. In addition it has fast charging capability, extended battery life and class leading safety features.

 

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An updated version of the original segment defining SCV, the all New Tata Intra was launched with rugged and powerful compact truck range built on our new ‘Premium Tough’ design philosophy. We are one of the leading commercial vehicle brands in South Africa. We showcased two new variants, Ultra Plus 1418 and Ultra 814 AMT, enhancing the Ultra Platform range at Futuroad Expo, 2019 in Johannesburg, South Africa. The Ultra AMT 814 is a variant of the existing Ultra range of vehicles for discerning customers looking for ease of operations. The Ultra Plus 1418 is a completely new model complimenting the HCV range of Ultra offerings. We are one of the leading bus manufacturers in India. We showcased seven new public transportation vehicles at Prawaas 2019. A biennial event, Prawaas 2019 displayed new technologies, innovations, products and services in the passenger transportation domain in Navi Mumbai in July 2019. We displayed an extensive range of sustainable mobility solutions at the Auto Expo 2020, connecting India’s aspirations. Going beyond BSVI by showcasing a completely new range of passenger, electric and commercial vehicles this year. We unveiled the ‘HBX Show Car’, based on the ALFA Architecture and the ‘Sierra EV Concept’, Hexa Safari Edition, ‘Harrier 2020’, based on the OMEGA Architecture, Flagship SUV – the Gravitas. In Commercial Vehicles space, we unveiled the all-new Tata Winger and the Tata Prima facelift 5530.S.

With the customer at center of all initiatives, our Passenger Vehicle Business Unit ranked 2nd in the J.D. Power 2019 India Customer Service Index (Mass Market) Study.

During Fiscal 2020, we filed 86 patent applications and 89 design applications. In respect of applications filed in earlier years, 179 patents have been granted and 50 designs registered. Both filing and grant details include India and international jurisdictions.

We plan to continue our endeavors in the research and development space to develop vehicles with reduced cost, time to market and shorter product life cycles. We aim for the timely and successful conclusion of technology projects so as to begin their induction into mainstream products, which will lead to a promising future. Our focus is going to be building technology, capability, scale and capacities in research and development to be able to ride the emerging trends. We are now focusing more on accelerated testing and validation and are using a lot of digital tools for the simulation process.

Continuing the journey of excellence, we constantly adopted new technologies and practices in the digital product development domain to improve the product development efficiency. This has led to better front loading of product creation, validation and testing, which results in timely delivery and ensuring that new products are developed with lower cost impacts due to design change. Niche integration tools, systems and processes continue to be enhanced in the areas of CAx, Knowledge Based Engineering (“KBE”), Product Lifecycle Management (“PLM”), and Manufacturing Planning Management (“MPM”), for more efficient end-to-end delivery of the product development process. More than 250 automation and KBE application tools were developed and deployed across ERC, which has resulted into 7% improvement in the Productivity for the designers. EGURU product mobility application deployed at dealership are getting upgraded with BSVI details, which is helping dealership to impart a virtual showroom experience and explain the product features to the customer.

Machine learning based algorithms and application are introduced into various domains such as design, service, quality and manufacturing. Trained AI models help in prediction of warranty defect code based on investigation report using natural language processing, prediction of on field engine failure on the basis of test data from plant and service report.

Digital Manufacturing was used predominantly to validate the manufacturability of critical assembly operations in virtual environment for BSVI and new vehicle programs. Digitization of some of the critical business processes related to purchase and budgeting was accomplished with its online workflow and approvals. Specialized application for body fastener (weld spot, sealant) design developed and deployed for quick authoring and adaptation of changes in body engineering.

Based on the guidelines set for the company, the IoT platform is now built and deployed. The first programs implementing the connected vehicle features are completely supported on the same. This will drive the enhancement to vehicle connectivity further and also help the company to leverage data to provide better products and services to its customers. Continuing the journey of dimensions Management the company has progressed further to making it integral to the design and development process embedded into the core PLM supported by library of use cases and knowledge driven intervention to proactively address issues. Bots framework is further supplemented with the NLP based voice support and helping to drive the implementation further.

Model Based Systems Engineering approach is initiated for enhancing control on project delivery and cost.

Jaguar Land Rover’s research and development operations are built around state-of-the-art engineering facilities, test tracks, testing centers, design hubs and a virtual innovation center. Our ERC in India and Jaguar Land Rover’s engineering and development operations in the United Kingdom work to enhance the product development process and achieve economies of scale.

 

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Jaguar Land Rover’s two primary design and development centers are equipped with computer-aided design and manufacturing and engineering tools configured to support a product development cycle plan. In recent years, Jaguar Land Rover has refreshed the entire Jaguar range under a unified concept and design language, and has continued to enhance the design of Land Rover’s range of all-terrain vehicles. The majority of Jaguar Land Rover’s products are designed and engineered in the United Kingdom. Jaguar Land Rover currently offers hybrid technology on some of its models such as the Range Rover, Range Rover Evoque and Land Rover Discovery Sport as well as their first battery electric vehicle, the Jaguar I-PACE. In addition to the development of electric vehicles, Jaguar Land Rover has also developed more efficient powertrains, including smaller and more efficient 2.0-Liter diesel and gasoline engines (now available across the majority of our model range), as well as the a 3.0-Liter 6 cylinder Ingenium petrol engine recently announced, to satisfy growing customer demand and to further improve the environmental performance of its vehicles. In June 2019, Jaguar Land Rover announced a collaboration with BMW to develop the next-generation Electric Drive Units to support the advancement of electrification technologies that will be installed in future Jaguar Land Rover vehicles and will be manufactured at the Engine Manufacturing Centre in the UK.

Intellectual Property

We create, own, and maintain a wide array of intellectual property assets throughout the world that are among our most valuable assets. Our intellectual property assets include patents, trademarks, copyrights, designs, trade secrets and other intellectual property rights. We proactively and aggressively seek to protect our intellectual property in India and other countries.

We own a number of patents in different fields of automobile technology and have applied for new patents which are pending for grant in India, as well as in other countries. We have also filed a number of patent applications outside India under the Patent Cooperation Treaty and Paris Convention Treaty, which we expect will be effective in other countries going forward. We also obtain new patents as part of our ongoing research and development activities.

We own registrations for a number of trademarks, domain names and have pending applications for registration of these in India, as well as in other countries. The registrations mainly include trademarks for our vehicle models and other promotional initiatives. We use the Tata brand, which has been licensed to us by Tata Sons. We believe that establishment of the Tata word mark and logo mark in India and around the world is material to our operations. As part of our acquisition of TDCV, we have rights to the perpetual and exclusive use of the Daewoo brand and trademarks in South Korea and overseas markets for the product range of TDCV.

As part of the acquisition of our Jaguar Land Rover business, ownership (or co-ownership, as applicable) of core intellectual property associated with Jaguar Land Rover was transferred to us; however, such intellectual property is still ultimately owned by Jaguar Land Rover entities. Additionally, perpetual royalty-free licenses to use other essential intellectual property from the third parties have been granted to us for use in Jaguar and Land Rover vehicles. Jaguar Land Rover owns registered designs to protect the design of its vehicles in several countries.

In varying degrees, all of our intellectual property is important to us. In particular, the Tata, Jaguar, Land Rover and Range Rover brands are integral to the conduct of our business, a loss of which could lead to dilution of our brand image and have a material adverse effect on our business.

Components and Raw Materials

The principal materials and components required by us for use in Tata Commercial Vehicles and Tata Passenger Vehicles are steel sheets (for in-house stampings) and plates, iron and steel castings and forgings, items such as alloy wheels, tires, fuel injection systems, batteries, electrical wiring systems, electronic information systems and displays, interior systems such as seats, cockpits, doors, plastic finishers and plastic functional parts, glass and consumables, such as paints, oils, thinner, welding consumables, chemicals, adhesives and sealants, and fuels. We also require aggregates such as axles, engines, gear boxes and cams for our vehicles, which are manufactured in-house or by our subsidiaries, affiliates, joint ventures or operations and strategic suppliers. We have long-term purchase agreements for certain critical components such as transmissions and engines. We have established contracts with certain commodity suppliers to cover our own as well as our suppliers’ requirements in order to moderate the effect of volatility in commodity prices. We have also undertaken special initiatives to reduce material consumption through value engineering and value analysis techniques.

 

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Our sourcing department in India has two divisions, purchasing and supplier quality and supply chain management (“SCM”). Purchasing oversees the commercial aspects of products sourcing. They also oversee the allocation of share of business. The supplier quality division is responsible for APQP and managing ongoing supplier relationships. SCM oversees the supply and delivery of parts from our suppliers. Our purchasing back office, known as GDC, supports the Purchasing division in managing all transactional work in SAP ERP system.

As part of our strategy to become a value for money vehicle manufacturer, we have undertaken various initiatives to reduce our fixed and variable costs. We started an e-sourcing initiative in India in 2002, pursuant to which we procure some supplies through reverse auctions. We also use external agencies as third-party logistic providers. This has resulted in space and cost savings. Our initiatives to leverage information technology in supply chain activities have resulted in improved efficiency through real time information exchange and processing with our suppliers. We continue to explore saving opportunities through our supplier base using various mechanisms such as our ‘Value Addition and Value Engineering’ initiative and competitive sourcing.

We have an established supplier quality sixteen-step process in order to ensure quality of outsourced components. We formalized the component development process using Automotive Industry Action Group guidelines. We also have a program for assisting suppliers from whom we purchase raw materials or components to maintain quality. Preference is given to suppliers with TS 16949 certification. We also maintain a stringent quality assurance program that includes random testing of production samples, frequent re-calibration of production equipment and analysis of post-production vehicle performance, as well as an ongoing dialogue with supplier partners to eliminate production defects.

We are also exploring opportunities for increasing the global sourcing of parts and components from low cost countries, and have in place a supplier management program that includes supplier base upgradation, supplier quality improvement and supplier satisfaction surveys. We have begun to include our supply chain in our initiatives on social accountability and environment management activities, including supply chain carbon footprint measurement and knowledge sharing on various environmental aspects.

The principal materials and components required for use in Jaguar Land Rover vehicles are steel and aluminum, in sheet (for in-house stamping) or externally in pre-stamped form, aluminum castings and extrusions, iron and steel castings and forgings and items such as alloy wheels, tires, fuel injection systems, batteries, electrical wiring systems, electronic information systems and displays, leather-trimmed interior components such as seats, cockpits and doors, plastic finishers and plastic functional parts, glass and consumables (paints, oils, thinner, welding consumables, chemicals, adhesives and sealants), rare earth minerals and fuels. Jaguar Land Rover also requires certain highly functional components, such as axles, engines and gear boxes for its vehicles, which are mainly manufactured by strategic suppliers. We have purchase agreements for critical components, such as transmissions (ZF Friedrichshafen AG) and engines (Ford and Ford-PSA) The components and raw materials in Jaguar Land Rover cars include steel, aluminum, copper, platinum, palladium and a number of other commodities. Jaguar Land Rover has established contracts with certain commodity suppliers (e.g., Novelis) to cover its own and its suppliers’ requirements to mitigate the effect of price volatility and supply disruption. Special initiatives are also undertaken to reduce material consumption through value engineering and value analysis techniques.

Jaguar Land Rover works closely with its suppliers to meet its requirements for parts and components. Jaguar Land Rover has established quality control programs to ensure that externally purchased raw materials and components are monitored and meet its quality standards. Jaguar Land Rover also outsources many of the manufacturing processes and activities to various suppliers. Where this is the case, Jaguar Land Rover provides training to outside suppliers. Jaguar Land Rover also continues to work with its suppliers to optimize procurement.

Although Jaguar Land Rover has commenced the production of its own “in-house” four cylinder diesel and gasoline engines as well as the 6 cylinder 3.0-litre Ingenium gasoline engine, it currently continues to source some of its engines from Ford and the Ford-PSA Joint Venture on an arm’s-length basis. Supply agreements have been entered into with Ford as further set out below:

 

   

Long-term agreements have been entered into with Ford for technology sharing and joint development, providing technical support across a range of technologies focused mainly around powertrain engineering such that we may continue to operate according to our existing business plan. This includes the EuCD platform, a shared platform consisting of shared technologies, common parts and systems and owned by Ford, which is shared among Land Rover, Ford and Volvo cars.

 

 

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Supply agreements, aligned to the business cycle plan and with different engines having different end-stop dates as of September 2020 to December 2020 at the latest, were entered into with Ford for (i) the long-term supply of engines developed by Ford, (ii) engines developed by us but manufactured by Ford and (iii) engines developed by the Ford-PSA Joint Venture. Purchases under these agreements are generally denominated in Euro and GBP.

 

Suppliers

We have an extensive supply chain for procuring various components. We also outsource many manufacturing processes and activities to various suppliers. Where this is the case, we provide training to the external suppliers.

Our associate company, Tata Auto Comp Systems Ltd., manufactures automotive components and collaborates with international manufacturers by setting up joint ventures with them.

In 2016, we introduced manufacturing site assessment (“MSA”) for India suppliers, a comprehensive supplier assessment process. The framework is broadly based on lead measures and lag measures to assess the suppliers’ capability to service our requirements. To facilitate financial oversight, MSA also integrates financial risk assessment.

We have initiated a supplier optimization initiative for Indian domestic suppliers. This initiative will rationalize the current supply base enabling scale cost benefits, improved quality and balance in volume cyclicality. This also improves supplier relationships, giving TML better access to technologies and support in vehicle development for new programs.

We have entered into long-term agreements with Ford for technology sharing, joint development and for providing technical support across a range of technologies focused mainly around powertrain engineering such that we may continue to operate according to our existing business plan. This includes the EuCD platform, a shared platform consisting of shared technologies, common parts and systems and owned by Ford, which is shared among Land Rover, Ford and Volvo vehicles.

Supply agreements, having end-stop dates to December 2020 at the latest, were entered into with Ford for (i) the long-term supply of engines developed by Ford, (ii) engines developed by us but manufactured by Ford and (iii) engines developed by the Ford-PSA Joint Venture. Purchases under these agreements are generally denominated in Euro and GBP.

Suppliers are appraised based on our long-term requirements through a number of platforms, such as vendor council meetings, council regional chapter meetings, national vendor meets and location-specific vendor meets. We also take efforts to assess supplier financial risk.

Capital and Product Development Expenditures

Our capital expenditures totaled Rs.302,945 million and Rs.342,236 million during Fiscal 2020 and Fiscal 2019, respectively. Our capital expenditures during the past two fiscal years related primarily to new product development and capacity expansion for new and existing products to meet market demand as well as investments toward improving quality, reliability and productivity that are each aimed at increasing operational efficiency.

We intend to continue to invest in our business units in general, and in research and product development in particular, over the next several years in order to improve our existing product range, develop new products and platforms and to build and expand our portfolio in the Passenger Vehicle and Commercial Vehicle categories. We believe this will strengthen our position in the Indian automotive market and help us to grow our market share internationally.

As part of this future growth strategy, we plan to make investments in product development, capital expenditures in capacity enhancement, plant renewal and modernization and to pursue other growth opportunities. Our subsidiaries also have their individual growth plans and related capital expenditure plans. These expenditures are expected to be funded largely through cash generated from operations, existing investible surplus in the form of cash and cash equivalents, investment securities and other external financing sources.

 

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Governmental Regulations

Governmental Regulations in India

Automotive Mission Plan, 2016-2026

The Automotive Mission Plan 2016-26 (“AMP 2026”) is the collective vision of the Government of India and the Indian automotive industry, in which the goal is for the vehicles, auto components, and tractor industries to reach certain size benchmarks over the next ten years and also contribute to India’s development, global footprint, technological maturity, competitiveness, and institutional structure and capabilities. AMP 2026 also seeks to define the trajectory of specific regulations and policies that govern research, design, technology, testing, manufacturing, imports/exports, sales, use, repair, and scrapping of automotive vehicles, components and services.

The vision statement of AMP 2026—“Vision 3/12/65”—states: “By 2026, the Indian automotive industry will be among the top three of the world in engineering manufacture and export of vehicles and auto components, and will encompass safe, efficient and environment friendly conditions for affordable mobility of people and transportation of goods in India comparable with global standards, growing in value to over 12% of India’s GDP, and generating an additional 65 million jobs”.

AMP 2026 envisages that the Government of India and the Indian automotive industry will work together to strengthen India’s position in the global automotive industry. AMP 2026 is intended to help the Indian automotive industry focus on its strengths and improve its competitiveness in selected segments, achieve the annual production target of Rs.1,616,000 crores to Rs.1,889,500 crores in terms of its size, and establish its “Right to Win” on the global stage.

The Auto Policy, 2002

The auto policy was introduced by the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises of the Government of India in March 2002, with the aims, among other things, of promoting a globally competitive automotive industry that would emerge as a global source for automotive components, establishing an international hub for manufacturing small, affordable Passenger Cars, ensuring a balanced transition to open trade at a minimal risk to the Indian economy and local industry, encouraging modernization of the industry and facilitating indigenous design, research and development, as well as developing domestic safety and environment standards on par with international standards.

Auto Fuel Vision and Policy 2025

The Ministry of Petroleum and Natural Gas formed an expert committee under the chairmanship of Shri Saumitra Chaudhuri, a member planning commission, on December 19, 2012. Its objective was to recommend auto fuel quality applicable through model year 2025. The committee in its draft report has recommended Bharat Stage IV compliant fuel across the country by 2017 and Bharat Stage V compliant fuel with 10 ppm of sulfur to be made available from 2020 onward. The draft report proposes nationwide Bharat Stage V emission standards for new four-wheelers from model year 2020 and for all four-wheelers from model year 2021. It also recommends BSVI emissions standards from model year 2024 onwards. In April 2014, the expert committee submitted its recommendations to the committee empowered by the Ministry of Petroleum and Natural Gas, which proposed the implementation of emission standards one year earlier than the expert committee’s recommendations, which would result in the implementation of Bharat Stage V emission standards starting in model year 2019 and BSVI emissions standards starting in model year 2023. However, in January 2016, the Government of India decided to implement the BSVI emission standards even earlier by skipping Bharat Stage V emission standards. As such, the BSVI standards will be made applicable from April 1, 2020 to all categories of vehicles across India. This two stage migration is going to be a huge challenge from developmental and capital expenditure investment perspectives.

FAME II Scheme

The Government of India announced the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India Phase II (“FAME II”) scheme in March 2019. FAME II is proposed to be implemented over a period of three years from Fiscal 2020 to Fiscal 2022. This scheme, in furtherance of the National Mission on Electric Mobility 2020 (“NEMMP”), is intended to support PHEV, or xEV, market development and its manufacturing network to achieve self-sustenance and the scheme is proposed to be implemented through three areas: (i) demand incentives (ii) establishment of network of charging stations and (iii) administration of scheme including publicity, information, education and communication activities.

 

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Central Motors Vehicles Rules, 1989

Chapter V of the Central Motor Vehicle Rules, 1989 (the “CMV Rules”) sets forth provisions relating to construction, equipment and maintenance of motor vehicles, including specifications for dimensions, gears, indicators, reflectors, lights, horns, safety belts and others. The CMV Rules govern emission standards for vehicles operating on CNG, gasoline, liquefied petroleum gas and diesel.

On and from the date of commencement of the Central Motor Vehicle (Amendment) Rules, 1993, every manufacturer must submit the prototype of every vehicle to be manufactured by it for testing by the Vehicle Research and Development Establishment of the Ministry of Defense of the Government of India, the Automotive Research Association of India, Pune, the Central Machinery Testing and Training Institute, Budni (MP), the Indian Institute of Petroleum, Dehradun, the Central Institute of Road Transport, Pune, the International Center for Automotive Technology, Manesar or such other agencies as may be specified by the central government for granting a certificate by that agency as to the compliance of provisions of the Motor Vehicles Act, and the CMV Rules.

The CMV Rules also require the manufacturers to comply with notifications in the Official Gazette, issued by Government of India, to use such parts, components or assemblies in the manufacture of certain vehicles according to standards specified by either the Automotive Industry Standards Committee or the Bureau of Indian Standards.

Emission and Safety in India

The Government of India, starting in April 2017, mandated Bharat Stage IV standards, which are equivalent to Euro IV standards, for all vehicles across India. All categories of our vehicles manufactured were compliant with Bharat Stage IV standards. Bharat Stage VI standards will be applicable across the country starting April 1, 2020. All categories of our vehicles currently manufactured are compliant with Bharat Stage VI standards.

The Supreme Court of India in its judgement, dated October 24, 2018, directed that no motor vehicle conforming to the emission standards of BSIV shall be sold or registered in the entire country with effect from April 1, 2020. Hence, our product plan, migration, manufacturing and product launches have been synchronized to fulfill these requirements.

CAFE standards for M1 category vehicles

The CAFE standards are applicable to M1 category vehicles from April 1, 2017. As a result, we are required to demonstrate CAFE compliance for our Passenger Vehicles, Commercial Vehicles and EV M1 models. TML has successfully complied with the Phase 1 CAFE requirements for Fiscal 2017 and Fiscal 2018. Through the use of the CAFE calculator, we regularly monitor production volumes and process to ensure that organizational level CAFE compliance (which will require us to produce enough fuel-efficient models to compensate for those models having higher CO2 emissions in g/km) is established at all times during the year. Any non-compliance could lead to penalties, product recalls and/or other punitive measures. To support our compliance obligations, our overall product portfolio needs to be enhanced with the incorporation of electric and hybrid vehicles as well as the inclusion of environmental-friendly technological features in existing and forthcoming models.

Light, Medium and Heavy Duty Fuel-Efficiency Norms

The Ministry of Power issued the final notification for Heavy Duty Fuel-Efficiency Norms for Diesel Vehicles of categories M3 and N3 with GVW of 12T and above. Every vehicle of the specified categories must meet fuel-efficiency targets mentioned in notification based on constant speed fuel consumption tests conducted at 40 km/h and 60 km/h. Phase 1 is applicable starting April 1, 2018 for vehicles complying with BS4 emission standards and Phase 2 will be applicable from April 1, 2021 for vehicles complying with BSVI emission standards. However, in absence of notification from the Ministry of Road Transport and Highways (“MoRTH”), the norms have never been implemented. Therefore, in June 2019, Ministry of Power has decided to implement Phase 1 of Heavy Duty Fuel Efficiency Norms from April 1, 2020, however final notification from MoRTH is still awaited for implementation of such norms.

Fuel Efficiency Norms for Light and Medium Duty vehicles having gross vehicle weight ranging from 3.5T to 12T was notified by Ministry of Power in July 2019. The notification is applicable with effect from April 1, 2020, however final notification from MoRTH is still awaited for implementation of such norms.

 

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Crash and other safety requirements for Motor Vehicles

India has a well-established regulatory framework administered by the MoRTH. Recently, the Government of India has embarked on a wide ranging program to institute standardized safety features for a variety of motor vehicles. Crash safety requirements, such as full frontal, offset frontal and lateral impact, have been made mandatory for all new models starting October 1, 2017 and from October 1, 2019 for all existing models of vehicle categories as specified in the individual standards. A pedestrian compliance program has been instituted for all new models from October 1, 2018 and for all existing models from October 1, 2020. Passenger Vehicles (M1 Category) have been mandatorily equipped with additional safety features such as driver airbag, safety belt reminders for driver and co-driver, reverse parking alert system, speed alert system and manual override for central locking system from July 1, 2019 onwards. Also the provisioning of child lock system has been prohibited in M1 transport category vehicles from July 1, 2019.

Anti-lock braking system (“ABS”) has been mandated for all M1 and M2 category Passenger Vehicles starting April 1, 2018 and April 1, 2019, for new models and existing models, respectively. The Government of India has also mandated advanced braking requirements for all motor vehicles which would become applicable progressively from 2021 onwards. The revised anti-lock braking requirements for M2, M3, N3 and N2 (for vehicles meant for the carriage of hazardous goods and LPG) will be applicable from April 1, 2021 for new models and April 1, 2022 for all models. The revised braking requirements for all category of vehicles will be applicable from April 1, 2021 for new models and April 1, 2022 for all models.

To facilitate informed consumer decision-making, the government is in the process of formulating the Bharat New Vehicle Safety Assessment Programme, a star-rating based system of safety assessment for Passenger Vehicles.

Fitment of vehicle location tracking system and emergency buttons have been mandated for national permit vehicles from November 2, 2018 and for all passenger public service vehicles from January 1, 2019.

Additionally, the MoRTH has also mandated the compliance with the Truck Body Code for all N2, N3 category vehicles in two phases (Phase I and Phase II) from October 1, 2018 and October 1, 2019, respectively. However drive away chassis without cabins built by OEMs are exempted till March 31, 2020. The MoRTH has also mandated compliance with advanced requirements for fully-built buses manufactured on and after April 1, 2019 supplied by OEM body builders. This calls for compliance to requirements such as acceleration, NVH limits, multiplexing for wiring harness and fitment of fire detection and suppression systems. The reverse parking alert system for all buses and trucks including small Commercial Vehicles has been mandated from April 1, 2020. Many revised standards are now being mandated for various component and system level requirements such as fuel tanks, mirrors, light signaling devices, steering gears and effort, retro reflective devices, Safety Glazing in Fiscal 2019 and Fiscal 2020. Also, MoRTH has mandated the fitment of high security registration plates by the vehicle manufacturer and dealers on all motor vehicles manufactured on or after April 1, 2019.

TML is working toward meeting all applicable regulations which we believe are likely to come into effect in various markets in the near future. We believe our vehicles also comply with the various safety regulations in effect in the other international markets where we currently operate.

India is a signatory to the 1998 UNECE Agreement on Global Technical Regulations and has voted in favor of all eleven global technical regulations (“GTRs”). TML works closely with the Government of India to participate in WP 29 World Forum for Harmonization of Vehicle Regulations activities.

The Motor Vehicle (Amendment) Act 2019 has been published on August 9, 2019. This act addresses vehicle recalls, road safety, traffic management and accident insurance, among other matters. The act imposes civil and criminal liability on manufacturers selling vehicles in contravention of the standards specified in the act, or required by the government to recall their vehicles. The act also proposes the creation of the National Road Safety Board to provide advice to the central and state governments on all aspects of road safety and traffic management.

 

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The Essential Commodities Act, 1955

The Essential Commodities Act, 1955, as amended by the Essential Commodities (Amendment and Validation) Act, 2009 (the “Essential Commodities Act”) authorizes the Government of India, if it finds it necessary or expedient to do so, to provide for regulating or prohibiting the production, supply, distribution, trade and commerce in the specified commodities under the Essential Commodities Act, in order to maintain or increase supplies of any essential commodity or to secure their equitable distribution and availability at fair prices, or to secure any essential commodity for the defense of India or the efficient conduct of military operations. The definition of “essential commodity” under the Essential Commodities Act includes “component parts and accessories of automobiles”.

Environmental Regulations

Our manufacturing units must ensure compliance with various environmental statutes. Significant statutes for our business include the Water (Prevention and Control of Pollution) Act, 1974 and the Rules thereunder, the Air (Prevention and Control of Pollution) Act, 1981 and the Rules thereunder, the Environment Protection Act, 1986 and the Rules thereunder and the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, PCBs, which are vested with diverse powers to deal with water and air pollution and hazardous waste disposal, have been set up in each state. The PCBs are responsible for establishing standards environmental quality and regulating industries through the issue of ‘Consent to Establish’, ‘Consent to Operate’ and ‘Hazardous Waste Authorisation’ and undertaking inspection of industries to ensure that units or plants are functioning in compliance with the standards prescribed therein. These authorities also have the power of search, seizure and investigation. All of our manufacturing plants are either in possession of current, valid Consents to Operate and Hazardous Waste Authorizations or are in the process of renewing the same from the respective PCBs of the states where they operate. Other key regulations applicable to our Plants include the Batteries (Management and Handling) Amendment Rules, 2010. The Plastic Waste Management Rules 2016, the Bio-Medical Waste (BMW) Management Rules 2016, e-waste Management Rules-2016, and the Construction and Demolition (C&D) Waste Management Rules 2016. We ensure that all prescribed standards are followed for control of pollution and management of waste and we have made significant investments toward pollution control and environmental protection at our manufacturing Plants.

The Environmental Impact Assessment Notification, 2006 and its amendments (the “EIA”) govern the process of granting ‘Environmental Clearance’ to certain projects which are specified in the Schedule to the Rules. All of our manufacturing plants have obtained environmental clearances for specific projects in the past as and when mandated.

The Ministry of Environment, Forests and Climate Change (“MoEFCC”) has recently published a draft notification on March 23, 2020, titled The EIA Notification, 2020. We have submitted our comments and suggestions to MoEFCC on the Draft Notification. The Government of India intends to regulate end of life vehicles (“ELVs”), which would be applicable to Passenger Cars and two wheelers. The authorized collection and dismantling centers would be equipped to handle Commercial Vehicles as well. The purpose of the ELV policy is to remove vehicles that are endangering the environment and public safety.

The Central Pollution Control Board has formulated the draft guidelines for environmentally sound management of end-of-life vehicles for implementation on the principle of shared responsibility that mandates the specific roles for the stakeholders in the EV value chain which includes government authorities, manufacturers, recyclers, dealers, intermediaries, insurers and consumers.

Recently MoRTH has also issued the draft guidelines for setting up, authorization and operation of Authorized Vehicles Scrapping Facility in the country. These guidelines are notified for the safe and regulated disposal of above mentioned vehicles for protection of the environment and promotion of a legally compliant vehicle dismantling and scrapping industry.

Regulation of Imports and Exports

Regulation of quantitative restrictions on imports into India were liberalized with effect from April 1, 2001, pursuant to India’s World Trade Organization obligations, and imports of capital goods and automotive components were placed under the open general license category.

 

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Automobiles and automotive components may, generally, be imported into India without a license from the Government of India subject to their meeting Indian standards and regulations, as specified by designated testing agencies. As a general matter, cars, UVs and SUVs in completely built up (“CBU”), condition may be imported at 60% basic customs duty. However, cars with cost, insurance and freight value of more than US$40,000 or with engine capacities greater than 3,000 cubic centimeters for petrol variants and 2,500 cubic centimeters for diesel variants or with both, may be imported at a 100% basic customs duty. Commercial Vehicles may be imported at a basic customs duty of 40% and components may be imported at a basic customs duty ranging from at 15% to 7.5%.

MoRTH issued the final notification regarding the acceptance of international standards (such as the United Nation Economic Commission for Europe (the “ECE”) or Japan) for direct import of CKD units without any need of domestic type approval by amending provisions of CMV Rules 92 and 126. Under the modified rules, the compliance of such part, component or assembly shall be deemed to be established for the purpose of CMV Rules 124 and 126. Also vehicle manufacturer can import unused RHD CBUs or CKDs directly or through their authorized representative, up to 2500 units of M1 and up to 500 units of other categories of vehicles annually, compliant with the international standard (such as the ECE or Japan) without any need for domestic CMV Rules Type Approval for Sales and Registration.

The FDI Policy

Automatic approval for foreign equity investments up to 100% is allowed in the automobile manufacturing sector under the FDI Policy. See Item 10.D “Additional Information—Exchange Controls” for additional information relating to restrictions on foreign investment under Indian law.

Indian Taxes

See Item 10.E “Additional Information—Taxation” for additional information relating to our taxation.

Major Taxes Applicable on Goods up to June 30, 2017

Excise Duty

The Government of India imposes excise duty on cars and other motor vehicles and their chassis, for which rates vary from time to time and across vehicle categories reflecting the policies of the Government of India. The chart below sets forth a summary of excise duty rates as applicable as of June 30, 2017.

 

Tax Rate

   Excise Duty (per vehicle or chassis)
   Small
cars1
    Cars other
than small
cars2
   Motor
vehicles
for more
than 13
persons
    Chassis fitted
with engines
for vehicles of
more than 13
persons
   Trucks     Chassis fitted with
engines for trucks
   Safari,
SUVs and
UVs

June 30, 2017

     12.5   24% or

27%1

     12.5   14%      12.5   13%    27% or
30%

 

1.

Small cars are cars with a length not exceeding 4,000 mm and an engine capacity not exceeding 1,500 cubic centimeters for cars with diesel engines, and not exceeding 1,200 cubic centimeters for cars with gasoline engines. The higher rate is applicable if the engine capacity exceeds 1,500 cubic centimeters.

2.

Cars other than small cars are cars with a length exceeding 4,000 mm with an engine capacity exceeding 1,500 cubic centimeters for diesel engines and 1,200 cubic centimeters for gasoline engines.

All vehicles and chassis are subject to the automobile cess, which is levied at 0.125%, on assessable value. Certain Passenger Vehicles are also subject to the National Calamity Contingent Duty, which is levied at 1% on assessable value. Infrastructure cess is applicable on certain vehicles falling under heading 8703 at 1% of assessable value in case of small cars-petrol/LPG/CNG, at 2.5% in case of small cars-diesel and at 4% in case of other motor vehicles.

 

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Value Added Tax

The value added tax (“VAT”) has been implemented throughout India. VAT enables set-off on input tax credit of VAT paid on inputs by traders and manufacturers against the output VAT/Central Sales Tax (the “CST”) liability, thereby eliminating the cascading effect of taxation. Standard rate of VAT in general was prescribed as 5% and 12.5%, along with special brackets of 0%, 1%, 3%, 4%, 13.5%, 14% 14.5%, 15%, 20%, 22% and 23% have been announced for various categories of goods and commodities sold in/from the respective states and certain states have also introduced additional VAT of 1% to 3% on specified commodities, including automobiles.

In some of the states, a surcharge of 5% to 10% on VAT has been introduced on automobiles. Since its implementation, VAT has had a positive impact on our business. Prior to the implementation of VAT, a major portion of sales tax paid on purchases formed part of our total cost of materials. The implementation of VAT has resulted in savings on the sales tax component, as VAT paid on inputs may generally be set-off against tax paid on outputs.

In addition to VAT, the CST continues to exist, although it was proposed to be abolished in a phased manner. The CST rate was reduced to 2% in 2008-2009. There was no change in the CST rates after June 1, 2008 and the same rates continued as of June 2017.

Economic Stimulus Package and Incentives

The Government of India launched the National Electric Mobility Mission Plan to encourage reliable, affordable and efficient electric vehicles that meet consumer performance and price expectations. Through collaboration between the government and industry for promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology, the NEMMP aims to help India to emerge as a leader in the electric vehicle market in the world by 2020 and to contribute towards national fuel security.

Furthermore, MoRTHs and the Bureau of Energy Efficiency in India finalized labeling regulations for the M1 category of vehicles, which includes Passenger Vehicles with nine seats or fewer.

The Government of India’s plan to encourage India’s transition to hybrid and electric mobility consists of the following initiatives:

 

   

Demand Side: Mandate use of electric vehicles in areas such as public transportation and government fleets in order to create initial demand for OEMs and provide incentives for the sales of electric vehicles to consumers.

 

   

Supply Side: Link incentives to localization of the production of key components of electric vehicle in a phased manner.

 

   

Research and Development: Fund research and development programs along with OEMs and component suppliers to develop optimal solutions for India at low cost.

 

   

Infrastructure Support: Develop pilot programs to support hybrid and/or electric vehicles and test their effectiveness and make modest investments to build public charging infrastructure to support electric vehicles, especially for buses.

Taxes Applicable from July 1, 2017

Goods and Services Tax

The introduction of the GST from July 1, 2017 was a very significant step in the field of indirect tax reforms in India. By subsuming a large number of central and state taxes into a single tax, the aim was to mitigate cascading or double taxation and pave the way for a common national market.

The salient features of GST are:

 

   

Applicable on “supply” of goods or services as against the earlier concept of tax on manufacture of goods or on sale of goods or on provision of services.

 

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Based on the principle of destination based consumption taxation as against the present principle of origin-based taxation.

 

   

Dual GST with the center and the states simultaneously levying it on a common base.

 

   

Replaced the taxes earlier levied and collected by the center, namely: (a) central excise duty; (b) duties of excise (medicinal and toilet preparations); (c) additional duties of excise (goods of special importance); (d) additional duties of excise (textiles and textile products); (e) additional duties of customs (commonly known as CVD); (f) special additional duty of customs; (g) service tax; (h) cesses and surcharges insofar as they relate to supply of goods or services.

 

   

State taxes that were subsumed within the GST are (a) state VAT; (b) the CST; (c) purchase tax; (d) luxury tax; (e) entry tax (all forms); (f) entertainment tax (except those levied by the local bodies); (g) taxes on advertisements; (h) taxes on lotteries, betting and gambling; (i) state cesses and surcharges insofar as they relate to supply of goods or services.

The GST rates together with the GST compensation cess rates applicable to vehicles as of March 31, 2020 are listed below:

 

Commodity    GST Rate    

GST Comp.

Cess Rate

 

Small Cars (Diesel)

     28     3

Small Cars (Gasoline)

     28     1

Motor Vehicles for transport of 10 to 13 persons incl. driver

     28     15

Motor vehicles for transport of more than 13 persons

     28      

Chassis fitted with engine for transport of more than 13 persons

     28      

Chassis fitted with engine for trucks

     28      

SUVs and UVs

     28     22

Car—Motor vehicle of engine capacity not exceeding 1500cc

     28     17

Motor vehicle of engine capacity exceeding 1500 cc and other than SUV

     28     20

Truck

     28      

Electrically operated vehicles (any type)

     5      

Environmental, fiscal and other governmental regulations around the world

Our Jaguar Land Rover business has significant operations in the United Kingdom, North America, Europe, China and other markets that have stringent and ever evolving regulations relating to vehicle emissions. Compliance with the proposed tightening of vehicle emissions regulations by the European Union may entail significant costs. Although Jaguar Land Rover is pursuing various technologies to meet the different environmental standards, the costs of compliance can be significant to its operations and may adversely and materially impact its business, financial condition and results of operations.

Greenhouse gas / CO2 / fuel economy legislation

Current legislation in Europe limits Passenger Car fleet average greenhouse gas emissions to 95 grams of CO2 per kilometer for all new cars from 2020. Different targets apply to each manufacturer based on their respective fleets of vehicles and average weight. Jaguar Land Rover has been granted a derogation by the European Commission Secretariat General under Regulation (EC) No. 443/2009 Article 11(4) from the weight based target requirement available to small volume and niche manufacturers. As a result, Jaguar Land Rover is permitted to reduce emissions by 45% from 2007 levels rather than meeting a specific CO2 emissions target.

 

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Jaguar Land Rover had an overall 2016-2019 target of an average of 178.0 grams of CO2 per kilometer for our full fleet of vehicles registered in the European Union. In 2018, under provisional EU data our fleet delivered 155.1 grams of CO2 per kilometer, well below the mandated target.

In 2019, the European Union has regulated target reductions for 95% of a manufacturer’s full fleet of new passenger cars registered in the European Union in 2020 to average 95 grams of CO2 per kilometer, rising to 100% in 2021. The new rule for 2020 contains an extension of the niche manufacturers’ derogation and permits us to reduce our emissions by 45% from 2007 levels, which enables us to have an overall target of 132 grams of CO2 per kilometer. The 2018 EU CO2 legislation extended the Niche Volume Derogation facility out to then end of 2028.

In 2019, the European Union has regulated target reductions for 95% of a manufacturer’s full fleet of new passenger cars registered in the European Union in 2020 to average 95 grams of CO2 per kilometer, rising to 100% in 2021. The new rule for 2020 contains an extension of the niche manufacturers’ derogation and permits us to reduce our emissions by 45% from 2007 levels, which enables us to have an overall target of 132 grams of CO2 per kilometer. The 2018 EU CO2 legislation extended the Niche Volume Derogation facility out to then end of 2028.

In the United States, both CAFE standards and greenhouse gas emission standards are imposed on manufacturers of passenger cars and light trucks. The federal CAFE standards for passenger cars and light trucks was set in 2011 by the NHTSA to meet an estimated combined average fuel economy level of 54.5 miles per US gallon for 2025 model year vehicles achieved by a 3.5% 5% year-on-year fuel consumption reduction from model year 2016. Meanwhile, the Environmental Protection Agency (“EIA”) had set an average greenhouse gas emissions target from passenger cars, light trucks and medium duty passenger vehicles at 163 grams per mile in model year 2025 (equivalent to the CAFE 54.5 miles per US gallon if achieved exclusively through fuel economy standards).

However, in April 2018, the EPA announced that the model years 2022 through 2025 emission standards are not appropriate given challenges to technology and the strain on investors. The EPA stated that it planned to harmonize the greenhouse gas emission standards and the CAFE standards without explicitly stating what those changes would be. This harmonization of standards on a national scale could significantly rollback CAFE standards and climate change rules will be rolled back significantly. Any such roll back is highly likely to in turn become subject to challenge. In August 2018, a Notice of Proposed Rule Making (“NPRM”) was issued proposing flat lining of emissions targets for model years 2021-2026 at model year 2020 target levels as well as detailed changes to “flexibilities”. Automotive manufacturers had 60 days to respond to the NPRM in which the industry supported a half way compromise between the current standards and the NPRM proposal. Any potential benefit to us in rolling back CAFE standards may be counter balanced by the current U.S. presidential administration’s possible changes to laws and policies governing international trade and potential additional tariffs and duties on foreign vehicle imports.

Although the State of California has been empowered to implement more stringent greenhouse gas emission standards, it has, so far, elected to accept the existing U.S. federal standards for compliance with the state’s own requirements. In November 2012, the California Air Resources Board (“CARB”) accepted the federal standard for vehicles with model years 2017 to 2025 for compliance with the state’s own greenhouse gas emission regulations via the “deemed to comply” mechanism. Through the coordination of the National Program with the CARB’s standards, automakers can seek to build one single fleet of vehicles across the United States that satisfies all requirements, and consumers can continue to have a full range of vehicle choices that meet their needs.

However, in September 2019, the US federal government revoked California’s right to set its own standards that require stricter air pollution rules than the federal government requires. California immediately moved to challenge the revocation in court and is looking to move forward with other stringent emission regulations for vehicles, including the Zero Emission Vehicle regulation, (“ZEV”), which requires manufacturers to increase their sales of zero emissions vehicles year-on-year, up to an industry average of 22% of vehicles sold in the state by 2025. The precise sales required in order to meet a manufacturer’s obligation in any given model year depend on the size of the manufacturer and the level of technology sold (for example, transitional zero emission technologies, such as plug-in hybrids, can account for at least a proportion of a manufacturer’s obligation, but these technologies earn compliance credits at a different rate from pure zero emissions vehicles). Other compliance mechanisms are available under ZEV, such as banking and trading of credits generated through the sale of eligible vehicles. The final rule that emerges from the NPRM process and the outcome of the dispute between the State of California and the US federal government over California’s ability to adopt separate, stricter emission standards may affect our sales in the US although the ultimate impact cannot be determined at present.

In addition, many other markets have employed similar greenhouse gas emissions standards, including Brazil, Canada, China, India, Japan, Mexico, Saudi Arabia, South Korea, Switzerland and, recently, Taiwan, each with different target mechanisms, targets, timing, requirements, compliance penalties and regulatory flexibilities.

 

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We are fully committed to meeting all of these standards. Local excise tax initiatives are a key consideration in ensuring our products meet customer needs for environmental footprint and cost of ownership concerns as well as continued access to major city centers (such as London and Paris’ Ultra Low Emission Zones and similar low emissions areas being contemplated in other major urban centers).

Non-greenhouse gas emissions requirements

The European Union has adopted Euro 6, the latest in a series of more stringent standards for emissions of other air pollutants from passenger and light commercial vehicles, such as NOx, carbon monoxide, hydrocarbons and particulates. These standards have been tightened again by the Euro 6d Temp standard, which incorporates the introduction of Real Driving Emissions (“RDE”) as a complement to laboratory testing to measure compliance. As a first step, manufacturers are required to reduce the discrepancy between laboratory compliance values and RDE procedure values to a conformity factor of a maximum of 2.1 (110%) for all models from September 2017 for passenger cars and from September 2018 for new light commercial vehicles. Following that, manufacturers will be required to reduce this discrepancy to a conformity factor of a maximum of 1.43 (43%) by January 2020 for new models of passenger cars and by January 2021 for new models of light commercial vehicles.

In 2017 and 2018, there was a move to the new WLTP in Europe, with changes made in September 2018, to address global concerns on more customer correlated fuel economy certified levels as well as air quality concerns. Other markets will likely adopt similar requirements. All programmes are fully engineered to enable the adoption of these new requirements.

In California, the Low Emission Vehicle 3 (“LEV3”) regulations and ZEV regulations place strict limits on emissions of particulates, NOx, hydrocarbons, organics and greenhouse gases from passenger cars and light trucks. These regulations require ever-increasing levels of technology in engine control systems, on-board diagnostics and after treatment systems affecting the base costs of our powertrains. California’s LEV3 and ZEV regulations cover model years 2015 to 2025. Additional stringency of evaporative emissions also requires more-advanced materials and joints solutions to eliminate fuel evaporative losses, all for much longer warranty periods (up to 150,000 miles in the United States).

In addition, the Tier 3 Motor Vehicle Emission and Fuel Standards issued by the EPA in April 2014 established more stringent vehicle emissions standards broadly aligned to California’s LEV3 standards for 2017 to 2025 model year vehicles.

While Europe and the United States typically lead the implementation of these emissions programmes, many other nations and states typically follow on with adoption of similar regulations two to four years thereafter. For example, China’s Stage IV targets a national average fuel consumption of 5.0L/100km by 2021 and a Stage V national average fuel consumption of 4.0L/100km by 2025. In response to severe air quality issues in Beijing and other major Chinese cities, the Chinese government will adopt more stringent emissions standards known as China 6, which is broadly aligned to California LEV3 levels.

To comply with the current and future environmental norms, we may have to incur substantial capital expenditure and research and development expenditure to upgrade products and manufacturing facilities, which would have a material and adverse impact on our cost of production and results of operations.

Noise legislation

The European Commission adopted rules, which apply to new homologations from July 2016, to reduce noise produced by cars, vans, buses, coaches and light and heavy trucks. Noise limit values would be lowered in two steps of each two A-weighted decibels for vehicles other than trucks, and one A-weighted decibel in the first step and two in the second step for trucks. Compliance would be achieved over a ten-year period from the introduction of the first phase.

Vehicle safety legislation

Our products are certified in all markets in which they are sold and compliance is achieved through vehicle certification in respective countries. Many countries use, and in many instances adopted into their own regulatory frameworks, the regulations and technical requirements provided through the United Nations Economic Commission for Europe (“UN-ECE”) series of vehicle regulations.

 

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Vehicles sold in Europe are subject to vehicle safety and environmental regulations established by both the European Union and by individual member states, if any. Following the incorporation of the United Nations standards commenced in 2012, the European Commission requires new model cars to have electronic stability control systems and has introduced regulations relating to low-rolling resistance tyres, tyre pressure monitoring systems and requirements for heavy vehicles to have advanced emergency braking systems and lane departure warning systems. The latest mandatory measures include safety belt reminders for more that the driver seat, electric car safety requirements, easier child seat anchorages, tyre pressure monitoring systems and gear shift indicators.

NHTSA issues Federal Motor Vehicle Safety Standards covering a wide range of vehicle components and systems such as occupant protection, seatbelts, brakes, windshields, tyres, steering columns, displays, lights, door locks, side impact protection and fuel systems. NHTSA has recently added, in addition to the technical requirements United States Federal Motor Vehicle Safety Standard (“FMVSS”) requirements, voluntary agreements relating to autonomous emergency brake system installation and rear seat reminder systems.

Failure to meet product regulated requirements in any jurisdiction will likely require some form of product recall to remedy the compliance failure. The financial cost and impact on consumer confidence of such recalls can be significant depending on the nature of the deficiency, repair required and the number of vehicles affected. The different standards applicable across the territories or countries increase the cost and complexity of designing and producing vehicles and equipment.

Regulations continue to evolve, there are methods and processes in place to monitor regulatory developments and ensure these are captured, internally communicated and design and engineering completed which consider all regulated requirements.

On June 22, 2017, we filed a noncompliance report after determining that approximately 126,127 Jaguar vehicles do not fully comply with FMVSS No. 135, Light Vehicle Brake Systems, as the brake fluid warning statement label on the subject vehicles is not permanently affixed as required. Instead, we installed a label that fits over the neck of the brake fluid reservoir that can be removed when the brake fluid reservoir cap is removed. On July 20, 2017, we petitioned the NHTSA for a decision that the subject noncompliance is inconsequential as it relates to motor vehicle safety for the following reasons, among others:

 

   

The installed label will not fall off or become displaced during normal vehicle use or operation.

 

   

The installed label is only able to be removed when the brake fluid reservoir cap is displaced which, based on routine maintenance schedules, is once every 3 years in service.

 

   

We have not received any customer complaints on this issue.

 

   

There have been no accidents or injuries as a result of this issue.

 

   

Vehicle production has been corrected to fully conform, with a new filler cap.

In April 2019, NHTSA granted the above mentioned petition.

NHTSA continue to raise enquiries relating to reports of product safety matters. More recently, NHTSA has been actively reviewing post recall remedy issues through their recall query process. In June 2019, NHTSA requested information relating to reports of fuel leaks from the fuel tank outlet flange or dust cover. All NHTSA enquiries are published and are in the public domain.

While vehicle safety regulations in Canada are similar to those in the United States, many other countries have different requirements. The differing requirements among various countries create complexity and increase costs such that the development and production of a common product that meets the country regulatory requirements of all countries is not possible. Global Technical Regulations, (“GTRs”), developed under the auspices of the United Nations, continue to have an increasing impact on automotive safety activities, as indicated by European Union legislation. In 2008, GTRs on electronic stability control, head restraints and pedestrian protection were each adopted by the United Nations World Forum for the Harmonisation of Vehicle Regulations, and are now in different stages of national implementation. While global harmonization is fundamentally supported by the automobile industry in order to reduce complexity, national implementation may still introduce subtle differences into the system.

The effect of Brexit on vehicle certification and type approval in the United Kingdom and European Union is clear and implementation of the changes required to accommodate this have now been completed. The European Union has issued regulation to facilitate a transition from the current 28 member state system permitting transfer to one of the remaining member state approval authorities. The UK Government has introduced legislation allowing proof of compliance from the European Union to be accepted in the United Kingdom for a limited period of time whilst the United Kingdom implements its system of vehicle certification and type approval.

 

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Insurance Coverage

The Indian insurance industry is predominantly state-owned and insurance tariffs are regulated by the Indian Insurance Regulatory and Development Authority. We have insurance coverage which we consider reasonably sufficient to cover all normal risks associated with our operations, including business interruptions, and which we believe are in accordance with industry standards in India. We have obtained coverage for product liability for some of our vehicle models in several countries to which we export vehicles. TDCV has insurance coverage as is required and applicable to cover all normal risks in accordance with industry standards in South Korea, including product liability. We have also taken insurance coverage on directors and officer’s liability to minimize risks associated with international litigation for us and our subsidiaries.

In accordance with treasury policy, Jaguar Land Rover has maintained insurance coverage that is reasonably adequate to cover normal risks associated with the operation of its business, such as coverage for people, property and assets, including construction, general, auto and product liability. On August 12, 2015, a series of explosions caused widespread damage at the Port of Tianjin in China, one of three major locations in China through which Jaguar Land Rover imports its vehicles. At the time of the explosion, approximately 5,800 Jaguar Land Rover vehicles were stored at various locations in Tianjin. Many of these vehicles were destroyed or damaged in the explosion, and, as a result, Jaguar Land Rover recognized an exceptional charge of GBP245 million in the second quarter of Fiscal 2016. By the end of Fiscal 2017, GBP274 million had been recovered through the receipt of insurance proceeds and other recoveries. These included amounts received for insurance, tax recoveries, foreign exchange gains and the sales of vehicles that were at the port at the time of the explosion including GBP35 million related to other costs associated with Tianjin including lost and discounted vehicle revenue. There can be no assurance that any claim under our insurance policies will be honored fully or timely, our insurance coverage will be sufficient in any respect or our insurance premiums will not increase substantially. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or which exceeds our insurance coverage, or have to pay higher insurance premiums, our financial condition may be materially and adversely affected.

We are insured by insurers of recognized financial standing against such losses and risks and in such amounts as are prudent and customary in the business in which it is engaged. All such insurance is in full force and effect.

We are able to renew our existing insurance coverage, as and when such policies expire or to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business, as now conducted.

Export Promotion Capital Goods

Since Fiscal 1997, we have benefited from participation in the Export Promotion Capital Goods Scheme (the “EPCG Scheme”), which permits us to import capital equipment under a special license at a substantially reduced customs duty. Our participation in this scheme is subject to us fulfilling an obligation to export goods manufactured or produced by the use of capital equipment imported under the EPCG Scheme to the value of a multiple of the cost plus insurance and freight value of these imports or customs duty saved over a period of 6 and 8 years from the date of obtaining the special license. We currently hold 35 licenses (excluding redeemed licenses) which require us to export our products of a value of approximately Rs.43.53 billion between the years 2016 to 2026, and we carefully monitor our progress in meeting our incremental milestones. After fulfilling some of the export obligations as per provisions of foreign trade policy, as of March 31, 2020, we have remaining obligations to export products worth approximately Rs.24.09 billion by March 2026. In the event that the export obligation under the EPCG Scheme is not fulfilled, we would have to pay the differential between the reduced and normal duty on the goods imported along with interest. In view of our past record of exceeding our export milestones, and our current plans with respect to our export markets, we do not currently foresee any impediments to meeting our export obligation in the required time frame.

 

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Legal Proceedings

In the normal course of business, we face claims and assertions by various parties. We record a liability for all claims where a potential loss is probable and capable of being estimated. We disclose such matters in our financial statements if they are material. We disclose potential losses that are considered reasonably possible but less than probable in our financial statements. However, we do not record a liability in our financial statements unless the loss becomes probable. If certain new developments arise, such as a change in law or a ruling against us, we may need to make provisions in our financial statements, which could adversely impact our reported financial condition and results of operations. If we are required to pay all or a portion of a significant claim, there could be a material adverse effect on our business and profitability. Certain claims that are above Rs.200 million are described in Note 37 to our consolidated financial statements included in this annual report on Form 20-F. Certain claims that are below Rs.200 million pertain to indirect taxes, labor and other civil cases. Other claims against us pertain to motor accidents in India involving vehicles that were damaged in accidents while being transferred from our manufacturing plants to regional sales offices, product liability claims and consumer complaints. Some of these other claims relate to the replacement of vehicles parts and/or compensation for deficiencies in services provided by us or our dealers.

Capital investments underway as of March 31, 2014, included the investment of Rs.3,098.8 million to build an automobile manufacturing facility at Singur in West Bengal for Nano project. In October 2008, we moved the Nano project from Singur in West Bengal to Sanand in Gujarat. In June 2011, the newly elected Government of West Bengal (the “West Bengal Government”) enacted a law known as the Singur Land Rehabilitation & Development Act, 2011 and by virtue of the provisions of this Act the West Bengal Government took possession of land. We challenged the law’s constitutionality. In June 2012, the Calcutta High Court declared the law unconstitutional and restored our rights under the land lease agreement. The West Bengal Government filed an appeal in the Supreme Court of India in August 2012.

The appeal is ongoing, and the timeline for its resolution is uncertain and the result is uncertain. In Fiscal 2015, our management made a provision for carrying the capital cost of buildings at Singur amounting to Rs.3,098.8 million, excluding other assets (such as electrical installations) and expenses written off or provided in earlier years, security expenses, lease rent and claim for interest on the whole amount (including Rs.3,098.8 million).

In August 2016, the Supreme Court of India declared the acquisition of the land for the project by the West Bengal Government illegal and directed that the land be returned to the landowners. Because the Supreme Court of India held that the land acquisition was illegal, the West Bengal Government’s subsequent appeal regarding the Singur Act’s constitutionality before the Supreme Court of India was rendered moot and withdrawn. The Supreme Court of India’s decision also rendered the West Bengal Government’s lease of the land to TML unviable. However, the lease agreement contained a clause stating that, if the acquisition was deemed illegal, the West Bengal Government would indemnify TML for the capital cost it had incurred on the site. The lease agreement also provided for arbitration as a mechanism to resolve any dispute between TML and the West Bengal Government. When TML raised its claim for compensation for indemnification for capital and other costs, the West Bengal Government declined to grant the same. TML sought arbitration pursuant to the lease agreement in order to resolve the dispute. After arbitration commenced, TML filed its claim for compensation before the arbitral tribunal comprising two retired judges from the Calcutta High Court and presided over by a retired judge from the Supreme Court of India. The arbitration proceedings before the arbitral tribunal have started in May 2019.

The CCI initiated an inquiry against us and other car manufacturers (collectively, the “Indian OEMs”) pursuant to allegations that the Indian OEMs engaged in anticompetitive conduct by not making genuine spare parts of automobiles manufactured by the Indian OEMs freely available in the open market in India. In an order dated August 25, 2014, the CCI held that the Indian OEMs had violated the provisions of Sections 3 and 4 of the Competition Act, 2002, and imposed a penalty of 2% of the average total revenues for three years. Subsequently, we and other Indian OEM’s filed a writ petition before the Delhi High Court challenging the constitutionality of Sections 22(3) and 27(b) of the Indian Competition Act, under which the order was passed and the penalty imposed.

In April 2019, the Delhi High Court directed the petitioners to approach the National Company Law Appellate Tribunal (“NCLAT”) for further deliberation on the merits. TML has filed a special leave petition before the Supreme Court of India challenging the Delhi High Court’s order, which was admitted by the Supreme Court of India. The Supreme Court of India has also continued the stay on recovery of the penalty imposed by the CCI. Further hearings on the matter are yet to take place.

A SEBI Order, dated March 6, 2018, directed TML to conduct an internal inquiry within three months into the leakage of information relating to its financial results for the quarter ended December 2015 and to take appropriate actions against those responsible. TML hired Ernst & Young LLP to conduct an internal investigation. The report was submitted to SEBI on June 11, 2018. There has been no further communication from SEBI.

 

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The Company, consequent to an order of the Supreme Court of India in the case of R.C Gupta and Ors. Vs Regional Provident Fund Commissioner, Employees Provident Fund Organization and Ors, evaluated the impact on its employee pension scheme and concluded that because the Court had stated that the decision was applicable to the facts of that case, it will not be applicable to TML due to factual differences as per the external legal opinion. Hence it is not probable that there will be an outflow of resources. The Company has also filed an intervention application with the Supreme Court of India on April 2019, which is pending before the Court. The Company has also filed application before the authorities for surrender of exemption in respect of its pension scheme.

C. Organizational Structure.

Tata Sons—Our Promoter and its Promoted Entities

Tata Sons holds equity interests in its promoted companies engaged in a wide range of businesses. The entities promoted by Tata Sons, including Tata Motors Limited, are based substantially in India and had aggregate revenues in excess of approximately US$100 billion for the financial year ending March 2019. The businesses of entities promoted by Tata Sons can be categorized under ten business verticals, information technology, steel, automotive, consumer and retail, infrastructure, financial services, tourism and travel, aerospace and defence, telecom and media and trading and investments.

Some of the entities promoted by Tata Sons have their origins in the trading business founded by the founder Mr. Jamsetji Nusserwanji Tata in 1868, which was developed and expanded in furtherance of his dreams by his two sons, Sir Dorabji Tata and Sir Ratan Tata, following their father’s death in 1904. The family’s interests subsequently vested largely in the Sir Ratan Tata Trust, the Sir Dorabji Tata Trust and other associate trusts, collectively called “the Tata Trusts”. The Tata Trusts have been established for philanthropic and charitable purposes and together own a significant percentage of the share capital of Tata Sons.

Over the years, the operations of the entities promoted by Tata Sons have expanded to encompass a number of major industrial and commercial enterprises, including Indian Hotels Company Limited (1902), Tata Steel Limited (1907), Tata Power Company Limited (1910), Tata Chemicals Limited (1939), and Tata Motors Limited (1945). Other Tata entities include Voltas Limited (1954) and Tata Consumer Products Limited (formerly known as Tata Global Beverages Ltd.) (1962), along with its UK-based Tetley tea business.

Tata Consultancy Services Limited (“TCS”), a subsidiary of Tata Sons which started its operations in the 1960s as a division of Tata Sons and later became a listed public company, is a leading software service provider in India and several countries abroad and the first Indian software firm to breach the US$100 billion market capitalization mark. TCS has delivery centers around the globe including the United States, the United Kingdom, Hungary, Brazil, Uruguay, China, Europe, Asia Pacific, Latin America, as well as India. Tata Sons promoted India’s first airline, Tata Airlines, which later changed its name to Air India (India’s national carrier), as well as India’s largest general insurance company, New India Assurance Company Limited, both of which were subsequently taken over by the government as part of the Government of India’s nationalization program. In 1999, entities promoted by Tata Sons also invested in several telephone and telecommunication ventures, including acquiring a significant portion of the Government of India’s equity stake in the then state owned Videsh Sanchar Nigam Limited, which was subsequently renamed Tata Communications Limited. Companies promoted by Tata Sons are building multinational businesses that aspire to achieve growth through excellence and innovation, while balancing the interests of shareholders, employees and society.

Some of the other companies promoted by Tata Sons include: Titan Company, established in 1984, which manufactures India’s largest and best-known range of personal accessories, such as watches, jewelry, sunglasses, and prescription eyewear, and excels in precision engineering; Tata Housing Development Company, established in 1984, a real estate developer in India; Tata AIA Life Insurance Company, established in 2001, which is a joint venture between Tata Sons and AIA Life Group Ltd., Tata AIG General Insurance Company, established in 2001, which provides non-life insurance solutions to individuals, groups and corporate houses in India; Tata Capital, established in 2007, a systemically important non-deposit taking NBFC and a core investment company registered with the RBI, that services the financial needs of retail and institutional customers in India; Tata Realty and Infrastructure Limited, established in 2007, which is an Infrastructure and Real Estate developer; AirAsia (India) Limited, a joint venture established in 2013, which is a low cost airline; Tata SIA Airlines Limited, a joint venture established in 2013 which is engaged in full service scheduled passenger airline services; Tata Advanced Systems Limited, established in 2006 and its subsidiaries which are, inter alia, engaged in activities including scientific, technical and research and development activities, manufacturing, testing and experimenting equipment, and components, in the field of advanced defense technologies, security systems, aerospace and aerostructures.

 

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We have for many years been a licensed user of the “TATA” brand owned by Tata Sons, and thus have gained from the use of the “TATA” brand and its brand equity. Tata Sons instituted a corporate identity program in the year 1998 to re-position the brand to compete in a global environment. A substantial ongoing investment and recurring expenditure is undertaken by Tata Sons to develop and promote a strong, well-recognized and common brand, which is intended to represent for the consumer a high level of quality, service and reliability associated with products and services offered by the entities promoted by Tata Sons.

Companies which have subscribed to the Tata Brand Equity & Business Promotion Scheme pay an annual subscription fee to use the “TATA” business name and trademarks and participate in and gain from the promotion of the Tata brand equity as well as avail themselves of various services including legal, human resources, economics and statistics, corporate communications and public affairs services organized by Tata Sons. We believe that we benefit from the use of and association with the “TATA” brand identity and accordingly, Tata Motors Limited and certain of its subsidiaries have subscribed to the Tata Brand Equity & Business Promotion Agreement and pay an annual subscription fee to Tata Sons which is in the range of 0.15% to 0.25% of the annual net income (defined as net revenues exclusive of excise duties and other governmental taxes and non-operating income), subject to a ceiling of 5% of annual profit before tax (defined as profit after interest and depreciation but before income tax), each calculated on a standalone basis for these entities. In some of the past years, Tata Sons has lowered the absolute amount of subscription fee in light of its outlay for activities related to brand promotion and protection in those years. For Fiscal 2014, Fiscal 2015, Fiscal 2017, Fiscal 2018 and Fiscal 2020, no amount was paid in view of losses of Tata Motors Limited calculated on a standalone basis. Pursuant to our licensing agreement with Tata Sons, we have also undertaken certain obligations for the promotion and protection of the Tata brand identity licensed to us under the agreement. The agreement can be terminated by written communications between the parties or by Tata Sons upon our breach of the agreement and our failure to remedy such a breach, or by Tata Sons upon providing six months’ notice for reasons to be recorded in writing. The agreement can also be terminated by Tata Sons upon the occurrence of certain specified events, including liquidation of Tata Motors Limited.

The entities promoted by Tata Sons continue to follow the ideals, values and principles of ethics, integrity and fair business practices espoused by the founder Mr. Jamsetji Tata, and his successors. To further protect and enhance the Tata brand equity, these values and principles have been articulated in the Tata Code of Conduct, which has been adopted by the entities promoted by Tata Sons. The Tata Trusts have also made significant contributions towards national causes through promotion of public institutions in the field of science, such as the Indian Institute of Science and the Tata Institute of Fundamental Research and in the field of social services through the Tata Institute of Social Sciences, the Tata Memorial Hospital, National Centre for the Performing Arts in Mumbai and, more recently, the Tata Medical Center at Kolkata in India for cancer patients, set up by the Tata Trusts and supported by Tata Sons and its promoted companies. The Tata Trusts are among the largest charitable foundations in India.

Some of the entities promoted by Tata Sons hold shares in other companies promoted by Tata Sons. Similarly, some of the Company’s directors may hold directorships on the boards of Tata Sons and/or other entities promoted by Tata Sons. However, there are no voting agreements, material supply or purchase agreements or any other relationships or agreements that have the effect of binding us with other entities promoted by Tata Sons at management, financial or operational levels. With the exception of Tata Steel, which under the Articles of Association has the right to appoint one Director on the Board, neither Tata Sons nor its subsidiaries have any special contractual or other power to appoint Directors or management. They have only the voting power of their respective shareholdings in Tata Motors Limited. Except as set forth in the tables below under the heading “Subsidiaries and Affiliates” and except for approximately a 15.37% equity interest in Tata Services Limited., a 17.29% equity interest in Tata International Limited and a 10.47% equity interest in Tata Industries Limited, our shareholdings in other entities promoted by Tata Sons are generally insignificant as a percentage of their respective outstanding shares or in terms of the amount of our investment or the market value of our shareholdings of those companies.

 

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Subsidiaries and Affiliates

The subsidiaries, joint operation and equity method affiliates and joint ventures of Tata Motors Limited that together with Tata Motors Limited form the Tata Motors Group as of March 31, 2020 are set forth in the chart below:

 

 

LOGO

 

 

(1)

With effect from March 31, 2020, the name of Concorde Motors (India) Limited was changed to TML Business Services Limited.

(2)

Brabo Robotics and Automation Limited - India 100% was incorporated with effect from July 17, 2019.

(3)

These subsidiaries are based in many countries outside India.

(4)

Holding Company of Jaguar Land Rover Automotive Plc, Tata Daewoo Commercial Vehicle Co. Limited, Tata Motors (Thailand) Limited, Tata Motors (SA) (Proprietary) Limited, PT Tata Motors Indonesia and TMNL Motor Services Nigeria Limited.

(5)

TML Holdings Pte. Limited increased its shareholding in Tata Motors (Thailand) Limited from 95.87% to 97.17% with effect from June 6, 2019

(6)

Holding in its subsidiary, Tata Daewoo Commercial Vehicle Sales and Distribution Co. Ltd. is 100%.

(7)

Holding 99.997% in PT Tata Motors Distribusion Indonesia, a subsidiary, along with TML Holdings Pte. Ltd. holding 0.003%.

(8)

Shareholding in Tata Technologies Limited increased from 72.28% to 72.48% post buyback of shares. The holdings in these 12 subsidiaries ranges between 72.28% and 72.48%.

(9)

Holds 100% shareholding in Tata Motors Finance Limited and Tata Motors Finance Solutions Limited.

(10)

Automobile Corporation of Goa Limited increased shareholding from 47.19% to 49.77% post Equity Share Buyback of 3,33,000 equity shares on November 15, 2019.

(11)

The holding in these 12 subsidiaries ranges between 19% to 26% and holdings in 6 joint ventures ranges between 6.63% to 13%.

(12)

Holding in its subsidiary, Chery Jaguar Land Rover Auto Sales Company Limited, is 100%.

(13)

An affiliate of Tata Technologies Limited. The shareholding increased from 36.14% to 36.24%

 

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Out of the above, the following are the Company’s three significant subsidiaries as defined under Regulation S-X:

 

Name

   Country of Incorporation      Ownership Interest /
Voting Power
 

Jaguar Land Rover Automotive Plc

     United Kingdom        100

Jaguar Land Rover Limited

     United Kingdom        100

Jaguar Land Rover Holdings Limited

     United Kingdom        100

With respect to certain subsidiaries and affiliates, where Tata Motors Limited has a joint venture partner, voting on certain items of business may be based on affirmative voting provisions and board of director’s participation clauses in the relevant joint venture agreement(s).

D. Property, Plants and Equipment

Facilities

We operate six principal automotive manufacturing facilities in India. The first facility was established in 1945 at Jamshedpur in the state of Jharkhand in eastern India. We commenced construction of the second facility in 1966 (with production commencing in 1976) at Pune, in the state of Maharashtra in western India, the third facility in 1985 (with production commencing in 1992) at Lucknow, in the state of Uttar Pradesh in northern India, the fourth at Pantnagar in the state of Uttarakhand, India, which commenced operations in Fiscal 2008, the fifth at Sanand in Gujarat in western India for manufacturing of the Nano, which commenced operations in June 2010, and the sixth plant for manufacturing Tata Marcopolo buses under our joint venture with Marcopolo and LCVs at Dharwad in Karnataka (which buses are also produced at Lucknow). The Jamshedpur, Pune, Sanand, Pantnagar and Lucknow manufacturing facilities have been accredited with an ISO/TS 16949:2000(E) certification.

The manufacturing facilities of TDCV are based in Gunsan, South Korea. TDCV has received the IATF 16949 certification, the automotive quality management system, given by SGS UK Ltd., a certification body accredited by the International Automotive Task Force. It is the first South Korean commercial vehicle manufacturer that received the IATF 16949 certification.

Fiat India Automobiles Private Limited, our joint arrangement with the FCA, has its manufacturing facility located in Ranjangaon, Maharashtra. The plant is used for manufacturing Tata and Fiat branded cars and engines, and transmissions for use by both partners.

Through Jaguar Land Rover, we currently operate four principal automotive manufacturing facilities in the United Kingdom at Solihull, Castle Bromwich, Halewood and the EMC at Wolverhampton, as well as two product development facilities in the United Kingdom at Gaydon and Whitley. Most of these facilities are owned as freehold estates or are held through long-term leaseholds, generally with nominal rents. In December 2015, Jaguar Land Rover announced an initial investment of GBP1 billion to build a manufacturing facility in Slovakia (owned as a freehold estate), which opened in October 2018 and currently produces the Land Rover Discovery and the new Land Rover Defender. Jaguar Land Rover also owns a joint venture manufacturing plant under our China Joint Venture, in Changshu, near Shanghai, as part of an RMB10.9 billion investment that also includes a new research and development center, which opened in October 2014. A new engine plant producing Jaguar land Rover’s 2.0-Liter Ingenium petrol engines opened in July 2017 for installation into vehicles manufactured by the China Joint Venture. Jaguar Land Rover also opened a new manufacturing facility in Brazil in June 2016, which manufactures the Range Rover Evoque and Discovery Sport for the Brazilian market. Jaguar Land Rover now produces the I-PACE battery electric vehicle and the new Jaguar E-PACE in Graz, Austria under its manufacturing partnership with Magna Steyr.

Tata Motors (SA) (Proprietary) Limited, our joint venture with Tata Africa Holdings (SA) (Proprietary) Ltd. for the manufacture and assembly operations of our LCVs and MHCVs in South Africa, owns and operates a manufacturing facility located in Rosslyn, South Africa.

 

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Description of environmental issues that may affect our utilization of facilities

Tata Commercial Vehicles and Tata Passenger Vehicles

Automobile industry is exposed to regulatory risks related to climate change. The design and development of fuel-efficient vehicles and vehicles running on alternative renewable energy has become a priority because of fossil fuel scarcity, escalating fuel price, climate change concerns, and government regulations. New and advanced technologies encourage customers to look beyond standard purchasing factors and they may start looking for the product differentiation based on advanced technologies used in the vehicle.

We have implemented our sustainability and climate change policies that address key climate change issues related to products, processes and services, and we are committed to reduce the greenhouse gas emissions throughout the lifecycle of our products. Our approach towards climate change mitigation and pursuing low carbon growth is three-fold – develop cleaner and more fuel-efficient vehicles, reduce environmental impacts of manufacturing operations and build awareness among stakeholders. Our sustainability strategy is aligned with global and national policies of future mobility solutions. Accordingly, we are extensively working on low carbon product development across our Commercial Vehicle and Passenger Vehicle segments. We have already launched a range of advanced technology vehicles, which would not only help mitigation of climate change risk, but also curb rising urban air pollution.

The United Nations 21st Conference on Climate Change, Conference of the Parties was held in Paris from November 30, 2015 to December 11, 2015. The Paris Agreement, which was set out to improve upon and replace the Kyoto Protocol, went into effect on November 4, 2016. As India ratified the Paris global climate agreement, The Honorable Prime Minister Narendra Modi highlighted India’s commitment to reduce its emission intensity to 33% to 35% by 2030 compared to 2005 levels, through nationally determined contributions.

Considering the climate change risk, we are actively involved in partnerships with technology providers to embrace energy efficient technologies not only for products but also for processes and are also participating actively in various national committees in India, which are working on formulating policies and regulations for improvement of the environment, including through reduction of greenhouse gases.

We are continually developing products to meet the current and future emission standards in India and other countries. In order to manage regulatory and general risks of climate change, we are increasingly investing in the design and development of new advanced technologies. With the growing need for reducing on road emission for vehicles, innovative technologies are needed to support the changing scenario and achieving targets. In order to reduce carbon emissions from vehicles, our focus is on researching, developing and producing advanced technologies, such as hybrid engines, electric cars, fuel-cell vehicles. We have developed a range of electric vehicles, such as the Ultra 9m AC Electric bus, Tiago EV, Tigor EV, Nexon EV along with Altroz EV which we showcased at Geneva International Motor show in March 2019. We are also simultaneously putting efforts in our research and development of vehicles, which are powered by alternative fuels like CNG, LPG, biodiesel and hydrogen.

For dealing with the challenges posed by climate change, we are determined to reduce carbon footprint of our manufacturing operations. Pursuant to our commitment to climate change mitigation, we are a signatory to the RE100, a global collaborative initiative of influential businesses committed to usage of 100% renewable electricity. We have made substantial investments in the area of wind and solar power to increase our renewable energy capacity. We have signed power purchase agreements with renewable energy producers. In addition to renewable energy, we have taken several energy conservation initiatives, which helped us in reducing our greenhouse gas emissions. All our manufacturing facilities in India are certified for ISO-14001. Going beyond our manufacturing boundaries, we are implementing sustainable supply chain initiative in a phased manner since Fiscal 2017 for integrating sustainability in supply chain to minimize the environmental and social impacts of our supply chain. We have already covered 350+ suppliers under this initiative in last four years. We are also working on the downstream side of supply-chain with our dealerships and channel partners for improving the sustainability performance.

 

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Jaguar Land Rover

Jaguar Land Rover’s production facilities are subject to a wide range of increasingly strict environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, releases into the environment, human exposure to hazardous materials, the storage, treatment, transportation and disposal of wastes and hazardous materials, the investigation and clean-up of contamination, process safety and the maintenance of health and safety conditions in the workplace. Many of Jaguar Land Rover’s operations require permits and controls to monitor or reduce pollution. We have incurred, and will continue to incur, substantial on-going capital and operating expenditures to ensure compliance with current and future environmental, health and safety laws and regulations or their more stringent enforcement. Violations of these laws and regulations could result in the imposition of significant fines and penalties, the suspension, revocation or non-renewal of Jaguar Land Rover’s permits, production delays or limitations, imprisonment, or the closure of Jaguar Land Rover’s plants. Other environmental, health and safety laws and regulations could impose restrictions or onerous conditions on the availability or the use of raw materials we need for Jaguar Land Rover’s manufacturing process. Violations of these laws and regul