|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|
|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|
|Item 17. Financial Statements|
|Item 18. Financial Statements|
|Item 19. Exhibits|
|Balance Sheet||Income Statement||Cash Flow|
As filed with the Securities and Exchange Commission on July 30, 2015
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|¨||REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934|
|x||ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the Fiscal year ended March 31, 2015
|¨||TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the transition period from to
|¨||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
Commission file number: 001-32294
TATA MOTORS LIMITED
(Exact name of Registrant as specified in its charter)
|Republic of India|| |
24, Homi Mody Street
Mumbai 400 001, India
|(Jurisdiction of incorporation or organization)||(Address of principal executive offices)|
Tel.: +91 22 6665 7219
Facsimile: +91 22 6665 7260
24, Homi Mody Street
Mumbai 400 001, India
(Name, Telephone, Facsimile number, Email and Address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Name of Each Exchange On Which Registered
|Ordinary Shares, par value Rs.2 per share *||New York Stock Exchange|
Securities registered or to be registered pursuant to Section 12(g) of the Act:
(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 issuers classes of capital or common stock as of the close of the period covered by the annual report. 2,736,713,122 Ordinary Shares and 481,966,945 A Ordinary Shares, including 582,260,190 Ordinary Shares represented by 116,447,836 American Depositary Shares, or ADSs, outstanding as at March 31, 2015. Each ADS represents five (5) Ordinary Shares as at March 31, 2015.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x 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 x 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. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). N/A
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
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 x|| |
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 x No
|*||Not for trading, but only in connection with listed American Depositary Shares, each representing five Ordinary Shares.|
In this annual report on Form 20-F:
References to we, our and us are to Tata Motors Limited and its consolidated subsidiaries, except as the context otherwise requires;
References to dollar, U.S. dollar and US$ are to the lawful currency of the United States of America; references to Indian rupees and Rs. are to the lawful currency of India; references to JPY are to the lawful currency of Japan; references to GBP are to the lawful currency of the United Kingdom; references to Euro are to the currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended; references to Russian Ruble are to the lawful currency of Russia; references to RMB and Chinese Renminbi are to the lawful currency of China and references to KRW and Korean won are to the lawful currency of the Republic of Korea;
References to Indian GAAP are to accounting principles generally accepted in India; and references to IFRS are to International Financial Reporting Standards and its interpretations as issued by International Accounting Standards Board;
References to an ADS are to an American Depositary Share, each of which represents five of our Ordinary Shares of Rs.2 each, and references to an ADR are to an American Depositary Receipt evidencing one or more ADSs;
References to Shares are to the Ordinary Shares and the A Ordinary Shares of Tata Motors Limited unless stated otherwise;
Passenger Cars are vehicles that have a seating capacity of up to five persons, including the driver, that are further classified into the following market categories:
|i.||Micro length of up to 3,200 mm;|
|ii.||Mini length of between 3,200 mm and 3,600 mm;|
|iii.||Compact length of between 3,600 mm and 4,000 mm;|
|iv.||Super Compact length of between 4,000 mm and 4,250 mm;|
|v.||Mid-size length of between 4,250 mm and 4,500 mm;|
|vi.||Executive length of between 4,500 mm and 4,700 mm;|
|vii.||Premium length of between 4,700 mm and 5,000 mm; and|
|viii.||Luxury length of above 5,000 mm;|
Utility Vehicles, or UVs, are vehicles that have a seating capacity of five to ten persons, including the driver, which includes sports utility vehicles, or SUVs, multi-purpose vehicles and vans;
Passenger Vehicles refers to passenger cars or utility vehicles;
Light Commercial Vehicles, or LCVs, refer to vehicles that have gross vehicle weight, or GVW, of up to 7.5 metric tons and Small Commercial Vehicles, or SCVs, are a subcategory of LCVs that have a GVW of up to 2 metric tons;
Medium and Heavy Commercial Vehicles, or M&HCVs, are vehicles that have a GVW of over 7.5 metric tons and Intermediate Commercial Vehicles, or ICVs, are a subcategory of M&HCVs with a GVW between 7.5 metric tons and 16 metric tons;
For our Jaguar Land Rover business, references to premium cars and sports utility vehicles refer to a defined list of premium competitor cars and sports utility vehicles;
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, or SIAM;
References to a particular Fiscal year, such as Fiscal 2015, are to our Fiscal year ended on March 31 of that year;
Millimeters or mm are 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;
Kilograms or kg are each equal to approximately 2.2 pounds, and metric tons or tons are equal to 1,000 kilograms or approximately 2,200 pounds;
Liters are equivalent to 61.02 cubic inches of volume, or approximately 1.057 U.S. quarts of liquid measure;
Revenue refers to Total Revenue net of excise duty unless stated otherwise; and
Companies Act refers to the Indian Companies Act, 2013, unless stated otherwise.
Figures in tables may not add up to totals due to rounding.
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, or the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or 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, Russia, China or in any of the other countries where we operate;
fluctuations in the currency exchange rate against the functional currency of the respective consolidated entities;
accidents and natural disasters;
terms on which we finance our working capital and capital and product development expenditures and investment requirements;
implementation of new projects, including mergers and acquisitions, planned by management;
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;
significant movements in the prices of key inputs such as steel, aluminum, rubber and plastics; 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.
Certain Non-IFRS Measures
This annual report on Form 20-F contains references to free cash flow, a non-IFRS measure. Free cash flow is not an IFRS measure and should not be construed as an alternative to any IFRS measure such as cash flow from operating activities. Free cash flow is defined for purposes of this annual report on Form 20-F as cash flow from operating activities, less payments for property, plant and equipment and intangible assets. Free cash flow should not be considered in isolation and is not a measure of our financial performance or liquidity under IFRS and should not be considered as an alternative to cash flow from operating, investing or financing activities or any other measure of our liquidity derived in accordance with IFRS. Free cash flow does not necessarily indicate whether cash flow will be sufficient or available for cash requirements and may not be indicative of our results of operations. Free cash flow as defined herein may not be comparable to other similarly titled measures used by other companies.
|Item 1.||Identity of Directors, Senior Management and Advisers|
|Item 2.||Offer Statistics and Expected Timetable|
|Item 3.||Key Information|
The following tables set forth selected financial data including selected historical financial information as at and for each of the Fiscal years ended March 31, 2015, 2014, 2013, 2012 and 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS.
The selected IFRS consolidated financial data as at March 31, 2015 and 2014 and for each of Fiscal 2015, 2014 and 2013 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 at March 31, 2013, 2012 and 2011 and for Fiscal 2012 and 2011 are derived from our audited IFRS consolidated financial statements not included in this annual report on Form 20-F. We adopted several new and amended standards issued by the IASB with effect from April 1, 2013. As described in Note 2(v) of our annual report on Form 20-F for Fiscal 2014, the earliest period presented in the consolidated financial statement has been retrospectively adjusted in accordance with the transitional provisions of the standards. Accordingly, selected financial data for Fiscal 2013, 2012 and 2011 have been retrospectively adjusted. These retrospective adjustments resulted in decreases in net income by Rs.26.5 million, Rs.1,623.4 million, Rs.2,818.7 million for Fiscals 2013, 2012 and 2011, respectively. The decrease / increase in net income resulted in corresponding increase / decrease in other comprehensive income.
Consolidated financial data as at March 31, 2012 and 2011 for each of Fiscal 2012 and 2011 may differ from the data originally presented in those audited IFRS consolidated financial statements included in prior annual reports.
You should read our selected financial data in conjunction with Item 5 Operating and Financial Review and Prospects.
Selected Financial Data Prepared in Accordance with IFRS
|Year ended March 31,|
|(in US$ millions, |
and per share
|(in Rs. millions, except share and per share amounts)|
Change in inventories of finished goods and work-in-progress
Purchase of products for sale
Raw materials and consumables
Depreciation and amortization
Other (income)/loss (net)
Foreign exchange (gain)/loss (net)
Interest expense (net)
Impairment in an equity accounted investee
Share of (profit)/loss of equity accounted investees
Net income /(loss) before tax
Income tax expense
Net income /(loss) after tax
|Year ended March 31,|
|(in US$ millions, |
and per share
|(in Rs. millions, except share and per share amounts)|
Net income/(loss) attributable to equity holders
Net income/(loss) attributable to non-controlling interest
Dividends per Ordinary Shares
|US$||||Rs. 2.0||Rs. 2.0||Rs. 4.0||Rs. 20.0||Rs. 15.0|
Dividends per share A Ordinary Shares
|US$||||Rs. 2.1||Rs. 2.1||Rs. 4.1||Rs. 20.5||Rs. 15.5|
Weighted average Ordinary Shares outstanding:
Weighted average A Ordinary Shares outstanding:
Earnings per Ordinary Shares:
|US$||0.6||Rs. 39.4||Rs. 40.2||Rs. 27.5||Rs. 35.5||Rs. 23.4|
|US$||0.6||Rs. 39.4||Rs. 40.2||Rs. 27.5||Rs. 35.2||Rs. 23.4|
Earnings per share of A Ordinary Shares:
|US$||0.6||Rs. 39.5||Rs. 40.3||Rs. 27.6||Rs. 35.6||Rs. 23.5|
|US$||0.6||Rs. 39.5||Rs. 40.3||Rs. 27.6||Rs. 35.3||Rs. 23.5|
Subsequent to the Fiscal 2015, we conducted a renounceable rights offer of 150,644,759 new Ordinary Shares, including Ordinary Shares represented by ADSs, and 26,530,290 new A Ordinary Shares of Rs.2 each to qualifying Tata Motors Shareholders recorded in the shareholders register at the close of business on April 8, 2015, at a subscription price of Rs.450 each for new Ordinary Shares and Rs.271 each for new A Ordinary Shares in the ratio of six rights offer Shares for every 109 Tata Motors Limited Shares held. The rights offer was fully subscribed and the shareholders received the new Shares on May 13, 2015. For each of Fiscal 2015, 2014, 2013, 2012 and 2011, basic and diluted earnings per share have been retrospectively adjusted for the bonus element of the rights offer attributable to the difference between the exercise price of the rights and the prevailing market price of the Shares. 154,279 Ordinary Shares and 20,531 A Ordinary Shares have been kept in abeyance. See Note 25 to our audited consolidated financial statements included elsewhere in this annual report on Form 20-F for further details.
During Fiscal 2012, Ordinary Shares and A Ordinary Shares were each subdivided from having a face value of Rs.10 each into five Shares having a face value of Rs.2 each. Dividend per Ordinary Share and dividend per A Ordinary Share, as presented above for Fiscal 2012 and 2011 are before the subdivision of Ordinary Shares and A Ordinary Shares and have not been adjusted to reflect the subdivision of Ordinary Shares and A Ordinary Shares. Consequently, the number of Shares as at March 31, 2011 is not comparable to the number of Shares as at March 31, 2015, 2014 and 2013 and 2012.
Weighted average Ordinary Shares and A Ordinary Shares outstanding and earnings per share of previous years have been adjusted retrospectively, to make them comparable following the sub-division of Shares described above.
|As at March 31,|
|(in US$ millions, |
except number of
|(in Rs. millions, except number of shares)|
Long term debt, net of current portion
Total shareholders equity (Net Assets)
Number of Equity shares outstanding
-A Ordinary Shares
Exchange Rate Information
For convenience, some of the financial amounts presented in this annual report on Form 20-F have been translated from Indian rupee amounts into U.S. dollar amounts at the rate of Rs.62.5000 = US$1.00, based on the fixing rate in the city of Mumbai as published by the Foreign Exchange Dealers Association of India on March 31, 2015
The following table sets forth information with respect to the exchange rate between the Indian rupee and the U.S. dollar (Rs. per U.S. dollar) as published by Bloomberg L.P. for Fiscal 2015, 2014, 2013, 2012 and 2011.
|Period End||Period |
The following table sets forth information with respect to the exchange rate between the Indian rupee and the U.S. dollar (Rs. per U.S. dollar) for the previous six months as published by Bloomberg L.P.
|Period End||Period |
As at July 29, 2015, the value of the Indian rupee against the U.S. dollar was Rs.63.9050 per US$1.00, as published by Bloomberg L.P.
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 ii. Although we will be making 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, and net assets, financial condition, results of operations, liquidity, capital resources and prospects.
Risk associated with Our Business and the Automotive Industry
Deterioration in global economic conditions could have a material adverse impact on our sales and results of operations.
The automotive industry, and the demand for automobiles are influenced by general economic conditions, including among other things, rates of economic growth, credit availability, disposable income of consumers, interest rates, environmental and tax policies, safety regulations, freight rates and fuel and commodity prices. Negative trends in any of these factors impacting the regions where we operate could materially and adversely affect our business, financial condition and results of operations.
The Indian automotive industry is affected materially by the general economic conditions in India and around the world. Muted industrial growth in India in recent years along with continuing higher inflation and interest rates continue to pose risks to overall growth in this market. The automotive industry in general is cyclical and economic slowdowns in the recent past have affected the manufacturing sector in India, including the automotive and related industries. A continuation of negative economic trends or further deterioration in key economic metrics such as the growth rate, interest rates and inflation as well as reduced availability of financing for vehicles at competitive rates could materially and adversely affect our automotive sales in India and results of operations.
In addition, investors reactions to economic developments in one country can have adverse effects on the securities of companies and the economy as a whole, in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indian financial markets and indirectly, in the Indian economy in general. In July 2015, stock markets in China experienced a substantial decline in values, which may have contributed to a drop in the price of our Shares and/or ADSs. Any worldwide financial instability 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 our Shares and ADSs.
Our Jaguar Land Rover business has significant operations in the United Kingdom, North America, continental Europe and China as well as sales operations in many other countries across the globe. While the automotive market in the United States, United Kingdom and Europe experienced healthy growth in Fiscal 2015, low economic growth in the Eurozone prompted the European Central Bank to engage in quantitative easing beginning in January 2015, and uncertainty over debt negotiations with Greece remains. Economic sanctions and declining energy prices continue to impact Russia. Recessionary concerns are mounting in Brazil while Chinas economy is showing signs of slowing. Jaguar Land Rovers ambitions for growth in emerging markets such as China, India, Russia and Brazil, may not materialize as expected, which could have a significant adverse impact on our financial performance. If automotive demand softens because of lower or negative economic growth in key markets (notably China) or other factors, our operations and financial condition could be materially and adversely affected.
Restrictive covenants in our financing agreements may 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. 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 results of operations and financial condition.
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 financial condition and results of operations.
In recent years, including Fiscal 2014, we were in breach of financial covenants relating to our ratio of total outstanding liabilities to tangible net worth and to our debt service coverage ratio in various financing agreements requested and obtained waivers of our obligations to pay additional costs as a consequence of such breaches. These breaches have not resulted in an event of default in our financing agreements or the payment of penalties. However, we cannot assure you that we will succeed in obtaining consents or waivers in the future from our lenders or guarantors, or that our lenders and guarantors will not impose additional operating and financial restrictions on us, or otherwise seek to modify the terms of our existing financing agreements in ways that are materially adverse to us. See Item 5. Operating and Financial Review and ProspectsB. Liquidity and Capital ResourcesLoan Covenants. In addition, future non-compliance with the financial covenants of our agreements may lead to increased cost for future financings.
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. In particular, the Indian rupee declined significantly relative to the U.S. dollar in recent years. As published by Bloomberg L.P. the exchange rate expressed in Indian rupees per US$1.00, was Rs.63.65 on June 30, 2015.
Moreover, we have outstanding foreign currency denominated debt and are sensitive to fluctuations in foreign currency exchange rates. We have experienced and expect to continue to experience foreign exchange losses and gains on obligations denominated in foreign currencies in respect of our borrowings and foreign currency assets and liabilities due to currency fluctuations.
We also have interest-bearing assets (including cash balances) and interest bearing liabilities, which bear interest at variable rates. We are therefore exposed to changes in interest rates in the various markets in which we borrow. 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.
Intensifying competition could materially and adversely affect our sales, financial condition and results of operations.
The global automotive industry is highly competitive and competition is likely to further intensify in light of continuing globalization and consolidation. 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 expanding in emerging markets, such as China, India, Russia, Brazil and parts of Asia. Factors affecting competition include product quality and features, innovation and the timing of the introduction of new products, cost control, pricing, reliability, safety, fuel economy, environmental impact and perception thereof, customer service and financing terms. There can be 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 as well as foreign automobile manufacturers. Improving infrastructure and growth prospects compared to 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 can be no assurance that we will be able to implement our future strategies in a way that will mitigate the effects of increased competition on the Indian automotive industry.
Designing, manufacturing and selling vehicles is capital intensive and requires substantial investments in facilities, machinery, research and development, product design, engineering, technology and marketing in order to meet both customer preferences and regulatory requirements. If our competitors consolidate or enter into other strategic agreements, they may be able to take better advantage of economies of scale or enhance their competitiveness in other ways. Our competitors may also be able to benefit from the cost savings offered by consolidation or alliances, which could adversely affect our competitiveness with respect to those competitors, which could also materially reduce our sales as well as materially and adversely affect our business, financial condition and results of operations.
Our future success depends on our ability to satisfy changing customer demands by offering innovative products in a timely manner and maintaining such products competitiveness and quality.
Our competitors may gain significant advantages if they are able to offer products satisfying customer needs earlier than we are able to and this could adversely impact our sales, results of operations and financial condition. Unanticipated delays or cost overruns in implementing new product launches, expansion plans or capacity enhancements could also materially and adversely impact our financial condition and results of operations.
Customer preferences, especially in many developed markets, seem to be moving in favor of more fuel efficient and environmentally friendly vehicles. In addition, increased government regulations, volatile fuel prices and evolving environment preferences of consumers has brought significant pressure on the automotive industry to reduce carbon dioxide emissions. Our operations may be significantly impacted if we experience delays in developing fuel efficient products that reflect changing customer preferences. In addition, a deterioration in the quality of our vehicles could force us to incur substantial costs and damage our reputation. There can be no assurance that the market acceptance of our future products will meet our sales expectations, in which case we may be unable to realize the intended economic benefits of our investments and our financial condition and results of operations may be materially and adversely affected.
Private and commercial users of transportation increasingly use modes of transportation other than the automobile. The reasons for this include the rising costs of automotive transport, increasing traffic density in major cities and environmental awareness. Furthermore, the increased use of car-sharing concepts and other innovative mobility initiatives facilitates access to other methods of transport, thereby reducing dependency on the private automobile. A shift in consumer preferences away from private automobiles would have a material adverse effect on our general business activity and on our sales, prospects, financial condition and results of operations.
To stimulate demand, competitors in the automotive industry have offered customers and dealers price reductions on vehicles and services, which has led to increased price pressures and sharpened competition within the industry. As a provider of numerous high-volume models, our profitability and cash flows are significantly affected by the risk of rising competitive price pressures. 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 are subject to risks associated with product liability, warranty and recall.
We are subject to risks and costs associated with product liability, warranties and recalls. Should we supply defective products, parts, or related after-sales services, we are subject to risks and costs associated with product liability, including negative publicity, which may have a material adverse effect on our business, results of operations and financial condition. Such events could also require us to expend considerable resources in correcting these problems and could significantly reduce demand for our products. In Fiscal 2015 and the first half of Fiscal 2016, we implemented product recalls for Jaguar Land Rover vehicles sold in North America and China. We may also be subject to class actions or other large scale product liability or other lawsuits in various jurisdictions where we conduct business.
We are subject to risks associated with the automobile financing business.
In India, we are subject to risks associated with our automobile financing business. Any default by our customers or inability to repay installments as due could materially and adversely affect our business, 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 sale of our commercial 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, financial condition and results of operations.
Jaguar Land Rover has consumer financing arrangements in place with local providers in a number of key markets. Any reduction in the supply of available consumer financing for purchase of new vehicles could create additional pressures to increase marketing incentives in order to maintain demand for our vehicles. This could materially reduce our sales and net income. Furthermore, Jaguar Land Rover also offers residual value guarantees on the leases of certain vehicles in some markets. Any significant declines in used car valuations could materially and adversely affect our sales, financial condition and results of operations.
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 that we originate, which could severely disrupt our ability to support the sale of our vehicles.
Underperformance of our distribution channels and supply chains may have a material adverse effect on 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. We monitor the performance of our dealers and distributors and provide them with support to enable them to perform to our expectations. There can be no assurance, however, that our expectations will be met. Any underperformance by our dealers or distributors could materially and adversely affect our sales and results of operations.
We rely on third parties to supply us with the raw materials, parts and components used in the manufacture of our products. For some of these parts and components, we are dependent on a single source. Our ability to procure supplies in a cost effective and timely manner is subject to various factors, some of which are not within our control. While we manage our supply chain as part of our vendor management process, any significant problems with our supply chain in the future could disrupt our business and materially and adversely affect our results of operations as well as our sales, net income and financial condition.
Natural disasters and man-made accidents, adverse economic conditions, decline in automobile demand, lack of access to sufficient financing arrangements, among others things, could have a negative financial impact on our suppliers, thereby impairing timely availability of components to us or causing increase in the costs of components. Similarly a deterioration in the financial condition of our distributors for any reason may adversely impact our performance. In addition, if one or more of the other global automotive manufacturers were to become insolvent, this would have an adverse effect on our supply chains and may have a material adverse effect on our results of operations.
In respect of our Jaguar Land Rover operations, as part of a separation agreement from Ford Motor Company, we have entered into long-term supply agreements for critical components with Ford Motor Company for the supply of engines and certain other third parties for critical components which requires Jaguar Land Rover to purchase fixed quantities of parts through take-or-pay contracts. Any disruption of such services could have a material adverse effect on our business, financial condition and results of operations.
Increases in input prices may have a material adverse effect on our results of operations.
In Fiscal 2015, 2014 and 2013, the consumption of raw materials, components and aggregates and purchase of products for sale (including changes in inventory) constituted approximately 61.0%, 61.7% and 63.4% respectively, of our total 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 price movements would closely depend on the evolving economic scenarios across the globe. 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 have a negative impact on demand. In addition, an increased price and supply risk could arise from the need for rare and frequently sought-after raw materials for which demand is high, such as rare earths, which are predominantly found in China. Rare earth metal prices and supply remain uncertain. In the past, China has limited the export of rare earths from time to time. Due to intense price competition and our high level of fixed costs, we may not be able to adequately address changes in commodity prices even if they are foreseeable. Increases in fuel costs also pose a significant challenge, especially in the commercial and premium vehicle categories where increased fuel prices have an impact on demand. If we are unable to find substitutes for supplies of raw materials or pass price increases on to customers, or to safeguard the supply of scarce raw materials, our vehicle production, business, financial condition and results of operations could be materially and adversely affected.
Deterioration in the performance of any of our subsidiaries, joint ventures and affiliates may adversely affect our results of operations.
We have made and may continue to make capital commitments to our subsidiaries, joint ventures and affiliates, and if the business or operations of any of these subsidiaries, joint ventures and affiliates deteriorates, 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. Our partners may be unable, or unwilling, to fulfill their obligations, or the strategies of our joint ventures or affiliates may not be implemented successfully, which may significantly reduce the value of our investments, and, which may in turn have a material adverse effect on our reputation, business, financial position or results of operations.
The significant reliance of Jaguar Land Rover on key markets increases the risk of negative impact of reduced customer demand in those countries.
Jaguar Land Rover, which contributes a large portion of our revenues, generates a significant portion of its sales in China, the United Kingdom, North American and continental European markets. Furthermore, in the fourth quarter of Fiscal 2015, retail sales of Jaguar Land Rover in China decreased by 20.4% to 23,526 units from 29,567 units compared to the same period in Fiscal 2014. This decline in retail sales of Jaguar Land Rover has continued in the first quarter of Fiscal 2016. A decline in demand for Jaguar Land Rover vehicles in these key markets, including China, or inability to maintain its pricing strategy in these markets, including China, may significantly impair our business, growth prospects, financial position and results of operations.
We are subject to risks associated with growing our business through mergers and acquisitions.
We believe that our acquisitions provide us opportunities to grow significantly in the global automobile markets by offering premium brands and products. Our acquisitions have provided us with access to technology and additional capabilities while also offering potential synergies. However, the scale, scope and nature of the integration required in connection with our acquisitions present significant challenges, and we may be unable to integrate the relevant subsidiaries, divisions and facilities effectively within our expected schedule. An acquisition 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.
For example, we acquired the Jaguar Land Rover business from Ford Motor Company in June 2008, and Jaguar Land Rover has become a significant part of our business and accounted for approximately 82.9% of our total revenues for Fiscal 2015. 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 assurances that any legacy issues at Jaguar Land Rover or any other acquisition we have undertaken in the past or will undertake in the future would 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 growth opportunities through suitable mergers and acquisitions in the future. Growth through mergers and acquisitions involves business risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the merger or acquisition is completed. The key success factors are seamless integration, effective management of the merged and/or acquired entity, retention of key personnel, cash flow generation from synergies in engineering and sourcing, joint sales and marketing efforts, and management of a larger business. If any of these factors fails to materialize or if we are unable to manage any of the associated risks successfully, our business, financial condition and results of operations could be materially and adversely affected.
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 due to year end as customers defer purchases to the new year.
Our Jaguar Land Rover business is impacted by the semi-annual registration of vehicles in the United Kingdom where the vehicle registration number changes every March and September, which, in turn, has an impact on the resale value of vehicles. 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, and there is some seasonality around the purchase of vehicles in northern states where the purchase of Jaguar vehicles is concentrated in the spring and summer months, and the purchase of 4x4 vehicles is concentrated in the autumn/winter months. Markets in China tend to experience higher demand for vehicles around the Chinese New Year. Demand in western European automotive markets tends to be reduced during the summer and winter holidays. Furthermore, our cash flows are impacted by the temporary shutdown of three of our manufacturing plants in the United Kingdom during the summer and winter holidays. The resulting sales and cash flow profile influences operating results on a quarter to quarter basis.
We rely on licensing arrangements with Tata Sons 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 Limited, or 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, financial condition and results of operations.
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 relating to the products we manufacture. In connection with the design and engineering of new vehicles and the enhancement of existing models, we seek to regularly develop new intellectual property. We also use technical designs which 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, would have a materially adverse effect on our business, financial condition and results of operations. 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.
Impairment of 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 intangible assets such as research and development, product design and engineering technology. We review the value of our intangible assets to assess on an annual basis whether the carrying amount matches the recoverable amount for the asset concerned based on underlying cash-generating units. We may have to take an impairment loss as at a current balance sheet date or future balance sheet date, if the carrying amount exceeds the recoverable amount, which could have a material adverse effect on our financial condition and the results of operations.
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 South Korea and the United Kingdom, including certain officers and managers, in relation to our automotive business, 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 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, financial condition and results of operations may be materially and adversely affected.
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.
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, which could materially decrease our net income and cash flows.
Any inability to manage our growing international business may materially and adversely affect our financial condition and results of operations.
Our growth strategy relies on the expansion of our operations by introducing certain automotive products in markets outside India, including Europe, China, Russia, Brazil, the United States, Africa and other parts of Asia. The costs associated with entering and establishing ourselves in new markets, and expanding such operations, may be higher than expected, and we may face significant competition in those regions. In addition, our international business is subject to many actual and potential risks and challenges, including language barriers, cultural differences and other difficulties in staffing and managing overseas operations, inherent difficulties and delays in contract enforcement and the collection of receivables under the legal systems of some foreign countries, the risk of non-tariff barriers, other restrictions on foreign trade or investment sanctions, and the burdens of complying with a wide variety of foreign laws, rules and regulations. As part of our global activities, we may engage with third-party dealers and distributors which we do not control but which nevertheless take actions that could have a material adverse impact on our reputation and business. In addition, we cannot assure you that we will not be held responsible for any activities undertaken by such dealers and distributors. If we are unable to manage risks related to our expansion and growth in other parts of the world, our business, financial condition and results of operations could be materially and adversely affected.
Any disruption of the operations of our manufacturing, design, engineering and other facilities could materially and adversely affect our business, financial condition and results of operations.
We have manufacturing facilities and design and engineering centers in India, the United Kingdom, China, South Korea, Thailand, South Africa and Brazil, and have established a presence in Indonesia. We could experience disruptions to our manufacturing, design and engineering capabilities for a variety of reasons, including, among others, extreme weather, fire, theft, system failures, natural catastrophes, mechanical or equipment failures and similar events. Any such disruptions could affect our ability to design, manufacture and sell our products and, if any of these events were to occur, there can be no assurance that we would be able to shift our design, engineering or manufacturing operations to alternate sites in a timely manner or at all, and our business, financial condition and results of operations could be materially and adversely affected.
We are exposed to operational risks, including risks in connection with our use of information technology.
Operational risk is the risk of loss resulting from inadequate or failed internal systems and processes, from either internal or external events. Such risks could stem from inadequacy or failures of controls within internal procedures, violations of internal policies by employees, disruptions or malfunctioning of information technology systems such as computer networks and telecommunication systems, other mechanical or equipment failures, human error, natural disasters or malicious acts by third parties. Any unauthorized access to or misuse of data on our information technology systems, human errors or technological or process failures of any kind could severely disrupt our operations, including our manufacturing, design and engineering processes, and could have a material adverse effect on our reputation, financial condition and results of operations.
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, and customer records, such information may be divulged, including as a result of hacking or other threats from cyberspace. If this occurs, we could be subject to claims by affected parties, negative publicity and loss of proprietary information, all of which could have an adverse and material impact our reputation, business, financial condition, results of operations and cash flows.
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 control over financial reporting conducted as at March 31, 2015, we concluded that there was a material weakness such that our internal control over financial reporting was not effective as at March 31, 2015. 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 control over financial reporting, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting. Any such additional weaknesses or failure to adequately remediate any existing weakness could materially and adversely affect our financial condition and results of operations as well as 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, and this may have a material adverse effect on our business, financial condition and results of operations.
While we believe that the insurance coverage that we maintain is reasonably adequate to cover all normal risks associated with the operation of our business, there can be no assurance that our insurance coverage will be sufficient, that any claim under our insurance policies will be honored fully or in a timely manner, or that 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 are required to pay higher insurance premiums, our business, financial condition and results of operations may be materially and adversely affected.
Our business could be negatively affected by the actions of activist shareholders.
Certain of our shareholders may from time to time advance shareholder proposals or otherwise attempt to effect changes or acquire control over our business. 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 and management of the company. 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 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 FDI (Foreign Direct Investment) Policy. Under the Consolidated FDI Policy, an Indian company is considered to be owned by a 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 our company may, in the near future, exceed 50%, thereby resulting in our company being considered as being owned by non-resident entities under the Consolidated FDI Policy. In such an event, any investment by us 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, 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 its 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 which 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, financial condition and results of operations could be materially and adversely affected.
Any downgrading of Indias debt rating by a domestic or international rating agency could negatively impact our business.
Any adverse revisions to Indias 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 our Shares and ADSs.
Political and Regulatory Risks
Indias obligations under the World Trade Organization Agreement could materially affect our business.
Indias 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, financial condition and results of operations.
New or changing laws, regulations and government policies regarding increased fuel economy, reduced greenhouse gas and other emissions, vehicle safety and taxes may have 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. These regulations are likely to become more stringent and the resulting higher compliance costs may significantly impact our future results of operations. In particular, the United States and Europe have stringent regulations relating to vehicle emissions. The proposed tightening of vehicle emissions regulations by the European Union will require significant costs for compliance. While we are pursuing 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 may be significant to our operations and may adversely impact our results of operations.
In order to comply with current and future safety and environmental norms, we may have to incur additional costs to (i) operate and maintain our production facilities, (ii) install new emissions controls or reduction technologies, (iii) purchase or otherwise obtain allowances to emit greenhouse gases, (iv) administer and manage our greenhouse gas emissions program, and (v) invest in research and development to upgrade products and manufacturing facilities. 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 significantly. 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 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, financial condition and results of operations.
In addition, the Road Transport and Safety Bill (RTSB) 2015, which is subject to legislative approval by the Indian Parliament, could expose us to additional liability for vehicle recalls and for manufacturers liability for our vehicles.
Imposition of any additional taxes and levies designed to limit the use of automobiles could significantly reduce the demand for our products as well as our sales and net income. Changes in corporate and other taxation policies as well as changes in export and other incentives given by various governments could also adversely affect our results of operations. For example, we benefit from excise duty exemptions for manufacturing facilities in the state of Uttarakhand and other incentives such as subsidies or loans from states where we have manufacturing operations. The Government of India had proposed a comprehensive national goods and services tax, or GST, regime that would combine taxes and levies by the central and state governments into one unified rate structure. While both the Government of India and state governments of India have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information in the public domain concerning the GST, we are unable to provide any assurance as to this or any other aspect of the tax regime following implementation of the GST. The implementation of this rationalized tax structure may be affected by any disagreement between certain state governments, which could create uncertainty. The Government of India has publicly announced its intention to implement the GST on April 1, 2016, however, we can make no assurances regarding this timeline.
Regulations in the areas of investments, taxes and levies may also have an impact on Indian securities, including our Shares and ADSs. For more information, see Item 4.B Business OverviewGovernment Regulations of this annual report on Form 20-F.
In addition, the antitrust regulator in China, the Bureau of Price Supervision and Anti-Monopoly of the National Development and Reform Commission, or 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 its competitors, in 2014. 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 manufacturers suggested retail price for the 5.0 liter V8 models and the price of certain of our spare parts. These and other price reductions on our products sold in China may significantly reduce our revenues and profits generated by operations in China and have a material adverse effect on our financial condition and results of operations. 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 through our joint venture with Chery Automobile Company Ltd., or Chery) may fail or not be as successful as expected. Furthermore, any regulatory action taken, or penalties imposed, by the NDRC or other authorities in China, may have significant severe reputational consequences on our business as well as our profitability and prospects.
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 regulates practices having an appreciable adverse effect on competition, or 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, or CCI. Additionally, on May 11, 2011, the CCI issued 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, collectively referred to hereinafter as the OEMs, 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, financial condition and results of operations.
We may be adversely impacted by political instability, wars, terrorism, multinational conflicts, natural disasters, fuel shortages/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, our operations in those markets may be subject to political instability, wars, terrorism, regional or multinational conflicts, natural disasters, fuel shortages, epidemics and labor strikes. 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, rules and regulations, unclear regulatory and taxation systems and divergent commercial and employment practices and procedures. Any significant or prolonged disruption or delay in our operations related to these risks could materially and adversely affect our business, 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, or SEC, regulations, Securities and Exchange Board of India, or SEBI, regulations, New York Stock Exchange, or NYSE, listing rules, 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. As an example, pursuant to the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, which contains significant corporate governance and executive compensation-related provisions, the SEC has adopted additional rules and regulations in areas such as say on pay. Similarly, under applicable Indian laws, for example, remuneration packages may in certain circumstances require shareholders approval. Our management and other personnel may be required to devote a substantial amount of time to such compliance initiatives. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards. We are committed to maintaining high standards of corporate governance and public disclosure. However, our efforts to comply with evolving laws, rules, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management resources and time.
The Companies Act has effected significant changes to the existing Indian company law framework, which may subject us to higher compliance requirements and increase our compliance costs. A majority of the provisions and rules under the Companies Act have been notified and have come into effect from the date of their respective notification, resulting in the corresponding provisions of the Companies Act, 1956 ceasing to have effect. The Companies Act has brought into effect significant changes to the Indian company law framework, such as in the provisions related to the issue of capital (including provisions in relation to issue of securities on a private placement basis), disclosures in offering documents, corporate governance norms, accounting policies and audit matters, related party transactions, introduction of a provision allowing the initiation of class action suits in India against companies by shareholders or depositors, a restriction on investment by an Indian company through more than two layers of subsidiary investment companies (subject to certain permitted exceptions), prohibitions on loans to directors and insider trading and restrictions on forward dealing by directors and key managerial personnel. 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 Indian GAAP, towards corporate social responsibility activities. Furthermore, the Companies Act imposes greater monetary and other liability on us and our directors for any non-compliance. To ensure compliance with the requirements of the Companies Act, we may need to allocate additional resources, which may increase our regulatory compliance costs and divert managements attention. Accordingly, we may face challenges in interpreting and complying with certain provisions of the Companies Act 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 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). Recently, SEBI issued revised corporate governance guidelines which became effective on October 1, 2014. Pursuant to the revised guidelines, we are required to, among other things, ensure that there is at least one woman director on our board of directors at all times, establish a vigilance mechanism for directors and employees and reconstitute certain committees in accordance with the revised guidelines. We may face difficulties in complying with any such overlapping requirements. Furthermore, we cannot currently determine the impact of certain provisions of the Companies Act and the revised SEBI corporate governance norms. Any increase in our compliance requirements or in our compliance costs may have an adverse effect on our business, financial condition and results of operations.
Compliance with the SECs rules for disclosures on conflict minerals may be time consuming and costly and could adversely affect our reputation.
Under the Dodd-Frank Act, the SEC has adopted rules that apply to companies that use certain minerals and metals, known as conflict minerals, in their products, including certain products manufactured for them by third parties. The rules require companies to conduct due diligence as to whether or not such minerals originated from the Democratic Republic of Congo or adjoining countries, and further require companies to file certain information with the SEC about the use of these minerals. We expect to incur additional costs to comply with these due diligence and disclosure requirements. In addition, depending on our findings or our inability to make reliable findings about the source of any possible conflict minerals that may be used in any products manufactured for us by third parties, our reputation could be harmed.
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 Indias 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 Indias economic and financial sectors and deregulation policies, there can be no assurance that such policies will be continued.
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 our ADSs and Shares 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 Indias 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 financial condition and results of 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, including terrorist attacks and 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 our Shares and ADSs. In addition, any deterioration in international relations, especially between India and its neighboring countries, may result in investor concern regarding regional stability, which could adversely affect the price of our Shares or ADSs. Furthermore, India has witnessed local civil disturbances in recent years, and it is possible that future civil unrest as well as other adverse social, economic or political events in India could have an adverse impact on our business. 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, results of operations and financial condition, and the market price of our Shares and ADSs.
We may be materially and adversely affected by Reserve Bank of India policies and actions.
In June 2015, after the Reserve Bank of India, or RBI, announced an interest rate reduction coupled with a cautious statement on inflation, the S&P Bombay Stock Exchange Sensitive Index dropped over six hundred (600) points and which may have impacted the price of our Shares and ADSs. We can make no assurances about future market reactions to RBI announcements and their impact on the price of our Shares and ADSs. Furthermore, our business could be significantly impacted were the RBI to make major alterations to monetary or financial policy. Certain changes, such as 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 financial condition and results of operations.
Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
Our Articles of Association, which include regulations applicable to our board of directors, and Indian law govern our 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 our 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 the Bombay Stock Exchange, or 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 our 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 China, may affect the prices of securities in India, including our Shares, which may in turn affect the price of our 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.
Investors may have difficulty enforcing judgments against us or our management.
We are a public limited company incorporated in India. The majority of our directors and executive officers are residents of India and substantially all of the assets of those persons and a substantial portion of our 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 us. 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, or 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 disposition 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, or 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.
We will be required to prepare financial statements under Ind-AS (which is Indias convergence to IFRS). The transition to Ind-AS in India is very recent and there is no clarity on the impact of such transition on us.
We currently prepare annual and interim financial statements under Indian GAAP and annual financial statements under IFRS. We will be required to prepare annual and interim financial statements under Indian Accounting Standard 101 First-time Adoption of Indian Accounting Standards, or Ind-AS. On January 2, 2015, the Ministry of Corporate Affairs, Government of India, the MCA, announced the revised roadmap for the implementation of Ind-AS, and on February 16, 2015, released the Companies (Indian Accounting Standards) Rules, 2015 (to be published in the Gazette of India) which will come into effect from April 1, 2016.
There is not yet a significant body of established practice on which to draw informing judgments regarding the implementation and application of Ind-AS. In addition, Ind-AS differs in certain respects from IFRS and therefore financial statements prepared under Ind-AS may be substantially different from financial statements prepared under IFRS. There can be no assurance that our financial condition, results of operation, cash flow or changes in shareholders equity will not be presented differently under Ind-AS than under Indian GAAP or IFRS. When we adopt Ind-AS reporting, we may encounter difficulties in the ongoing process of implementing and enhancing our management information systems. There can be no assurance that the adoption of Ind-AS will not materially and adversely affect our financial conditions and results of operations.
Risks associated with our 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 our 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 our 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.
Holders of ADSs have fewer rights than shareholders and must act through the depositary 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 depositary, or the depositary, is the registered shareholder of the deposited Shares underlying our ADSs, and only the depositary may exercise the rights of shareholders in connection with the deposited Shares. The depositary will notify ADS holders of upcoming votes and arrange to deliver our voting materials to ADS holders only if requested by us. The depositary will try, in so far as practicable, subject to Indian laws and the provisions of our Articles of Association, to vote or have its agents vote the deposited securities as instructed by the ADS holders. If the depositary receives voting instructions in time from an ADS holder which fails to specify the manner in which the depositary is to vote the Shares underlying such ADS holders ADSs, such ADS holder will be deemed to have instructed the depositary to vote in favor of the items set forth in such voting instructions. If the depositary has not received timely instructions from an ADS holder, such ADS holder shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us, subject to the conditions set forth in the deposit agreement. If requested by us, the depositary is required to represent all Shares underlying ADSs, regardless 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 our accounting books and records, or exercise appraisal rights. Registered holders of our Shares withdrawn from the depositary 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 we do not instruct the depositary to distribute such materials, or may not receive such voting materials in time to instruct the depositary to vote.
For further details on the terms and conditions of our ADSs and the rights and obligations of our ADS holders, please see the amended and restated deposit agreement dated as of September 27, 2004 among us, Citibank, N.A., as depositary, 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, we are required to offer our 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 our shareholders 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. Our 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 we do not commit that we would file such a registration statement. If any issue of securities is made to our shareholders in the future, such securities may also be issued to the depositary, 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 depositary 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 Indias 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 our 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 Exchange Controls.
There are restrictions on daily movements in the price of the Shares, which may constrain a shareholders 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, including us, 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 our circuit breaker is set by the stock exchanges in India based on the historical volatility in the price and trading volume of our Shares. The stock exchanges in India are not required to inform us of the percentage limit of the circuit breaker from time to time, and may change it without our knowledge. This circuit breaker effectively acts to limit the upward and downward movements in the price of our Shares. As a result of this circuit breaker, we cannot make any assurance regarding the ability of our shareholders to sell their Shares or the price at which such shareholders may be able to sell their Shares.
You may be subject to Indian taxes arising out of capital gains on the sale of the Shares. Capital gains arising from the sale of Shares are generally taxable in India.
Any gain realized on the sale of the Shares on an Indian stock exchange held for more than 12 months will not be subject to capital gains tax in India if the securities transaction tax has been paid on the transaction. The securities transaction tax will be levied on and collected by the Indian stock exchange on which the Shares are sold. Any gain realized on the sale of Shares held for more than 12 months on which no securities transaction tax has been paid, will be subject to capital gains tax in India. Furthermore, any gain realized on the sale of the Shares held for a period of 12 months or less will be subject to capital gains tax in India. See Item 10.E Additional InformationTaxationTaxation of Capital Gains and LossesIndian TaxationCapital Gains of this annual report on Form 20-F for further information on the application of capital gains tax in India to our shareholders and ADS holders.
|Item 4.||Information on the Company|
We were 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 we received a certificate of commencement of business on November 20, 1945. Our 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. 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, when we started producing passenger vehicles as well. Together with our consolidated subsidiaries we form the Tata Motors Group.
In June 2008, we acquired the Jaguar Land Rover business from Ford Motor Company. Jaguar Land Rover is a global automotive business, which designs, manufactures and sells Jaguar luxury sedans and sports cars 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 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.
In September 2004, we became the first company from Indias automotive sector to be listed on the New York Stock Exchange. Our ADSs are traded on the NYSE under the symbol TTM. Our 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., or NSE, under the symbols TATAMOTORS and TATAMTRDVR, respectively.
We offer a broad portfolio of automotive products, ranging from sub-1 ton to 49 ton GVW, trucks (including pickup trucks) to small, medium, and large buses and coaches to passenger cars, including the worlds most affordable carthe Tata Nano, premium luxury cars and SUVs.
We have a substantial presence in India and also have global operations in connection with production and sale of Jaguar and Land Rover brand passenger vehicles. We are the largest commercial vehicle manufacturer in terms of revenue in India and among the top six passenger vehicle manufacturers in terms of units sold in India during Fiscal 2015. We estimate that over 8 million vehicles produced by us are being operated in India as of the date of this annual report on Form 20-F.
We operate six principal automotive manufacturing facilities in India: at Jamshedpur in the state of Jharkhand, at Pune in the state of Maharashtra, at Lucknow in the state of Uttar Pradesh, at Pantnagar in the state of Uttarakhand, Sanand in the state of Gujarat and at Dharwad in the state of Karnataka. We also operate three principal automotive manufacturing facilities in the United Kingdom through our Jaguar Land Rover business: at Solihull and Castle Bromwich in the West Midlands and at Halewood in Liverpool. Jaguar Land Rover also recently opened its inaugural overseas manufacturing facility in China with its joint venture partner, Chery Automobile Company Ltd., with the Range Rover Evoque the first model built there. Our Jaguar Land Rover business also includes an engine manufacturing center at Wolverhampton in the West Midlands, where, in Fiscal 2015, it began to build the new family of Ingenium engines. Jaguar Land Rover also has two advanced design and engineering facilities located at Whitley in Coventry and at Gaydon in South Warwickshire.
We have 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 (earlier called Fiat Group Automobiles S.p.A., Italy), or the Fiat Group. Together with FCA Italy SPA, 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 Fiat Linea, Fiat Punto, Tata Indica, Tata Indica Vista 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, or RFA. Under the RFA:
The joint venture shall manufacture and assemble Fiat 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 shall continue in accordance with current terms.
The distribution company, owned by Fiat Group, shall be 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, or the Thonburi Group, to manufacture pickup trucks in Thailand. As at March 31, 2015, we own 95.28% of the joint venture, while the Thonburi Group owns the remaining 4.72%. 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, we acquired an 80% equity interest in Trilix Srl., or Trilix, a design and engineering company, in line with our objective to enhance our styling/design capabilities to meet global standards. 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. In the two years since making this move, Trilixs sales and profits have increased by over 12% per year
Jaguar Land Rover is committed to its joint venture with Chery, which opened a factory in Changshu, China in October 2014 and recently began manufacturing the Range Rover Evoque. The total investment in the joint venture is expected to be approximately RMB 10.9 billion which is being contributed towards the establishment of the manufacturing plant, R&D center and engine production facility. Jaguar Land Rover is committed to invest RMB 3.5 billion of equity capital in the joint venture company, representing a 50% of the share capital and voting rights of the joint venture company.
In December 2013, Jaguar Land Rover signed an agreement to invest approximately GBP 240 million, in a production facility in Rio de Janeiro in Brazil with an annual production capacity of 24,000 units. The foundation stone of this manufacturing facility was laid in December 2014 and the Land Rover Discovery Sport was named as one of the first vehicles to be manufactured at the new facility in Brazil with production expected to commence in 2016.
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 Rovers growth plans. We believe that Magna Steyr has extensive contract manufacturing expertise working with many other car manufacturers globally.
Please see Item 4.B Business OverviewOur StrategyCapital and Product Development Expenditures and Item 5.B Operating and Financial Review and ProspectLiquidity and Capital ResourcesCapital Expenditures of this annual report on Form 20-F for details on our principal capital expenditures.
Through our other 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, or TTL, our 72.32% owned subsidiary, is engaged in providing specialized engineering and design services, product lifecycle management, or PLM, and product-centric IT services to leading global manufacturers. TTLs customers are among the worlds premier automotive, aerospace and consumer durables manufacturers. TTL had 14 subsidiary companies and one joint venture as at March 31, 2015.
TML Distribution Company Limited, or TDCL, our 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.
Our wholly-owned subsidiary, Tata Motors Finance Limited, or 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 Non-Banking Financial Company, or NBFC, and is classified as an Asset Finance Company under the RBIs regulations on NBFCs. In Fiscal 2015, TMFL has 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 or TMFSL. TMFSL will focus on the used vehicle financing business.
Our wholly-owned subsidiary, Tata Motors Insurance Broking and Advisory Services Limited, or TMIBASL, is a licensed Direct General Insurance Broker with the Insurance Regulatory and Development Authority of India that operates in the Indian market and has plans to branch out globally to seek additional business opportunities. TMIBASL commenced business in Fiscal 2008 and provides end-to-end insurance solutions in the retail sector with a focus on the automobile sector. TMIBASL offers services to various OEMs in the passenger vehicle, commercial and construction equipment markets, including to us.
As at March 31, 2015, our operations included 72 consolidated subsidiaries, 2 joint operations, 3 joint ventures and 18 equity method affiliates, in respect of which we exercise significant influence.
As at March 31, 2015, we had approximately 73,485 permanent employees, including approximately 45,488 permanent employees at our consolidated subsidiaries and joint operations.
Tata Incorporated serves as our authorized United States representative. The address of Tata Incorporated is 101 Park Avenue, New York, NY 10178, United States of America.
Our Registered Office is located at Bombay House, 24, Homi Mody Street, Mumbai 400 001, India. Our telephone number is +91-22-6665-8282 and our website address is www.tatamotors.com. Our website does not constitute a part of this annual report on Form 20-F.
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 and Europe as well as in emerging markets, including China, Russia and Brazil. 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.
Our business segments are (i) automotive operations and (ii) all other operations. Our automotive operations include all activities relating to development, design, manufacture, assembly and sale of vehicles including financing thereof, as well as sale of related parts and accessories. We provide financing for vehicles sold by dealers in India. The vehicle financing is intended to encourage sales of vehicles by providing financing to the dealers customers and as such is an integral part of our automotive business. Our automotive operations segment is further divided into Tata and other brand vehicles (including financing thereof) and Jaguar Land Rover. Tata and other brand vehicles consist of vehicles manufactured under our Tata, Daewoo and Fiat brands, and excludes vehicles manufactured by our Jaguar Land Rover operations.
We produce a wide range of automotive products, including:
Passenger Cars: Our range of Tata brand passenger cars include the Nano, a micro, the Indica, the Vista, the Zest and the Bolt, which are compacts and the Indigo eCS and the Manza, which are 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 category under the Jaguar brand name. There are four car lines currently manufactured under the Jaguar brand name, including the F-TYPE two-seater sports car coupe and convertible (including all-wheel drive derivatives) the XF sedan (including the Sportbrake and all-wheel drive derivatives), the XJ saloon, and the new XE sports saloon, which commenced sales in May 2015.
Utility Vehicles: We manufacture a range of Tata brand utility vehicles, including the Sumo and the Safari, which are SUVs, the Xenon XT, a lifestyle pickup, the Tata Aria, a crossover, and the Venture, a multipurpose utility vehicle. We offer two variants of the Safari: the Dicor and the Storme. We also offer a variant of the Sumo, the Sumo Gold, and launched the new Movus in May 2014, which is an entry level UV. There are six car lines under the brands of Range Rover and Land Rover in the premium all-terrain vehicles categories: the Range Rover, Range Rover Sport, including the Range Rover Sport SVR, the Range Rover Evoque (available in 5-door and coupe versions), Land Rover Discovery, including the Discovery 4 which features 7-seat capacity, the Discovery Sport and the Defender, which will cease production in Fiscal 2016.
Light Commercial Vehicles: We manufacture a variety of light commercial vehicles, including pickup trucks and small commercial vehicles. This includes the Tata Ace, Indias first indigenously developed mini-truck, with a 0.75 ton payload with different fuel options, the Super Ace, with a 1-ton payload, the Ace Zip, with a 0.6 ton payload, including a CNG variant launched in Fiscal 2015, the Magic and the Magic Iris, including an electric variant, both of which are passenger variants for commercial transportation developed on the Tata Ace platform, and the Winger. In addition, we introduced a new generation of Ultra LCV trucks, including the Ultra narrow cab, in Fiscal 2015. We also offer the City Ride and Starbus ranges of buses.
Medium and Heavy Commercial Vehicles: We manufacture a variety of medium and heavy commercial vehicles, which include trucks, tractors, buses, tippers, and multi-axled vehicles, with GVWs (including payload) of between 8 tons and 49 tons. In addition, through Tata Daewoo Commercial Vehicles Co. Ltd., or 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 Prima line of trucks is aimed at its customers in India and South Korea, and we have extended the Prima line by offering Prima LX and multi-axle truck variants. We expect to gradually export our Prima products to other countries such as South Africa, Russia, the other South Asian Association for Regional Cooperation countries, the Middle East and various countries in Africa. We also offer a range of buses, which includes the Divo Coach, 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.
Our other operations business segment includes information technology, or IT services and machine tools and factory automation solutions.
We believe that we have established a strong position in the Indian automobile industry by launching new products, investing in research and development, strengthening our financial position and expanding our manufacturing and distribution network. We have pursued the strategy of increasing our presence in the global automotive markets and enhancing our product range and capability through strategic acquisitions and alliances. Our goal is to position ourselves as a major international automotive company by offering products across various markets by combining our engineering and other strengths as well as through strategic acquisitions. Our strategy to achieve these goals consists of the following elements:
Continued focus on new product development
Our recent product launches and anticipated product launches include the following:
Zest: In August 2014, we launched the Zest, a sub-four meter compact sedan. It is manufactured at the Pimpri and Ranjangaon plants in Pune, India.
Bolt: In January 2015, we announced the launch of a sporty hatchback, the all-new Bolt, which is manufactured at the Pimpri plant in Pune, India.
SuperAce Mint: The Tata Ace family of mini trucks offers last mile cargo transport solutions. With the launch of the SuperAce Mint in March 2015, we aim to penetrate further into the small pick-up market.
Xenon and Prima: In January 2015, we launched new-generation Xenon and Prima commercial vehicles in the Malaysian market, with our partner DRB-HICOM Commercial Vehicles. Furthermore, in Fiscal 2015, we launched the Prima in South Africa, Oman, Dubai and the South Asian Association for Regional Cooperation, or SAARC, countries as well. We extended the Prima LX range of trucks with new variants of multi-axled trucks.
Buses: We have developed new bus models for the Jawaharlal Nehru National Urban Renewal Mission II scheme in India in the standard, mini and mid categories
Ultra: In Fiscal 2015, we launched the Ultra range of trucks in light commercial vehicle and intermediate commercial vehicles categories, which offers superior technology and design that we believe ensures the lowest total cost of ownership through higher uptime because of increased driver comfort, superior aggregates and customized requirements.
Land Rover Discovery Sport: In September 2014, Jaguar Land Rover revealed to the market the new Discovery Sport, a versatile premium compact sport utility vehicle that is the first member of the new Discovery family. Sales of the new Land Rover Discovery Sport have been underway since early 2015. Starting in Fiscal 2016, the Discovery Sport will feature Jaguar Land Rovers Ingenium engines.
Range Rover Evoque: In February 2015, Jaguar Land Rover began sales of the locally-manufactured Evoque through its joint venture with Chery in China. The 2016 Range Rover Evoque made its world debut at the Geneva Motor Show in March 2015 and is the first model from Jaguar Land Rover to feature full-LED adaptive headlamp technology. The 2016 model year Evoque will feature the new 2.0 liter Ingenium diesel engine which will go on sale later this year.
Range Rover Evoque Convertible: The Range Rover Evoque Convertible, which features a refreshed exterior and the new 2.0 liter Ingenium diesel engine, is expected to go on sale in Fiscal 2016.
Jaguar XE: The Jaguar XE made its global debut at the 2014 Paris Auto Show and went on sale in May 2015. The XE is being manufactured at a new purpose-built production facility at our Solihull plant in the UK, and it is the first aluminum monocoque vehicle in the midsize vehicle category. The Jaguar XE will feature Jaguar Land Rovers new Ingenium engines.
Jaguar XF: The 2016 Jaguar XF made its official world debut at the 2015 New York International Auto Show on April 1, 2015. As with other new Jaguar models, the XF features strengthened, lightweight aluminum-intensive construction. It is anticipated to go on sale during Fiscal 2016. The XFR-S was introduced at the 2014 model year and was Jaguar Land Rovers fastest ever sports saloon, powered by a 5.0-liter supercharged V8 engine. The XFR-S Sportbrake and the XFR-Sport joined the fleet at the 2015 model year.
Jaguar F-PACE: The Jaguar F-PACE performance crossover is based on the C-X17 Concept Vehicle, which was revealed to the market at the Frankfurt Motor Show in 2013. It is intended to be an ultimate practical sports car and to offer a combination of Jaguar sports car-inspired exterior design and a practical and spacious luxury interior. The F-PACE will utilize the same aluminum-intensive architecture as the Jaguar XE.
Range Rover Sport SVR: The Range Rover Sport SVR, which debuted in the United States in August 2015, is the first Land Rover produced from the high performance special operations division and is also the fastest Land Rover ever powered by the 5.0 liter V8 petrol engine, reaching 0-60 mph in just 4.5 seconds and a top speed of 162 mph.
Our research and development focuses on developing and acquiring the technology, core competences and skill sets required for the timely delivery of our envisaged future product portfolio with industry-leading features across our range of commercial and passenger vehicles. For the passenger vehicle product range, our focus is on stunning design, driving pleasure and connected car technologies. For the commercial vehicle product range, our focus is on enhancing fuel-efficiency and minimizing the total cost of ownership. 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 alternate fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen.
We have plans to expand the range of our product base further supported by our strong brand recognition in India, our understanding of local consumer preferences, in-house engineering capabilities and extensive distribution network. With 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.335,771 million, Rs.272,832 million and Rs.212,078 million during Fiscal 2015, 2014 and 2013, respectively and we currently plan to invest approximately Rs.338 billion in Fiscal 2016 in new products and technologies.
Jaguar Land Rover has aimed to enhance its technological strengths through in-house R&D activities, including the development of its engineering and design centers which centralize Jaguar Land Rovers capabilities in product design and engineering. Furthermore, Jaguar Land Rover 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 Governments Technology Strategy Board.
Leveraging our capabilities
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 Centre, or ERC, established in 1966, has enabled us to successfully design, develop and produce our own range of vehicles. Jaguar Land Rovers research and development operations are built around engineering facilities that feature an extensive test track, testing centers, design hubs and a recently inaugurated 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, we have a wholly-owned subsidiary, Tata Motors European Technical Centre PLC, or 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 of M&HCVs, including the Prima, both for civilian and defense applications, 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 throughout the decades and in Fiscal 2015, we celebrated 60 years of truck manufacturing at our first manufacturing and engineering facility in Jamshedpur.
Jaguar Land Rover aims to invest substantially to develop new products in new and existing segments by introducing new powertrains and technologies that satisfy both customer preferences and regulatory requirements. Complementing this, Jaguar Land Rover invests in manufacturing capacity in the United Kingdom and internationally to meet customer demand. In line with other premium automotive manufacturers Jaguar Land Rover aims to maintain an allocation of 10 to 12% of revenue on capital expenditure. However, in Fiscal 2016, we anticipate that Jaguar Land Rover will make higher capital spending in order to take advantage of growth opportunities. For Fiscal 2016, capital expenditure at Jaguar Land Rover is expected to be approximately GBP 3.6 billion to GBP 3.8 billion (approximately Rs.332.8 billion to Rs.351.3 billion), allocated approximately 40% for R&D and 60% for expenditure on tangible fixed assets such as facilities, tools and equipment as well as investment in our China joint venture.
In October 2014, Jaguar Land Rover opened its Engine Manufacturing Centre at Wolverhampton, in the West Midlands. The plant currently manufactures the 2.0-liter Ingenium diesel engine first introduced into the Jaguar XE and it is expected to produce a 2.0-liter petrol Ingenium engine. We believe that the Wolverhampton facility is ideally located between Jaguar Land Rovers three principal UK manufacturing sites at Halewood, Castle Bromwich and Solihull. The total investment in the Engine Manufacturing Centre was approximately GBP 500 million and we expect that the plant will eventually employ almost 1,400 people.
Continuing focus on high quality and enhancing customer satisfaction
One of our principal goals is to achieve international quality standards for our products and services. We have established a procedure for ensuring quality control of outsourced components. Products purchased from approved sources undergo a supplier quality improvement process. 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.
We have established a comprehensive purchasing and quality control system that is designed to consistently deliver quality products and services. 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 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. In India, we improved our J.D. Power Asia Pacific 2014 India Customer Service Index (CSI) Study score to 834 in 2014 from 799 in 2013, and are the second-most improved company with an increase of 35 points. Overall, we moved up from the sixth ranking last year to the fourth ranking in that survey. Additionally, we won several awards at the Apollo CV awards in January 2015, with the Ultra 812 winning Commercial Vehicle of the Year & LCV Carrier of the Year and our Prima LX 2523.T winning MCV Cargo Carrier of the Year.
Jaguar and Land Rover received over 220 awards from leading international motoring writers, magazines and opinion leaders between 2014 and early 2015, reflecting the strength of our model line-up and our design and engineering capabilities. The following table sets out certain of these awards received in 2014 and early 2015.
|Best Luxury SUV||Range Rover||What Car?||January 2015|
|Best Car of the Year||Range Rover Sport||Car||January 2015|
|Small SUV||Range Rover Evoque||What Car? Car of the Year |
|Safety Award||Land Rover Discovery Sport||What Car?||January 2015|
|First in Middle Class Segment||Jaguar XE||Best Cars 2015 Award||January 2015|
|Best Coupe||Jaguar F-TYPE||Auto Express New Car |
|Cabriolet of the Year||Jaguar F-TYPE||BBC Top Gear Awards||February 2014|
|Executive Car of the Year||Jaguar XF||Business Car Awards||January 2014|
|Best Imported Car of the Year||Jaguar XJ||dayoo.com||November 2014|
|Queens Award for Enterprise in International Trade||Jaguar Land Rover||Her Royal Highness the |
|Best Car Styling Luxury Brand||Jaguar||Kelley Blue Book||April 2014|
|Automotive Performance, Execution and Layout||Land Rover||J.D. Power and Associates||September 2014|
Our strategy is to invest in products and technologies that position our products ahead of expected stricter environmental regulations and ensure that we benefit from a shift in consumer awareness of the environmental impact of the vehicles consumers drive. Our environmental vehicle strategy focuses on new propulsion technology, weight reduction and reducing parasitic losses through the driveline. We have developed diesel hybrid versions of the Range Rover and Range Rover Sport without compromising the vehicles off-road capability or load space. We believe we are a global leader in the use of aluminum and other lightweight materials to reduce vehicle weight and improve fuel and CO2 efficiency, and we believe we are ahead of many of our competitors in the implementation of aluminum construction. We plan to continue to build on this expertise and extend the application of aluminum construction as we develop a range of new Jaguar products, including the new Jaguar XE and the recently announced Jaguar performance crossover, the F-PACE. Recognizing the need to use resources responsibly, produce less waste and reduce our carbon footprint, we are also taking measures to reduce emissions, waste and the use of natural resources in all of our operations. We are also developing more efficient powertrains and other technologies. This includes smaller and more efficient diesel and petrol engines, stop-start and hybrid engines, starting with a state-of-the-art high-efficiency diesel hybrid engine now on offer in the Range Rover and Range Rover Sport and the introduction of our own Ingenium four cylinder (2.0-liter) engines from 2015, which will first be installed in the new Jaguar XE.
Our current product line-up is the most efficient it has ever been. The most efficient version of the Range Rover Evoque emits less than 130 g/km of CO2. The all-aluminum Jaguar XJ 3.0 V6 twin-turbo diesel has CO2 emissions of 159 g/km. The 3.0-liter TDV6 Range Rover offers similar performance to the previous 4.4-liter TDV8 Range Rover while fuel consumption and CO2 emissions have been reduced (now 196 g/km). The 2.0-liter turbocharged petrol engine options in the Range Rover Evoque and the Jaguar XF and XJ also offer improved fuel efficiency. Equipped with stop-start and an eight-speed automatic transmission, the XF 2.2-liter diesel was further improved for 2014 Model Year with CO2 emissions cut to 129 g/km. In addition, we launched our first hybrid electric vehicles in the Range Rover and Range Rover Sport 3.0L TDV6 Hybrid with emissions of 169 g/km. The new Jaguar XE will be the most fuel-efficient Jaguar yet with expected fuel consumption and CO2 emissions on the NEDC combined cycle of 76 mpg and 99g/km, respectively. The new Discovery Sport will be launched with a range of four-cylinder turbocharged petrol and diesel engines. The all-alloy Si4 2.0-liter petrol engine, a 2.2-liter turbo diesel engine featuring stop-start technology and a highly efficient ED4 turbo diesel engine with expected CO2 emissions of just 119g/km will also join the range later in 2015.
We are also taking measures to reduce emissions, waste and the use of natural resources from all of our operations. We recognize the need to use resources responsibly, produce less waste and reduce our carbon footprint. We have reduced our energy use per vehicle by nearly 30% from 2007 levels. We have implemented life cycle techniques so that we can evaluate and reduce our environmental footprint throughout the value chain. We have been certified to the international environmental management standard, ISO 14001, since 1998. As part of our integrated CO2 management strategy, we have one of the largest voluntary CO2 offset programs. Through CO2 offset schemes, we offset all our own UK manufacturing assembly CO2 emissions.
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/fixtures in order to reduce the impact of cyclicality of the automotive industry.
Expanding our international business
Our international expansion strategy involves entering new markets where we have an opportunity to grow and introducing 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 and Middle East markets such as Kenya, Nigeria, Tanzania, Saudi Arabia, UAE and Qatar in addition to maintaining 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, where in the past 18 months we entered Indonesia, Malaysia, and the Philippines, and also in Australia.
We have also expanded our range through acquisitions and joint ventures. Our acquisition of Jaguar Land Rover expanded our geographical presence significantly. 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. We intend to build upon the internationally recognized brands of Jaguar Land Rover. TDCV continues to be the largest exporter of heavy commercial vehicles from South Korea. Our joint venture with the Thonburi Group, Tata Motors (Thailand) Limited, is also focusing on increasing its geographical reach by introducing Thailand manufactured pickup trucks in other Asian markets. Thailand-produced pickup trucks were introduced in Malaysia in beginning of 2015. 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 domestic South African market and, in Fiscal 2015 sold 839 chassis.
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 vehicle and passenger vehicle 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 it is advantageous for us to do so, we intend to add our existing low-cost engineering and sourcing capability to Jaguar Land Rover vehicles.
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.
We have intensified efforts to review and realign our cost structure through a number of measures such as reduction of manpower costs and rationalization of other fixed costs. Our Jaguar Land Rover business continues to focus on cost management initiatives such as streamlining its purchasing processes and building on its strong relationships with suppliers while increasing employee deployment and flexibility across its sites. In addition, our Jaguar Land Rover business continues to increase its use of its new modular aluminum architecture across vehicle platforms, which we expect will result in common technology use across products lines and a reduction in engineering complexity.
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
With financing a critical factor in vehicle purchases and in light of the rising aspirations of consumers in India, we intend to expand our vehicle financing activities to enhance our vehicle sales. In addition to improving its competitiveness in customer attraction and retention, we believe that expansion of its financing business would also contribute towards moderating the impact on our financial results from the cyclical nature of vehicle sales. To spur growth in the small commercial vehicles category, we have teamed up with various public sector and cooperative banks and Grameen banks to introduce new finance schemes. TMFL has increased its reach by opening a number of limited services branches in tier 2 and 3 towns. This has reduced turn-around times and, we believe, improved customer satisfaction. TMFLs channel finance initiative and fee-based insurance support business have also helped improve profitability.
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 continue to invest in new technologies to develop products that meet the opportunities of the premium market, including developing sustainable technologies to improve fuel economy and reduce CO2 emissions. 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 2015 and 2014 was Rs.365,401 million and Rs.371,432 million, respectively. Our operating cash flows are primarily due to our Jaguar Land Rover business, 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.
Leveraging brand equity
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 Indica, Indigo, Sumo, Safari, Aria, Venture, Nano, Ace, Magic and Prima, Daewoo, Jaguar, Range Rover and Land Rover are highly regarded, which we intend to continue to nurture and promote. At the same time, we will continue to build new brands such as the newly launched Ultra range of LCVs, the Zest and the Bolt to further enhance our brand equity.
Our commercial vehicle initiative, Project Neev, provides a growth program for rural India designed to promote self-employment. Local, unemployed rural youth have been enrolled and trained to work from homes as promoters of our commercial vehicles. Project Neev is currently operational in twelve states of India and has engagement in 365 districts and 2,981 sub-districts, which covers more than 427,000 villages. The rural penetration drive initiated through Project Neev has deployed an approximately 5,000 member dedicated team and 600 dedicated rural outlets in towns and villages with populations of less than 50,000. More than 71,144 small commercial vehicles have been sold since the commencement of this program, to which we attribute a 20% increase in volumes of small commercial vehicle sales. Project Neev currently completed its fourth wave of expansion, and we anticipate that it will operate in all major states across the country within the next couple of years. This program has been appreciated and recognized in various forums such as Rural Marketing Association of India Flame Awards for excellence in the field of rural marketing.
In Fiscal 2015, we launched Truck World: Advanced Trucking Expo, an exposition which showcases our offering of medium and heavy commercial vehicles, alongside our own service-related brands such as Tata Genuine Parts, Tata Delight and Tata FleetMan.
Another initiative through our commercial vehicles business is TATA-OK. TATA-OK seeks to promote our commercial vehicles by capturing new customer segments (such as economical and used vehicle buyers), promoting the sale of new vehicles through the exchange of used commercial vehicles at our dealerships, increasing the resale value of its commercial vehicles products, and facilitating deeper customer engagement and thereby promoting brand loyalty. TATA-OK has completed four years of operation, including a pilot year, with retailed over 10,600 transactions in Fiscal 2015 through over 220 retailers.
We offer a variety of support products and services for its customers. Tata FleetMan, our telematics and fleet management service, is designed to enable the commercial sector to boost productivity and profitability. With the goal of bringing the most advanced technology in this area to its customers, we have entered into a partnership with UK-based Microlise Limited to introduce global standards of telematics and fleet management solutions into the Indian logistics and transport industry, to enhance Tata FleetMans telematics systems through upgrades of the underlying technology and to develop the next generation of fleet telematics solutions for the Indian transport industry.
In Fiscal 2014, we expanded the Tata Alert service across all national highways. Tata Alert provides breakdown assistance by promising to respond to the breakdown site within four hours of notification and to return the vehicle to the road within 48 hours. This was coupled with the introduction of new services such as the Tata On-site service and parts support through the use of container workshops. These workshops are an onsite service support system that deploy a container on site which houses the repair equipment while the repairs are done in the open. In addition, we offer an on-demand AMC (annual maintenance contracts) service, which provides customized AMC support for significant customers, such as large fleet owners.
We offer triple benefit insurance products for certain of our commercial vehicles which provide coverage for zero depreciation, loss of revenue, and replacement for total loss in case of accident. We offer a warranty of 4 years/4 lakh (which is 400,000) kilometers on drivelines for its entire range of heavy trucks with 25 tons and higher GVW and extended the same to its 16T GVW truck range, effective from March 2014 onwards.
In order to cultivate safe practices of school bus riders, promote our brand image and build connections with school bus riders and stakeholders such as children, parents and school authorities, in Fiscal 2013 we organized the Dream it to Win it school bus campaign across 2,070 schools in 11 cities across India. In light of positive responses received to the campaign, in Fiscal 2014 this campaign was further extended to 1,967 schools across 22 Indian cities. Through this event, students from different regions were educated on safety while travelling in school buses. Our flagship safety program, Humare Bus Ki Baat Hain, won several accolades in Fiscal 2015, such as Global Marketing Excellence Awards and Brand Excellence Awards in the Sustainable Marketing Excellence and Effective Use Of Marketing Communication categories from World Marketing Congress, and has reached out to over 15,000 school bus staff on school bus safety. In Fiscal 2015, we launched Tata SKOOLMAN, a student and school bus safety initiative, which is a telematics-based tracking solution, as a standard accessory for Tata Ultra range of school buses.
We also organized the Prima Truck Racing Championship Season 2, which drew in over 45,000 spectators.
In January 2015, in the SIAM International Bus & Utility Vehicles Show, at Greater Noida, we showcased the Tata articulated bus, among other vehicles. The articulated bus upholds one of Tata Motors core values of developing environment-friendly and efficient products for public and private transportation. Articulated buses have a signature single-deck design comprising two rigid sections linked by a pivoting joint.
Overview of Automotive Operations
We sold 997,550, 1,020,546 and 1,192,742 units in Fiscal 2015, 2014 and 2013, respectively, consisting of 524,522 units of Tata and other brand vehicles and 473,028 units of Jaguar Land Rover vehicles in Fiscal 2015. In terms of units sold, our largest market is India where we sold 461,513 and 527,378 units during Fiscal 2015 and 2014 (constituting 46.3% and 51.7% of total sales in Fiscal 2015 and Fiscal 2014, respectively), followed by China where we sold 119,310 units and 103,910 units in Fiscal 2015 and 2014, respectively (constituting 12.0% and 10.2% of total sales in Fiscal 2015 and 2014, respectively). A geographical breakdown of our revenue is set forth in Item 5.A Operating ResultsGeographical breakdown.
Our total sales (including international business sales, Jaguar Land Rover sales and sales by our joint venture with Chery) in Fiscal 2015, 2014 and 2013 are set forth in the table below:
|Year ended March 31,|
Light Commercial Vehicles
Medium and Heavy Commercial Vehicles
Tata and other brand vehicles
The following table sets forth our total sales of Tata and other brand vehicles:
|Year ended March 31,|
Light Commercial Vehicles
Medium and Heavy Commercial Vehicles
Our overall vehicle sales for Tata and other brand vehicles decreased by 10.9% to 524,522 units in Fiscal 2015 from 588,657 units in Fiscal 2014. However revenue attributable to Tata and other brand vehicles (before inter-segment elimination) increased by 2.8% to Rs.447,218 million in Fiscal 2015, compared to Rs.435,012 million in Fiscal 2014.
India is the major market for Tata and other brand vehicles. In India, due to higher spending on gross capital formation, slowing inflation, and lowering interest rates and crude oil price compared to the previous fiscal year, some sectors of the economy have started showing signs of revival and higher growth. Both fiscal and current account deficits in India remained relatively stable, which contributed to overall economic growth.
In Fiscal 2015, the GDP of India increased by 7.3% as compared to an increase of 6.9% in Fiscal 2014, which reflects changes by the Ministry of Statistics and Programme Implementation in the GDP calculation methodology. Growth in Agriculture and Industry decreased in Fiscal 2015 by 1.1% as compared to 3.7% in Fiscal 2014 while growth in the services sector growth increased by 8.4% in Fiscal 2015 as compared to 11.1% in Fiscal 2014. Growth in the Index of Industrial Production, or IIP, has shown signs of revival based on increases in IIP between November 2014 to March 2015. The IIP increased by 2.8% in Fiscal 2015 as compared to a decrease of 0.1% in Fiscal 2014. Significant factors influencing IIP growth in Fiscal 2015 included a 1.4% increase in the mining sector in Fiscal 2015 compared to a decrease of 0.6% in Fiscal 2014 and an increase in the manufacturing sector of 2.3%, compared to a decrease of 0.8% in Fiscal 2014. However, consumer durables decreased by 12.5% in Fiscal 2015 as compared to a decrease of 12.2% in Fiscal 2014.
The Indian automotive industry witnessed growth during Fiscal 2015, compared to a contraction in the previous year. Lower interest rates and inflation in Fiscal 2015 compared to Fiscal 2014 contributed to an improvement in consumer sentiment, which in turn contributed to an increase in automobile purchases. Expectations of higher capital expenditures and revivals in the mining, quarrying and manufacturing sectors contributed to replacements of old vehicles in commercial fleets, which in turn contributed to growth in the domestic auto industry.
We sold 524,522, 588,657, and 820,686 units of Tata and other brand vehicles in Fiscal 2015, 2014 and 2013, respectively. Of the 524,522 units sold overall in Fiscal 2015, we sold 461,513 units of Tata and other brand vehicles in India while 63,009 units were sold outside of India, compared to 588,657 units and 61,279 units, respectively, in Fiscal 2014. Our share of the Indian four-wheeler automotive vehicle market, which consists of automobile vehicles other than two and three-wheeler categories, decreased from 16.5% in Fiscal 2014 to 14.1% in Fiscal 2015. We maintained our leadership position in the commercial vehicle category in the industry, which was characterized by increased competition during the year. The passenger vehicle market also continued to be subject to intense competition. A principal reason for the decline in volume of sales of Tata and other brand vehicles, mainly light commercial vehicles, is the lack of fund availability for potential customers. High default rates in loans alongside early delinquencies has led financiers to tighten lending norms, for example by lowering the loan-to-value ratio on new financings while focusing on collection of existing loans.
The following table sets forth our market share in various categories in the Indian market based on wholesale volumes:
|Year ended March 31,|
Light Commercial Vehicles3
Medium and Heavy Commercial Vehicles
Overall share of Four-Wheel Vehicles
Source: Society of Indian Automobile Manufacturers Report and the Companys internal analysis
Passenger Cars market share data includes sales of Fiat vehicles distributed by us and Jaguar Land Rover vehicles sold in India.
Utility Vehicles market share data includes the market share for Vans V1 category (i.e., Tata Venture) and excludes Vans V2 segment (i.e., Tata Ace Magic).
Light Commercial Vehicles market share data includes the market shares for Vans V2 category (i.e., Tata Ace Magic) in accordance with SIAMs classification of passenger vehicles.
Passenger vehicles in India
Industry-wide sales of passenger vehicles grew by 5.5% in Fiscal 2015 compared to a decline of 4.7% in Fiscal 2014. The growth in sales volumes was reflected across both passenger vehicle categories and was primarily attributable to reduced fuel prices, improved consumer sentiment, and lower interest rates. Hatchback sales remained flat, but sedans continued to show significant growth with new launches. The utility vehicle category has also shown growth, mainly with strong performances in softroad SUVs and multi-purpose vehicles.
Notwithstanding growth in the Indian passenger vehicle sector, our passenger vehicle sales in India decreased by 3.7% to 136,653 units in Fiscal 2015 from 141,846 units in Fiscal 2014, due to fewer new-product offerings by us compared to our competitors.
During Fiscal 2015, in the passenger car category, our sales increased by 1.2% to 119,203 units from 117,767 units in Fiscal 2014 primarily due to new model launches. Our overall market share of passenger cars in India was lower at 5.9% in Fiscal 2015 as compared to 6.1% during Fiscal 2014 primarily due to industry-wide competition and declining demand for diesel vehicles.
Our sales in the utility vehicles category decreased by 22.4% in Fiscal 2015 to 24,517 units from 31,583 units in Fiscal 2014. Our share in the overall utility vehicles category has declined mainly due to a lack of presence in the growing compact SUV and softroader categories resulting in our overall market share of utility vehicles in India decreasing to 4.4% in Fiscal 2015 from 5.5% during Fiscal 2014.
Commercial Vehicles in India
Sales of commercial vehicles in India decreased by 8.4% in Fiscal 2015 compared to a decrease of 22.4% in Fiscal 2014. However, in the fourth quarter of Fiscal 2015, sales of our commercial vehicles started to recover due to growth in the M&HCV category. In Fiscal 2015, we recorded commercial vehicle sales of 317,793 units as compared to 378,028 units in Fiscal 2014 a decrease of 15.9%.
Industry-wide sales in the M&HCV category increased by 15.9% in Fiscal 2015 as compared to a decrease of 25.2% in Fiscal 2014. Pending fleet replacements, a recent trend in gradual improvement in operating environment for fleet operators due to relatively higher freight rates, a correction in diesel prices, some improvement in cargo availability, market expectations of an increase in investments in infrastructure as well as manufacturing space and a renewal of mining and construction activities have contributed to the increase in M&HCV sales in Fiscal 2015.
In Fiscal 2015, our sales in the M&HCV category increased by 14.9% to 126,368 units in Fiscal 2015 from 109,987 units in Fiscal 2014 primarily due to an industry-wide increase in M&HCV sales.
Our overall market share of M&HCVs sales in India decreased to 54.4% in Fiscal 2015 from 54.9% in Fiscal 2014 primarily due to increased competition.
The increase in sales in the M&HCV category was offset by a continuing decrease of sales in the LCV category of 18.1% to 406,902 units in Fiscal 2015 from 496,993 units in Fiscal 2014. Demand in the light commercial vehicles category was affected due to lower freight transportation needs due to high-capacity additions to fleets over recent years, financing defaults and tightened lending norms, all of which continue to impede the recovery in sales of small commercial vehicles.
Our sales in the LCV category declined by 28.6% to 191,425 units in Fiscal 2015 from 268,041 units in Fiscal 2014 due to the factors affecting the LCV market industry wide. Our overall market share of LCV sales in India decreased to 47.0% in Fiscal 2015 from 53.9% during Fiscal 2014.
Tata and other brand vehiclesExports
We are expanding our export operations, which have been ongoing since 1961. We market our commercial and passenger vehicles in several countries in South Africa, Europe, Africa, the Middle East, South East Asia, Ukraine and Russia. We market a range of products including M&HCV trucks, LCV trucks, buses, pickups and small commercial vehicles. Our export business has also been bolstered by the entry into the ASEAN region, including Indonesia, Malaysia, Philippines as well as with the introduction of the new range of world class products Prima and Ultra in various markets during Fiscal 2015, which we anticipate offering in additional markets in Fiscal 2016.
Our overall sales in international markets increased by 2.8% to 63,009 units in Fiscal 2015 from 61,279 units in Fiscal 2014. Our exports of vehicles manufactured in India increased marginally by 2.1% in Fiscal 2015 to 47,961 units from 46,983 units in Fiscal 2014. The improvement of the geopolitical situation in the South Asian Association for Regional Cooperation region has contributed to an increase in investment in capital goods, which has helped us to improve volumes in this region generally, and particularly in Bangladesh. In addition, the launch of new models in the Middle East and Africa region, along with the opening up of new markets in this region contributed to an increase in international sales volumes. Our top five export destinations for vehicles manufactured in India, that is, Bangladesh, Sri Lanka, Nepal, South Africa and Indonesia, accounted for approximately 56% and 79% of the exports of commercial vehicles and passenger vehicles, respectively. 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.
TDCV, our subsidiary company engaged in the design, development and manufacturing of M&HCVs, recorded a 9.9% increase in its overall vehicle sales to 11,640 units in Fiscal 2015 from 10,594 units in Fiscal 2014. In the South Korean market, TDCVs sales have increased by 3.4% from 6,584 units in Fiscal 2014 to 6,808 units in Fiscal 2015, primarily due to higher sales in October to December 2014, prompted by emissions norms effective from January 2015. TDCV exported 4,832 units in Fiscal 2015, compared to 4,010 units in Fiscal 2014, an increase of 20.5%. Sluggish market conditions in Russia, South Africa, Algeria and Laos due to adverse sociopolitical conditions were partially offset by increases in sales volumes in Vietnam, the Philippines, and the UAE. The Ukraine crisis and financial sanctions contributed to sluggish market conditions in Russia, which affected currency exchange rates and lessened demand for automobiles and for new large projects. Overall sales in South Africa have been affected by the depreciation of the South African Rand and overall limited economic growth. In Algeria and Laos, vehicle demand has been affected by continued political and economic uncertainties, general economic conditions and the absence of major projects. In Vietnam, TDCV has been able to develop new fleet customers to take advantage of a shift in demand to more lightweight commercial vehicles due to stricter application of vehicle-weight regulations.
Tata and other brand vehiclesSales and Distribution
Our sales and distribution network in India as at March 2015 comprises approximately 3,904 contact points for sales and service for our passenger and commercial vehicle business. Our subsidiary, TML Distribution Company Limited, or TDCL, acts as a dedicated distribution and logistics management company to support the sales and distribution operations of our vehicles in India. We believe this has improved the efficiency of our selling and distribution operations and processes. We use a network of service centers on highways and a toll-free customer assistance center to provide 24-hour on-road maintenance, including replacement of parts, to vehicle owners.
TDCL provides distribution and logistics support for vehicles manufactured at our facilities and has set up stocking points at some of our plants and at different places throughout India. TDCL helps us improve planning, inventory management, transport management and timely delivery. We have completed the initial rollout of a new 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 and passenger vehicles in several countries in Africa, Middle East, South East Asia, South Asia, Australia, 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 and other brand vehiclesCompetition
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.
Tata and other brand vehiclesSeasonality
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 Indias 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 model year change.
Tata and other brand vehiclesVehicle Financing
Through our vehicle financing division and wholly owned subsidiary, TMFL, we also provide financing services to purchasers of our vehicles through our independent dealers, who act as our agents, and through our branch network. The vehicle financing is intended to encourage sale of vehicles by providing financing to the dealers customers and as such is an integral part of automotive business.
TMFL disbursed Rs.73,156 million and Rs.87,676 million in vehicle financing during Fiscal 2015 and 2014, respectively. During Fiscal 2015 and 2014, approximately 24% and 30%, respectively, of our vehicle unit sales in India were made by the dealers through financing arrangements where our captive vehicle financing divisions provided the support. Total vehicle finance receivables outstanding as at March 31, 2015 and 2014 amounted to Rs.158,016 million and Rs.185,275 million, respectively. As at March 31, 2015 and 2014 our customer finance receivable portfolio comprised 687,580 and 732,550 contracts, respectively. We follow specified internal procedures, including quantitative guidelines, for selection of our finance customers to assist in managing default and repayment risk in our portfolio. We originate all of the contracts through our authorized dealers and direct marketing agents with whom we have agreements. All our marketing, sales and collection activities are undertaken through dealers or by TMFL.
We securitize or sell our finance receivables on the basis of 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. We undertake these securitizations of our receivables in either or both of the following forms:
Assignment of the receivables due from purchasers under loan agreements; and
Securitization of receivables due from purchasers by means of private placement.
We act as 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. We also secure 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 to the investors collateral, in respect of the obligations of the purchasers and the undertakings to be provided by us;
Furnishing, in favor of the investors, 10.88% to 14.90% of the gross receivables as cash collateral, for securitizations done till Fiscal 2014, either by way of a fixed deposit or bank guarantee 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.
For further details see Note 36(b) to our consolidated financial statements included elsewhere in this annual report on Form 20-F.
Jaguar Land Rover
In Fiscal 2015, Jaguar Land Rover continued to grow in all of its geographic markets on an annual basis, although retail sales in China decreased by 20.4% in the fourth quarter of Fiscal 2015 compared to the same period in Fiscal 2014. Growth in volume has been driven by the continued success of the Range Rover, Range Rover Sport and the Jaguar F-TYPE. More established models such as the Range Rover Evoque and the Land Rover Discovery have also been performing well, however more mature products such as the Jaguar XF and XJ experienced lower sales in anticipation of the introduction of the all new Jaguar XE and the new Jaguar XF. Production of Jaguar XK and the Land Rover Freelander were terminated during the year, with the latter replaced by the Land Rover Discovery Sport.
Our total wholesale sales of Jaguar Land Rover in Fiscal 2015, 2014 and 2013 are set forth in the table below:
|Fiscal 2015||Fiscal 2014||Fiscal 2013|
Wholesale volumes in Fiscal 2015 increased by 9.5% to 473,028 units from 431,889 units in Fiscal 2014. Wholesale volumes for Land Rover in Fiscal 2015 increased by 12.4% to 394,945 units from 351,245 units in Fiscal 2014. The increase in sales occurred in a majority of models, most notably the Range Rover and Range Rover Sport, which was partially offset by the inventory shortages of the Freelander (which had ceased production) while Jaguar Land Rover initiated production of the Discovery Sport (which had recently commenced production). However, wholesale volumes for Jaguar in Fiscal 2015 decreased by 3.2% to 78,083 units from 80,644 units sold in Fiscal 2014. Increased sales of the Jaguar F-TYPE were offset by a fall in volume of the maturing Jaguar XF and XJ models in advance of the introduction of the Jaguar XE and the Jaguar XF.
The strengths of the Jaguar Land Rover business include its internationally recognized brands, strong product portfolio of award-winning luxury performance cars and premium all-terrain vehicles, global distribution network, strong research and development capabilities, and a strong management team.
Jaguar Land Rovers performance in key geographical markets on retail basis
Retail volumes in Fiscal 2015 increased by 6.4% to 462,209 units from 434,311 units Fiscal 2014. The overall increase in sales volumes was primarily due to strong sales of the Range Rover, Range Rover Sport and the Jaguar F-TYPE vehicles, which was partially offset by the lack of available Freelander inventory. For Land Rover, retail volumes increased by 8.9% to 385,279 units in Fiscal 2015 from 353,789 units in Fiscal 2014. However, for Jaguar, retail volumes in Fiscal 2015 decreased by 4.5% to 76,930 units from 80,522 units in Fiscal 2014, as increased sales of the Jaguar F-TYPE were offset by a decrease in volume of the maturing Jaguar XF and XJ models in advance of the introduction of the Jaguar XE and the all new Jaguar XF. Furthermore, retail sales volumes in China decreased by 20.4% in the fourth quarter of Fiscal 2015 compared to the same period in Fiscal 2014. Jaguar Land Rover exports increased by 6.9% to 378,427 units in Fiscal 2015 from 354,005 units in Fiscal 2014.
Industry vehicle sales rose by 7.5% in Fiscal 2015 in the United Kingdom compared to Fiscal 2014 as economic growth improved inflation and interest rates remained low and labor market conditions continued to strengthen. Jaguar Land Rover retail volumes increased by 13.1% to 86,750 units in Fiscal 2015 from 76,721 units in Fiscal 2014, with a strong sales performance from Jaguar, up 7.0% in Fiscal 2015, which was driven by sales of the Jaguar F-TYPE and the XF. Land Rover retail volumes increased by 14.8%, as all models experienced an increase in volumes, most notably the Range Rover Sport and the Discovery.
Economic performance in the United States continued to strengthen over the year as unemployment continued to fall, lower inflation driven by lower energy prices increased disposable incomes and consumer confidence continued to grow contributing to an industry-wide increase in passenger car sales of 6.8% in Fiscal 2015 compared to Fiscal 2014. Jaguar Land Rover retail volumes increased by 3.6% to 78,372 units from 75,671 units in Fiscal 2014, with a 9.5% increase in Land Rover retail volumes as Range Rover, Range Rover Sport and Range Rover Evoque continued to perform well. Jaguar volumes in North America decreased by 13.6% as sales of the aging XF and XJ decreased, which was partially offset by strong sales of the popular F-TYPE.
Passenger car sales increased by 5.5% industry-wide in Europe despite low growth, recessionary pressures and ambiguity over the Greek national debt negotiations, while quantitative easing announced by the European Central Bank in January 2015 has provided a boost in economic activity more recently. Jaguar Land Rover volumes in Europe increased by 6.0% to 87,863 units in Fiscal 2015 from 82,854 units in Fiscal 2014, with sales particularly strong in Germany, Italy and France. Land Rover volumes increased by 9.2% in Fiscal 2015 as sales of the Range Rover Sport and Range Rover grew significantly. Jaguar volumes decreased by 14.2% in Fiscal 2015, as sales of the aging XF sedan and Sportbrake decreased, which was partially offset by solid sales of the F-TYPE.
Despite continuing signs of softening in the Chinese economy during the year, GDP still grew over 7.0% and passenger car sales increased by 9.6%. Jaguar Land Rover retail volumes, which include sales from our joint venture with Chery increased by 12.5% to 115,969 units in Fiscal 2015 from 103,077 units in Fiscal 2014. However, in the fourth quarter of Fiscal 2015, retail sales of Jaguar Land Rover in China decreased by 20.4% to 23,526 units from 29,567 units compared to the same period in Fiscal 2014 due to inventory shortages of the Land Rover Freelander (which had ceased production) and the Land Rover Discovery Sport and the locally produced Range Rover Evoque (which had recently commenced production). This decline in retail sales of Jaguar Land Rover has continued in the first quarter of Fiscal 2016. Retail sales of Land Rover increased by 14.8% in Fiscal 2015 with sales of the majority of models up, most notably the Range Rover and Range Rover Sport, while Jaguar retail sales increased by 2.8% in Fiscal 2014, as both the XF and F-TYPE performed well.
The Asia Pacific region most notably comprises Australia, Japan and South Korea for purposes of our Jaguar Land Rover operations. Jaguar Land Rover retail volumes increased by 16.8% to 26,619 units in Fiscal 2015 from 22,795 units in Fiscal 2014, most notably in South Korea (increased by 46.7%) and in Australia (increased by 16.4%) as consumer demand for Jaguar Land Rover products continued to rise in these markets. Retail sales of the Range Rover, Range Rover Sport, Land Rover Discovery and Jaguar F-TYPE performed particularly well in the Asia Pacific region. Land Rover sales increased by 21.1% and Jaguar retail sales increased by 1.3% in Fiscal 2015.
Other overseas markets
Jaguar Land Rovers retail volumes in the other overseas markets declined by 9.0% to 66,636 units in Fiscal 2015 from 73,193 units in Fiscal 2014, primarily as a consequence of economic sanctions and low energy prices impacting Russia and slowing economic growth reducing consumer spending in Brazil and South Africa. Slowing economic growth and ongoing recessionary pressures in Brazil have contributed to a decrease in automotive sales industry-wide of 11.0% in Fiscal 2015 compared to Fiscal 2014, and Jaguar Land Rover sales volumes in Brazil have followed suit, decreasing 16.6% in Fiscal 2015 compared to Fiscal 2014. Continuing economic sanctions and softer energy prices have had an adverse effect on passenger car sales industry-wide in Russia, which decreased 17.7% in Fiscal 2015 compared to Fiscal 2014. Jaguar Land Rover sales, however, have fallen comparatively slower, decreasing 9.6% in Fiscal 2015 compared to Fiscal 2014, as Range Rover Sport continued to perform well and F-TYPE volumes increased. South Africas persistent slow growth continues to impact the automotive industry as passenger car sales fell by 1.7% in Fiscal 2015 compared to Fiscal 2014 and Jaguar Land Rover retail volumes dropped by 23.2% in Fiscal 2015 compared to Fiscal 2014.
We sold 2,873 units of Jaguar Land Rover vehicles in India through our exclusive dealerships in Fiscal 2015 as compared to 2,805 units in Fiscal 2014, an increase of 1.2%, which was aided by the manufacture of the Jaguar XF, Jaguar XJ and the Range Rover Evoque in India, as vehicles manufactured and sold in India are not subject to certain import duties. We expect that the continued efforts towards dealership network expansion and local manufacturing of Jaguar Land Rover products will enable us to further penetrate the premium/luxury automotive passenger car market in India.
Jaguar Land RoverSales & Distribution
Jaguar Land Rover markets products in 170 countries, through a global network of 19 national sales companies, 73 importers, 53 export partners and 2,674 franchise sales dealers, of which 915 are joint Jaguar Land Rover dealers, which operate independently. Jaguar Land Rover has regional offices in certain countries that manage customer relationships, 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 to retail customers through our global dealership network and to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. As a consequence, Jaguar Land Rover has a diversified customer base, which reduces its dependence on any single customer or group of customers.
Jaguar Land Rover has established business processes and systems designed to ensure that its production plans meet anticipated retail sales demand and to enable the active management of its inventory of finished vehicles and dealer inventory throughout its network. Jaguar Land Rover has multi-year exclusive branded arrangements in place with Black Horse (part of the Lloyds Bank Group) in the UK, FCA Bank (a joint venture between Fiat Chrysler Auto and Credit Agricole) in Europe and Chase Auto Finance in the United States for the provision of dealer and consumer financial services products. Jaguar Land Rover has similar arrangements with local automotive financial services providers in other key markets. Jaguar Land Rovers financing partners offer its customers a full range of consumer financing options.
Jaguar Land RoverCompetition
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 we are. Jaguar vehicles compete primarily against other European brands such as Audi, BMW and Mercedes Benz. Land Rover and Range Rover vehicles compete largely against SUVs manufactured by Audi, BMW, Infiniti, Lexus, Mercedes Benz, Porsche and Volkswagen. The Land Rover Defender competes with vehicles manufactured by Isuzu, Nissan and Toyota.
Jaguar Land RoverSeasonality
Jaguar Land Rover sales volume is impacted by the semi-annual registration of vehicles in the United Kingdom where the vehicle registration number changes every six months, which in turn has an impact on the resale value of the vehicles. This leads to a concentration of sales during the periods when the change occurs. Seasonality in most other markets is driven by introduction of new model year derivatives, for example in the U.S. market. Additionally in the U.S. market there is some seasonality around the purchase of vehicles in northern states where the purchase of Jaguar vehicles is concentrated in the spring /summer months, and the purchase of 4x4 vehicles is concentrated in the autumn/winter months. In China, there is an increase in vehicle purchases during the fourth fiscal quarter, which includes the Chinese New Year holiday. Furthermore, western European markets tend to be impacted by summer and winter holidays. The resulting sales profile influences operating results on a quarter-to-quarter basis.
In addition to our automotive operations, we are also involved in other business activities, including information technology services. Net revenues, before inter-segment elimination, from these activities totaled Rs.27,152 million, Rs.24,989 million and Rs.22,179 million in Fiscal 2015, 2014 and 2013, respectively, representing nearly 1.0%, 1.1% and 1.2% of our total revenues before inter-segment elimination in the corresponding Fiscal periods.
Information Technology Services
As at March 31, 2015, we owned a 72.32% equity interest in our subsidiary, TTL. TTL, founded in 1994 and a part of Tata Motors Group, provides product development IT services solutions for PLM and Enterprise Resource Management, or ERM, to automotive, aerospace and consumer durables manufacturers and their suppliers. TTLs 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 has its international headquarters in Singapore, with regional headquarters in the United States, India and the United Kingdom. In Fiscal 2014, TTL acquired Cambric Corporation, an engineering services organization, to achieve greater domain expertise and presence in the industrial equipment sector. TTL has a combined global workforce of around 7,804 professionals serving clients worldwide from facilities in the North America, Europe, and Asia Pacific regions. TTL responds to customers needs through its subsidiary companies and through its offshore development centers in India, Thailand and Romania. TTL had 14 functional subsidiary companies and one joint venture as at March 31, 2014.
The consolidated revenues of TTL increased by 10.3% in Fiscal 2015 to Rs.26,170 million (including sales to Tata Motors Limited and its consolidated subsidiaries) from Rs.23,724 million in Fiscal 2014 due to operations in the automotive and aerospace markets. TTL recorded profit after tax of Rs.3,349 million in Fiscal 2015, reflecting an increase of 26.8% over Rs.2,642 million in Fiscal 2014.
Research and Development
Over the years, we have devoted significant resources towards our research and development activities. Our research and product development costs in Fiscal 2015, 2014 and 2013 were Rs. 28,515.3 million, Rs. 25,651 million and Rs. 20,340 million, respectively. Our research and development activities focus on product development, environmental technologies and vehicle safety. In India, our Engineering Research Centre, or 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 integrated with all of the Tata Motors Global Automotive Product Design and Development Centers in South Korea, Italy and the United Kingdom. In addition to this, we leverage key competencies through various engineering service suppliers and design teams of its suppliers.
We have a new passenger car electrical and electronics facility for the development of hardware-in-the-loop systems, labcars and infotainment systems to achieve system and component integration. We have an advance engineering workshop, with a lithium-ion battery module, for the development of electric vehicle and hybrid products. We have a crash test facility for passive safety development in order to meet regulatory and consumer group test requirements and evaluate occupant safety, which includes a full vehicle-level crash test facility, a sled test facility for simulating the crash environment on subsystems, a pedestrian safety testing facility, a high strain rate machine and a pendulum impact test facility for goods carrier vehicles. This facility is also supported with computer-aided engineering infrastructure to simulate tests in a digital environment. Our safety development facilities also incorporate other equipment that we believe will help improve the safety and design of our vehicles, such as an emission labs engine development facility, a testing facility for developing vehicles with lower noise and vibration levels, an engine emission and performance development facility and an eight poster test facility that helps to assess structural durability of M&HCVs. In addition, we are installing a new engine noise test facility and transmission control unit which we expect will aid in powertrain development. Other key facilities include a full vehicle environmental testing facility, material pair compatibility equipment, corrosion test facility, heavy duty dynamometers and aggregate endurance test rigs.
Our product design and development centers aim to create a highly scalable digital product development and virtual testing and validation environment, targeting a reduction in product development cycle-time, improved quality and the ability to create multiple design options. Global design studios are key part of our product conceptualization strategy. We have aligned our end-to-end digital product development objectives and infrastructure with our business goals and have made significant investments to enhance our capabilities, especially in the areas of product development through computer-aided design, computer aided manufacturing, computer-aided engineering, knowledge-based engineering, product lifecycle management and manufacturing planning. In specific engineering review processes, such as digital mock-up and virtual build and validation, we have been able to provide capabilities for reduced time and increased quality in product designs. The design IP is managed through a product lifecycle management system, enabling backbone processes, and we have institutionalized issue tracking work-flow based systems in various domains to manage them effectively.
We have begun developing a technology platform for small electric vehicles with a GVW of one ton or greater with the National Automotive Board, SIAM and other OEMs. In addition, our research and development activities also focus on developing vehicles that consume alternative fuels, including CNG, liquefied petroleum gas, bio-diesel, compressed air and electricity. We are continuing to develop green-technology vehicles and are presently developing an electric vehicle on a small commercial vehicle platform. We are also pursuing alternative fuel options such as ethanol blending. Furthermore, we are working on development of vehicles fueled by hydrogen.
We are also pursuing various initiatives, such as the introduction of premium lightweight architecture, to enable our business to comply with the existing and evolving emissions legislations in the developed world, which we believe will be a key enabler of both reduction in CO2 and further efficiencies in manufacturing and engineering.
We have implemented initiatives in vehicle electronics, such as engine management systems, in-vehicle network architecture and multiplexed wiring. We are in the process of implementing electronic stability programs, automated and automatic transmission systems, telematics for communication and tracking, anti-lock braking systems and intelligent transportation systems. We have implemented new driver information technologies and high performance infotainment systems with IT enabled services. Likewise, various new technologies and systems including hybrid technologies that would improve the safety, performance and emissions of our product range and are being implemented in our passenger cars and commercial vehicles.
We are developing an enterprise-level vehicle diagnostics system with global connectivity in order to achieve faster diagnostics of complex electronics in vehicles in order to provide prompt service to customers. We are also developing prognostic data collection and analysis for failure prediction to the end customer. Furthermore, our initiative in telematics has spanned into a fleet management, driver information and navigation systems, and vehicle tracking system using global navigation satellite systems. We intend to incorporate Wi-Fi and Bluetooth interfaces in our vehicles to facilitate secure and controlled connectivity to third-party IT enabled devices.
Jaguar Land Rovers research and development operations are built around engineering facilities that feature an extensive test track, testing centers, design hubs and a recently inaugurated virtual innovation center. The ERC in India and Jaguar Land Rovers 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.
Jaguar Land Rovers two design and development centers are equipped with computer-aided design, manufacturing and engineering tools configured to support an ambitious 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 Rovers range of all-terrain vehicles. Jaguar Land Rovers R&D operations look for synergies through sharing premium technologies, powertrain designs and vehicle architecture. The majority of Jaguar Land Rovers products are designed and engineered in the United Kingdom. Jaguar Land Rover endeavors to implement the best technologies into its product range to meet the requirements of a globally competitive market and to comply with regulatory requirements. Jaguar Land Rover currently offers hybrid technology on some of its models such as the Range Rover and Range Rover Sport and conducts research and development related to the further application of alternative fuels and technologies to further improve the environmental performance of its vehicles, including the reduction of CO2 emissions.
We endeavor to absorb the best of technologies for our product range to meet the requirements of a globally competitive market. All of our vehicles and engines are compliant with the prevalent regulatory norms in the respective countries in which they are sold.
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 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, 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 and have pending applications for registration of these in India as well as 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 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 and other brand 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.
Our sourcing department in India has four divisions, namely, Purchasing, Supplier Quality, Supply Chain and Production and Planning Management or PPM. The reorganization was done with a view to establish and define responsibility and accountability in the sourcing department. Purchasing oversees the commercial aspects of product sourcing, Supplier Quality is primarily responsible for maintaining the quality of supplies that we purchase, Supply Chain oversees the logistics of the supply and delivery of parts for our vendors while PPM oversees execution of new projects.
As part of our strategy to become a low-cost vehicle manufacturer, we have undertaken various initiatives to reduce our fixed and variable costs. In India we started an e-sourcing initiative 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 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 vendors from whom we purchase raw materials or components to maintain quality. Preference is given to vendors 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 workers to reduce 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 vendor management program that includes vendor base rationalization, vendor quality improvement and vendor 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 our Jaguar Land Rover vehicles are steel and aluminum sheets, 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 systems such as seats, cockpits and doors, plastic finishers and plastic functional parts, glass and consumables, such as paints, oils, thinner, welding consumables, chemicals, adhesives and sealants, 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 long-term purchase agreements for critical components such as transmissions with ZF Friedrichshafen AG and for engines with Ford and the Ford-PSA Peugeot Citroën joint venture, or the Ford-PSA joint venture. The components and raw materials in Jaguar Land Rover cars include steel, aluminum, copper, platinum and other commodities. Jaguar Land Rover has established contracts with certain commodity suppliers, such as Novelis, to cover its own and its suppliers requirements to mitigate the effect of high volatility. Special initiatives are also undertaken to reduce material consumption through value engineering and value analysis techniques.
Jaguar Land Rover works with a range of strategic suppliers to meet their requirements for parts and components, and we endeavor to work closely with our suppliers to form short- and medium-term plans for our business. We have established quality control programs to ensure that externally purchased raw materials and components are monitored and meet our 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 the outside suppliers who design and manufacture the required tooling and fixtures. Such programs include site engineers who regularly interface with suppliers and carry out visits to supplier sites to ensure that relevant quality standards are being met. Site engineers are also supported by persons in other functions, such as program engineers who interface with new model teams as well as resident engineers located at Jaguar Land Rover plants, who provide the link between the site engineers and the plants. Jaguar Land Rover has in the past worked, and expect to continue to work, with its suppliers to optimize their procurements, including by sourcing certain raw materials and component requirements from low-cost countries.
Although we have commenced production of Ingenium four cylinder (2.0-liter) engines which will be installed in the Jaguar XE from 2015, at present we continue to source all of our engines from Ford or the joint venture between Ford and PSA on an arms-length basis.
We have an extensive supply chain for procuring various components. We also outsource many manufacturing processes and activities to various suppliers. In such cases, we provide training to external suppliers who design and manufacture the required tools and fixtures.
Our associate company, Tata AutoComp Systems Ltd., or TACO, manufactures automotive components and encourages the entry of internationally acclaimed automotive component manufacturers into India by setting up joint ventures with them.
Our other suppliers include some of the large Indian automotive supplier groups with multiple product offerings, such as the Anand Group, the Sona Group, and the TVS Group, as well as large multinational suppliers, such as Bosch, Continental, Delphi and Denso, Johnson Controls Limited for seats and Yazaki AutoComp Limited for wiring harnesses. We continue to work with our suppliers for our Jaguar Land Rover business to optimize procurements and enhance our supplier base, including for the sourcing of certain of our raw material and component requirements. In addition, the co-development of various components, such as engines, axles and transmissions also continue to be evaluated, which we believe may lead to the development of a low-cost supplier base for Jaguar Land Rover.
In India, we have established vendor parks in the vicinity of our manufacturing operations and vendor clusters have been formed at our facilities at Pantnagar and Sanand. This initiative is aimed at ensuring availability of component supplies on a real-time basis, thereby reducing logistics and inventory costs as well as reducing uncertainties in the long distance supply chain. Efforts are being taken to replicate the model at new upcoming locations as well as a few existing plant locations.
As part of our pursuit of continued improvement in procurement, we have integrated our system for electronic interchange of data with our suppliers. This has facilitated real time information exchange and processing, which enables us to manage our supply chain more effectively.
We have established processes to encourage improvements through knowledge sharing among our vendors through an initiative called the Vendor Council, which consists of our senior executives and representatives of major suppliers. The Vendor Council also helps in addressing common concerns through joint deliberations. The Vendor Council works on four critical aspects of engagement between us and the suppliers: quality, efficiency, relationships and new technology development.
We import some components that are either not available in the domestic market or when equivalent domestically-available components do not meet our quality standards. We also import products to take advantage of lower prices in foreign markets, such as special steels, wheel rims and power steering assemblies.
Ford has been and continues to be a major supplier of parts and services to Jaguar Land Rover. In connection with our acquisition of Jaguar Land Rover in June 2008, long-term agreements were entered into with Ford for technology sharing and joint development providing technical support across a range of technologies focused mainly around power train engineering so that we may continue to operate according to our existing business plan. Supply agreements, 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 from the Ford-PSA joint venture.
Following the global financial crisis and its cascading effect on the financial health of our suppliers, we have commenced efforts to assess supplier financial risk.
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.
Capital and Product Development Expenditures
Our capital expenditure totaled Rs.335,771 million, Rs.272,832 million and Rs.212,078 million during Fiscal 2015, 2014 and 2013, respectively. Our capital expenditure during the past three Fiscal years related primarily to new product development and capacity expansion for new and existing products to meet market demand as well as investments towards 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 expenditure 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.
Governmental Regulations in India
Automotive Mission Plan, 2006-2016
The automotive mission plan, or Plan 2006, promulgated by the Ministry of Heavy Industries and Public Enterprises of the Government of India in December 2006, consists of recommendations to the task force of the Development Council on Automobile and Allied Industries constituted by the Government of India in relation to the preparation of the mission plan for the Indian automotive industry. Plan 2006 recommends that a negative list of items, such as no duty concessions for the import of used or remanufactured vehicles, or treatment of remanufactured automotive products as old products, should be negotiated for free trade agreements or regional trade agreements, on a case-by-case basis with other countries. It recommends the adoption of appropriate tariff policies to attract more investment into the automobile industry, the improvement of power infrastructure to facilitate faster growth of the automotive sector both domestically and internationally, policy initiatives such as encouragement of collaboration between the automotive industry and research and academic institutions, tax concessions and incentives to enhance competitiveness in manufacturing and promotion of research and technology development. For the promotion of exports in the automotive components sector, among other things, it recommends the creation of special automotive component parks in special economic zones and the creation of virtual special economic zones, which would enjoy certain exemptions on sales tax, excise duty and customs duty. Other major recommendations of the plan include strengthening the inspection and certification system by encouraging public-private partnerships and rationalization of motor vehicles regulations.
A committee set up under the chairmanship of the Secretary of the Ministry of Heavy Industries and Public Enterprises consisting of all stakeholders, including representatives of the Ministry of Finance, and of other interested parties relating to road transport, the environment, commerce, industrial policy and promotion, labor, shipping, railways, human resource development, science and technology, new and renewable energy, petroleum and natural gas and the automotive industry, will monitor the implementation and progress of Plan 2006.
As of the date of this annual report on Form 20-F, Plan 2006 is being reviewed by Ministry of Heavy Industries and Public Enterprises of the Government of India.
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 & Policy 2025
The Ministry of Petroleum and Natural Gas constituted an expert committee under the Chairmanship of Shri Saumitra Chaudhuri, 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 sulphur to be made available from 2020 onwards. The draft report proposes nationwide Bharat Stage V emission norms for new 4 wheelers from model year 2020 and for all 4 wheelers from model year 2021. It also recommends Bharat Stage VI emissions norms from 2024 onwards. In April 2014, the expert committee submitted its recommendations to the committee empowered by the Ministry of Petroleum and Natural Gas, which has proposed the advancement of emission norms by one year earlier than the expert committees recommendations, which would result in the implementation of Bharat Stage V emission norms starting in model year 2019 and Bharat Stage VI emissions norms starting in model year 2023.
Central Motors Vehicles Rules, 1989
Chapter V of the Central Motor Vehicle Rules, 1989, or 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 compressed natural gas or CNG, gasoline, liquefied petroleum gas and diesel.
On and from the date of commencement of the CMV (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.
The existing CMV Rules would be replaced by the Road Transport and Safety Bill (RTSB) 2015, which is subject to legislative approval by the Parliament, which could expose us to additional liability for vehicle recalls and for manufacturers liability for our vehicles.
Emission and Safety in India
In 1992, the Government of India issued emission and safety standards, which were further tightened in April 1996, under the Indian Motor Vehicle Act. Currently Bharat Stage IV norms, which are equivalent to Euro IV norms, are in force for four-wheelers in 13 cities and Bharat Stage III norms, which are equivalent to Euro III norms, are in effect in the rest of India. Our vehicles comply with these norms. In 2014, the Ministry of Road Transport and Highways has extended Bharat Stage IV norms in 20 additional cities. In its draft GSR No.247 (E), dated April 1, 2015, the Ministry of Road Transport and Highways proposed the further extension of Bharat Stage IV norms in 30 additional cities starting July 1, 2015.
We are also working towards meeting all applicable regulations which we believe are likely to come into effect in various markets in the near future. Our vehicle exports to Europe comply with Euro V norms, and we believe our vehicles also comply with the various safety regulations in effect in the other international markets where we operate.
The Indian automobile industry is progressively harmonizing its safety regulations with international standards in order to facilitate sustained growth of the Indian automobile industry as well as to encourage export of automobiles from India.
India has been a signatory to the 1998 UNECE Agreement on Global Technical Regulations since April 22, 2006 and has voted in favor of all eleven Global Technical Regulations. We work closely with the Government of India to participate in WP 29 World Forum Harmonization activities.
India has a well-established regulatory framework administered by the Indian Ministry of Road Transport and Highways. The Ministry issues notifications under the CMV Rules and the Motor Vehicles Act. Vehicles manufactured in India must comply with applicable Indian standards and automotive industry standards. In January 2002, the Indian Ministry of Road Transport and Highways has finalized plans on implementing automobile safety standards. The plans are based on traffic conditions, traffic density, driving habits and road user behavior in India and is generally aimed at increasing safety requirements for vehicles under consideration for Indian markets.
The Essential Commodities Act, 1955
The Essential Commodities Act, 1955, as amended by the Essential Commodities (Amendment and Validation) Act, 2009, or 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.
Manufacturing units or plants must ensure compliance with environmental legislation, such as the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981, the Environment Protection Act, 1986 and the Hazardous Wastes (Management and Handling and Transboundary Movement) Rules, 2008. The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, Pollution Control Boards, or PCBs, which are vested with diverse powers to deal with water and air pollution, 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. All of our manufacturing plants are either in possession of current, valid Consents to Operate and Hazardous Waste Authorisations or are in the process of renewing their Consents to Operate and Hazardous Waste Authorisations from the respective state PCBs of the states where they operate.
The Ministry of Environment and Forests under the Government of India receives proposals for expansion, modernization and establishment of projects and the impact of such projects on the environment are assessed by the Ministry, before it grants environmental clearances for the proposed projects under the Environmental Impact Assessment Notification and Rules. All of our manufacturing plants have obtained environmental clearances for specific projects in the past as and when mandated.
We ensure that all prescribed norms are followed for management of waste and we have made significant investments towards pollution control and environmental protection at our manufacturing plants.
Regulation of Imports and Exports
Regulation of quantitative restrictions on imports into India were liberalized with effect from April 1, 2001, pursuant to Indias World Trade Organization obligations, and imports of capital goods and automotive components were placed under the open general license category.
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, or 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 diesel variants and 2,500 cubic centimeters for gasoline variants, may be imported at a 100% basic customs duty. Commercial vehicles may be imported at a basic customs duty of 20% and components may be imported at basic customs duty ranging from at 10% to 7.5%.
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 Exchange Controls for additional information relating to restrictions on foreign investment under Indian law.
See Item 10.E Taxation for additional information relating to our taxation.
The Government of India imposes excise duty on cars and other motor vehicles and their chassis, 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 historical changes and the current rates of excise duty.
|Excise Duty (per vehicle or chassis)|
|Cars other |
|Chassis fitted |
for vehicles of
more than 13
|Trucks||Chassis fitted with |
engines for trucks
|12||%||24% or |
|8||%||20% or |
|12||%||24% or |
March 2015 onwards
|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 4000 mm with an engine capacity exceeding 1,500 cubic centimeters for diesel engines and 1,200 cubic centimeters for gasoline engines.|
|(-)||indicates no change during the relevant year.|
All vehicles and chassis are subjected to the automobile cess, which is assessed at 0.125%. Certain passenger vehicles are also subject to the National Calamity Contingent Duty, or NCCD, assessed at 1%. The education cess, assessed at 2%, and secondary and higher education cess, assessed at 1%, in addition to the excise duties indicated above, are exempted on goods starting March 1, 2015.
Value Added Tax
The Value Added Tax, or VAT, has been implemented throughout India. VAT enables set-off from sales tax paid on inputs by traders and manufacturers against the sales tax collected by them on behalf of the Government of India, thereby eliminating the cascading effect of taxation. Two main brackets of 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 the country 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, a Central Sales Tax continues to exist, although it is proposed to be abolished in a phased manner. In the Indian Union Budget 2008-09, the Central Sales Tax rate was reduced to 2%, which remained unchanged in Fiscal 2015.
Goods and Services Tax
The Government of India is proposing to reform the indirect tax system in India with a comprehensive national goods and services tax, or GST, covering the manufacture, sale and consumption of goods and services. The date of introduction of GST is expected to be as early as April 1, 2016. The proposed GST regime will combine taxes and levies by the central and state governments into one unified rate structure. There is a proposal to levy a 1% Non-Creditable Tax to be collected by the Government of India and will be appropriated to the origin state government on every interstate movement of goods. The Government of India has publicly expressed the view that following the implementation of the GST, the indirect tax on domestically manufactured goods is expected to decrease along with prices on such goods.
We have benefitted and continue to benefit from excise duty exemptions for manufacturing facilities in the state of Uttarakhand and other incentives such as subsidies or loans from other states where we have manufacturing operations. While both the Government of India and other state governments of India have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information in the public domain concerning the GST, we are unable to provide any assurance as to the effect of this or any other aspect of the tax regime following implementation of the GST.
Imposition of any additional taxes and levies by the Government of India designed to limit the use of automobiles could adversely affect the demand for our products and our results of operations.
Economic Stimulus Package and Incentives
There was a 4% cut in the central value added tax rate, or Cenvat, on cars and trucks and a 2% cut in Cenvat rate on motor vehicles for transport of more than 13 persons, including the driver. Further, in February 2009, the Cenvat rate was reduced from 10% to 8% for Trucks and buses and service tax was also reduced from 12% to 10%. The Government of India has also provided for an accelerated tax depreciation of 50% for commercial vehicles purchased between January 1 and September 30, 2009. The Cenvat rate was restored to 10% since April 1, 2010 and was further revised to 12% with effect from March 16, 2012. The Government of India has made changes in the excise duty in February 2014 which will be in effect until December 31, 2014 as follows: the Cenvat on small cars, trucks and buses reduced to 8% in February, 2014 whereas Cenvat on cars other than small cars has been reduced to 20% or 24% from 24% or 27%. The Cenvat on UVs have been reduced from 27% or 30% to 24%. The Cenvat for chassis which was increased from 12% to 14% in the budget for the Indian fiscal year 2012-2013, has since been revised to 13% in the budget for the Indian fiscal year 2013-2014 and further reduced to 9% in February 2014.
The Government of India has launched a National Electric Mobility Mission plan 2020, or NEMMP, 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 contribute towards national fuel security.
Furthermore, the Ministry of Road Transport & Highways and the Bureau of Energy Efficiency in India finalized labeling regulations for the M1 category of vehicles, which includes passenger vehicles up to, less than, or equal to 10 seats.
The Government of Indias plan to encourage Indias 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: Development of 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.
Environmental, fiscal and other governmental regulations around the world
Our Jaguar Land Rover business has significant operations in the United States and Europe, which have stringent regulations relating to vehicular emissions. The proposed tightening of vehicle emissions regulations by the European Union will require significant costs of compliance for Jaguar Land Rover. While we are pursuing various technologies in order to meet the required standards in the various countries in which we operate, the costs of compliance with these required standards can be significant to our operations and may adversely impact our results of operations.
In the United Kingdom, the Bank of England base (interest) rate has been maintained at an historic low of 0.5% despite an improvement in the UK economy. The UK labor market is strengthening as unemployment continues to fall and wages rise while inflation remains low primarily reflecting low energy prices. As a result the outlook is generally positive for UK GDP as higher levels of disposable income are expected to drive consumption and the Bank of England is likely to keep interest rates lower for longer as inflation remains subdued.
Economic growth in the Eurozone remained low during Fiscal 2015 and some member states experienced mild recession. In response the European Central Bank embarked on a quantitative easing program in January 2015 and there are signs of growth as a result; however uncertainty remains over the outcome of the debt negotiations with Greece.
The U.S. economy continues to strengthen despite the adverse effects of another harsh winter impacting in the first three months of 2016. The U.S. Federal Reserve continues to taper off its quantitative easing program and, similarly to the United Kingdom, improving labor market conditions along with lower energy prices are driving increased consumption. The U.S. Federal Reserve also held interest rates at historical lows at around 0.25% during Fiscal 2015 while rates are likely to rise gradually in the near term as confidence in the stronger economic recovery gains momentum.
Greenhouse gas / CO2 / fuel economy legislation
Legislation is in place limiting passenger car fleet average greenhouse gas emissions in Europe to 130 grams of CO2 per kilometer for 100% of new cars in 2015. Different targets apply to each manufacturer based on their respective fleets of vehicles and average weight. We have received a permitted derogation from the weight-based target requirement available to small volume and niche manufacturers. As a result, we are permitted to reduce our emissions by 25% from 2007 levels rather than meeting a specific CO2 emissions by 2015. Jaguar Land Rover now has an overall 2015 target of an average of 178.0 grams of CO2 per kilometer for our full fleet of vehicles registered in the EU that year, with Jaguar Land Rover and Tata Motors Limited monitored as a single pooled entity for compliance with this target (for Jaguar Land Rover alone, this would be 179.8 g/km). We are in compliance with the 2013 requirement that the best 75% of our pooled fleet registered in the EU that year has met this target and the 2014 requirement that the best 80% of our pooled fleet registered in the EU has met this target, achieving an average 164.5 grams of CO2 per kilometer and 165.3 grams of CO2 per kilometer (provisional) in calendar 2013 and 2014, respectively.
Furthermore, the European Union has regulated target reductions for 95% of a manufacturers full fleet of new passenger cars registered in the EU in 2020 to average 95 grams of CO2 per kilometer, rising to 100% in 2021. The new rule contains an extension of the small volume and niche manufacturers derogation which permits us to reduce our emissions by 45% from 2007 levels rather than meet a specific CO2 emissions target by 2020. Jaguar Land Rover could apply for an overall target of 132 grams of CO2 per kilometer.
The European Union has also adopted an average emissions limit of 175 grams of CO2 per kilometer for light commercial vehicles to be phased in between 2014 and 2017. Implementation of light commercial vehicle CO2 standards affect the Defender and a small number of Freelander and Discovery vehicles. We have been granted a small volume derogation by the European Commission for alternative specific emission targets for 2014-2016 inclusive, which protects the Defender through to end of manufacturing. A further average emissions limit of 147 grams of CO2 per kilometer for light commercial vehicles has been adopted for 2020.
In the United States, both Corporate Average Fuel Economy, or CAFE, standards and greenhouse gas emissions standards are imposed on manufacturers of passenger cars and light trucks. The National Highway Traffic Safety Administration, or NHTSA, has set the federal CAFE standards for passenger cars and light trucks to meet an estimated combined average fuel economy level of 35.5 miles per U.S. gallon for 2016 model year vehicles. Meanwhile, the U.S. Environmental Protection Agency, or EPA, and NHTSA issued a joint rule to reduce the average greenhouse gas emissions from passenger cars, light trucks and medium-duty passenger vehicles for model years 2012-16 to 250 grams of CO2 per mile, which would be equivalent to 35.5 miles per U.S. gallon in model year 2016 if the requirements were met only through fuel economy improvements. The United States federal government extended this program to cars and light trucks for model years 2017 through 2025, targeting an estimated combined average emissions level of 243 grams of CO2 per mile in 2017 and 163 grams per mile in 2025, which is equivalent to 54.5 miles per gallon if achieved exclusively through fuel economy improvements. In addition, many other markets either have or will shortly define similar greenhouse gas emissions standards (including Brazil, Canada, China, the European Free Trade Association, India, Japan, Mexico, Saudi Arabia, South Korea and Switzerland).
California is empowered to implement more stringent greenhouse gas emissions standards but has elected to accept the existing U.S. federal standards for compliance with the states own requirements. The California Air Resources Board enacted regulations that deem manufacturers of vehicles for model years 2012 through 2016 that are in compliance with the EPA greenhouse gas emissions regulations to also be in compliance with Californias greenhouse gas emission regulations. In November 2012, the California Air Resources Board accepted the federal standard for vehicles with model years 2017-25 for compliance with the states own greenhouse gas emission regulations. However, California is moving forward with other stringent emission regulations for vehicles, including the Zero Emission Vehicle regulation, or ZEV. ZEV requires manufacturers to increase their sales of zero emissions vehicles year-on-year, up to an industry average of 16% of vehicles sold in the state by 2025. The precise sales required in order to meet a manufacturers 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 manufacturers 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.
We are fully committed to meeting these standards and technology deployment plans incorporated into cycle plans are directed to achieving these standards. These plans include the use of lightweight materials, including aluminum, which will contribute to the manufacture of lighter vehicles with improved fuel efficiency, reducing parasitic losses through the driveline and improvements in aerodynamics. They also include the development and installation of smaller engines in our existing vehicles and other drivetrain efficiency improvements, including the introduction of eight-speed or nine-speed transmissions in some of our vehicles. We continue to introduce smaller vehicles such as the Jaguar XE, our most fuel-efficient Jaguar yet. The technology deployment plans also include the research, development and deployment of hybrid-electric vehicles. These technology deployment plans require significant investment. Additionally, 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 Londons Ultra Low Emission Zone and similar low emissions areas being contemplated in Paris, Berlin and Beijing.
Non-greenhouse gas emissions legislation
The European Union has adopted the latest in a series of more-stringent standards for emissions of other air pollutants from passenger and light commercial vehicles, such as nitrogen oxides, carbon monoxide, hydrocarbons and particulates. These standards have been or are being phased in from September 2009 (Euro 5) and September 2014 (Euro 6b) and September 2017 (Euro 6c) for passenger cars and from September 2010 (Euro 5), September 2015 (Euro 6b) and September 2018 for light commercial vehicles. September 2015 will see the adoption of driving emissions monitoring, while September 2017 will see such monitoring become mandatory along with a move to the new Worldwide harmonised Light-duty Test Procedure, or WLTP, coincident with Eu6c in Europe to address global concerns on more customer correlated fuel economy certified levels as well as air quality concerns, with other markets to follow. All programs are being fully engineered to enable the adoption of these new requirements.
In the United States, existing California Low-Emission Vehicle regulations and the recently adopted LEV III regulations, as well as the states ZEV regulations, place ever-stricter limits on emissions of particulates, nitrogen oxides, 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. The new California 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, in April 2014, the Tier 3 Motor Vehicle Emission and Fuel Standards issued by the EPA were finalized. With Tier 3, the EPA has established more stringent vehicle emissions standards broadly aligned to Californias LEV III standards for 2017 to 2025 model year vehicles. The EPA made minor amendments to these Tier 3 standards in January 2015.
While Europe and the United States lead the implementation of these emissions programs, other nations and states typically follow on with adoption of similar regulations two to four years thereafter. For example, Chinas Stage III fuel consumption regulation targets a national average fuel consumption of 6.9L/100km by 2015 and its Stage IV targets a national average fuel consumption of 5.0L/100km by 2021. In response to severe air quality issues in Beijing and other major Chinese cities, the Chinese government also intends to adopt more stringent emissions standards beginning in 2016.
To comply with the current and future environmental norms, we may have to incur substantial capital expenditures and research and development expenditures to upgrade products and manufacturing facilities, which would have an impact on our cost of production and results of operations.
The European Commission adopted new 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.
Vehicles sold in Europe are subject to vehicle safety regulations established by the European Union or by individual Member States. In 2009, the European Union enacted a new regulation to establish a simplified framework for vehicle safety, repealing more than 50 existing directives and replacing them with a single regulation aimed at incorporating relevant United Nations standards. The incorporation of the United Nations standards commenced in 2012, and the European Commission requires new model cars to have electronic stability control systems, has introduced regulations relating to low-rolling resistance tires, requires tire pressure monitoring systems and requires heavy vehicles to have advanced emergency braking systems and lane departure warning systems. From April 2009, the criteria for whole vehicle type approval were extended to cover all new road vehicles, to be phased in over five years depending on vehicle category. The extension clarifies the criteria applicable to small commercial vehicles. In the European Union, new safety requirements came into force from November 2012 for new vehicle types and come into force in November 2014 for all new vehicles sold in the EU market. The new mandatory measures include safety belt reminders, electric car safety requirements, easier child seat anchorages, tire pressure monitoring systems and gear shift indicators.
In the United States, NHTSA issues federal motor vehicle safety standards covering a wide range of vehicle components and systems such as airbags, seatbelts, brakes, windshields, tires, steering columns, displays, lights, door locks, side impact protection and fuel systems. We are required to test new vehicles and equipment and assure their compliance with these standards before selling them in the United States. We are also required to recall vehicles found to have defects that present an unreasonable risk to safety or which do not conform to the required Federal Motor Vehicle Safety Standards, and to repair them without charge to the owner. The financial cost and impact on consumer confidence of such recalls can be significant depending on the repair required and the number of vehicles affected. We have no investigations relating to alleged safety defects or potential compliance issues pending before NHTSA.
These standards add to the cost and complexity of designing and producing vehicles and equipment. In recent years NHTSA has mandated, among other things:
A system for collecting information relating to vehicle performance and customer complaints, and foreign recalls to assist in the early identification of potential vehicle defects as required by the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act; and
Enhanced requirements for frontal and side impact, including a lateral pole impact.
Furthermore, the Cameron Gulbransen Kids Transportation Safety Act of 2007 (Kids and Cars Safety Act), passed into law in 2008, requires NHTSA to enact regulations related to rearward visibility and brake-to-shift interlock and requires NHTSA to consider regulating the automatic reversal functions on power windows. The costs to meet these proposed regulatory requirements may be significant.
Vehicle safety regulations in Canada are similar to those in the United States; however, many other countries have vehicle regulatory requirements which differ from those in the United States. 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, or GTRs, developed under the auspices of the United Nations, continue to have an increasing impact on automotive safety activities, as indicated by EU legislation. In 2008, GTRs on electronic stability control, head restraints and pedestrian protection were each adopted by the UN World Forum for the Harmonization 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.
At present, India is a signatory of the 1998 UNECE Agreement on Global Technical Regulations, which makes the global technical regulations alternate standards to national regulations. The transition of finalized global technical regulations into national standards remains in progress.
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 officers liability to minimize risks associated with international litigation for us and our subsidiaries.
Jaguar Land Rover has global insurance coverage which we consider to be reasonably sufficient to cover normal risks associated with our operations and insurance risks, including property, business interruption, marine and product/general liability and which we believe is in accordance with commercial industry standards and statutory requirements.
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, or 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, 8 and 12 years from the date of obtaining the special license. We currently hold 101 licenses which require us to export our products of a value of approximately Rs.81.19 billion between the years 2002 to 2021, 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 at March 31, 2015 we have remaining obligations to export products of a value of approximately Rs.7.09 billion by March 2021. 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.
In the normal course of business, we face claims and assertions by various parties. We assess such claims and assertions and monitor the legal environment on an ongoing basis, with the assistance of external legal counsel where appropriate. We record a liability for any claims where a potential loss is probable and capable of being estimated and disclose such matters in our financial statements, if material. For potential losses which are considered reasonably possible, but not probable, we provide disclosure in the financial statements, but do not record a liability in our financial statements unless the loss becomes probable. Should any new developments arise, such as a change in law or rulings against us, we may need to make provisions in our financial statements, which could adversely impact our reported financial condition and results of operations. Furthermore, if significant claims are determined against us and we are required to pay all or a portion of the disputed amounts, there could be a material adverse effect on our business and profitability. Certain claims that are above Rs.200 million in value are described in Note 34 to our consolidated financial statements included in this annual report on Form 20-F. Certain claims that are below Rs.200 million in value pertain to indirect taxes, labor and other civil cases. There are other claims against us which pertain to motor accident claims 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 cases relate to replacement of parts of vehicles and/or compensation for deficiency in services provided by us or our dealers.
Capital work-in-progress as at March 31, 2014, included building under construction at Singur in West Bengal of Rs.3,098.8 million for the purposes of manufacturing automobiles. 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 (State Government) enacted a law cancelling the land lease agreement at Singur, and took over possession of the land. We challenged the constitutional validity of the law. In June 2012, the Calcutta High Court declared the law unconstitutional and restored our rights under the land lease agreement. The State Government filed an appeal in the Supreme Court of India in August 2012, which is pending disposal.
Though we continue to rigorously press our rights, contentions and claims in the matter, we have been advised that the time it may take in disposal of the appeal is uncertain. We have also been advised that we have a good case and can strongly defend the appeal, but the questions that arise are issues of constitutional law and thus the result of the appeal cannot be predicted. In these circumstances, in view of the uncertainty on the timing of resolution, following the course of prudence, the management has, in Fiscal 2015, made a provision for carrying capital cost of buildings at Singur amounting to Rs.3,098.8 million, excluding other assets (electrical installations etc.) and expenses written off / provided in earlier years, security expenses, lease rent and claim for interest on the whole amount (including Rs.3,098.8 million). We shall however continue to pursue the case and assert our rights and our claims in the Courts.
In South Korea, our union employees filed a lawsuit to include some elements of non-ordinary salary and bonus as part of ordinary wages for the period December 2007 to May 2011. The district court ruled in favor of the union employees on January 2013 and ordered TDCV to pay the employees KRW 17.2 billion and interest, up to the period of payment. We recorded a provision of KRW 45.8 billion (Rs.2,565 million) as at March 31, 2014, in respect of this lawsuit and consequential obligation for all employees (including non-union employees). TDCV filed an appeal against the order to the High Court of Seoul, which gave its verdict on December 24, 2014. The High Court of Seoul, following the decision of the Supreme Court in a case of an unaffiliated company, determined that some elements of non-ordinary salary were part of ordinary wages and the need to be paid with retrospective effect. However, based on the Good Faith Principle and because any retrospective payment would have high financial impact on the Company, the court determined that the bonuses and work performance salary would not be eligible for retrospective payment. Accordingly, the liability was determined at KRW 99 million and interest of KRW 20 million thereon.
Furthermore, in order to maintain the claim for the period from June 2011 to March 2014, TDCV union employees filed a case in the Seoul district court on November 24, 2014. In addition to the items included in the first lawsuit, one new item for additional 50% allowance for overtime work was added. However, after receipt of the final judgment of the Seoul High Court for the first lawsuit, which was not in their favor, the labor union decided to withdraw the second lawsuit and submitted the case withdrawal confirmation on March 19, 2015. Accordingly, the provision created as at March 31, 2014 of KRW 45.8 billion (Rs.2,643 million) has been reversed in Fiscal 2015.
The Competition Commission of India, or CCI, has initiated an inquiry against us and other car manufacturers (collectively referred to hereinafter as the OEMs) 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. The CCI through its order, dated August 25, 2014, held that the OEMs had violated the provisions of Section 3 and Section 4 of the Competition Act, 2002, and imposed a penalty of 2% of the average turnover for three years. Subsequently, we and other car manufacturers filed a writ petition before the Delhi High Court challenging the constitutional validity of Section 22(3) and 27(b) of the Indian Competition Act under which the order was passed and penalty imposed. The matter is currently pending before the Delhi High Court.
During the year the Groups Brazilian subsidiary has received a demand for GBP 35 million in relation to additional indirect taxes, that is, PIS (Programa de Integração Social) and COFINS (Contribuição para Financiamento da Seguridade Social) claimed as being due on local vehicle and parts sales made in 2010. The matter is currently being contested before the Brazilian appellate authorities. Professional legal opinions we have obtained in Brazil support our position that the basis of the tax authoritys assertion is incorrect and, as a result, the likelihood of any settlement ultimately having to be made is considered remote.
We believe that none of the contingencies, would have a material adverse effect on our financial condition, results of operations or cash flows.
Tata SonsOur Promoter and its Promoted Entities
Tata Sons holds equity interests in promoted companies engaged in a wide range of businesses. The various companies promoted by Tata Sons, including Tata Motors Limited, are based substantially in India and had combined consolidated revenues of approximately US$108.78 billion in Fiscal 2015. The businesses of Tata Sons promoted entities can be categorized under seven business sectors, namely, engineering, materials, energy, chemicals, consumer products, services, and communications and information systems.
Tata Sons-promoted entities have their origins in the trading business founded by the founder Mr. Jamsetji Tata in 1868, which was developed and expanded in furtherance of his ideals by his two sons, Sir Dorabji Tata and Sir Ratan Tata, following their fathers death in 1904. The family interests subsequently vested largely in the Sir Ratan Tata Trust, the Sir Dorabji Tata Trust and other related trusts. These 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 Tata Sons promoted entities have expanded to encompass a number of major industrial and commercial enterprises, including Indian Hotels Company Limited (1902), Tata Steel Limited, or Tata Steel (1907), one of the top ten steel manufacturers in the world, Tata Power Company Limited (1910), Tata Chemicals Limited (1939), which is the worlds second largest manufacturer of soda ash and Tata Motors Limited (1945). Other Tata entities include Voltas Limited (1954), and Tata Global Beverages Ltd, or Tata Tea Limited (1962), which is the second largest branded tea company in the world, along with its UK-based subsidiary Tetley.
Tata Consultancy Services Limited, or TCS, a subsidiary of Tata Sons which started its operations in the 1960s as a division of Tata Sons and later converted to a listed public company, is a leading software service provider in India and exporter and the first Indian software firm to exceed sales of US$4 billion. TCS has delivery centers around the globe including in the United States, the United Kingdom, Hungary, Brazil, Uruguay and China, as well as India.
Tata Sons promoted Indias first airline, Tata Airlines, which later became Air India (Indias national carrier), as well as Indias 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 Indias 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 Indias equity stake in the then state owned Videsh Sanchar Nigam Limited, which was subsequently renamed Tata Communications Limited and is one of the worlds largest wholesale voice carriers. Tata Sons promoted companies 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 emerging companies promoted by Tata Sons include Titan Company, established in 1984, which is manufacturing Indias largest and best-known range of personal accessories such as watches, jewelry, sunglasses, 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 and Tata Capital, established in 2007, a systemically important non-deposit taking non-banking financial company, or NBFC, that fulfills the financial needs of retail and institutional customers in India.
We have for many years been a licensed user of the Tata brand owned by Tata Sons, and thus have both gained from the use of the Tata brand and common brand equity as well as helped to grow and sustain its brand equity. Tata Sons instituted a corporate identity program to re-position the brand to compete in a global environment. A substantial ongoing investment and recurring expenditure is undertaken by Tata Sons planned to develop and promote a strong, well-recognized and common brand equity, which is intended to represent for the consumer a high level of quality, service and reliability associated with products and services offered by the Tata Sons promoted entities.
Each of the Tata Sons promoted entities which have subscribed to the Tata Brand Equity & Business Promotion Scheme pays a subscription fee to use the Tata business name and trademarks and participate in and gain from the Tata brand equity as well as to avail themselves of various services including legal, human resources, economics and statistics, corporate communications and public affairs services of 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 agreed to pay an annual subscription fee to Tata Sons which is in the range of 0.15%-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. In Fiscal 2013, Tata Motors Limited on a standalone basis paid an amount less than 0.25% of its annual net income calculated in accordance with Indian GAAP and in Fiscal 2014 and 2015 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 agreement between the parties, 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 Tata Sons promoted entities have sought to continue to follow the ideals, values and principles of ethics, integrity and fair business practices espoused by the founder of Tata Sons, 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 Tata promoted entities. The Tata Trust has 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, the National Centre for the Performing Arts in Mumbai and, more recently, the Tata Medical Center at Kolkata for cancer patients set up by the Tata Trusts and supported by Tata Sons and promoted companies. The Tata Trust is one among the largest charitable foundations in India.
Some of the Tata Sons promoted entities hold shares in other companies promoted by Tata Sons. Similarly, some of our directors hold directorships on the boards of Tata Sons and/or other Tata Sons promoted entities. 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 Tata Sons promoted entities at management, financial or operational levels. With the exception of Tata Steel, which under our Articles of Association has the right to appoint one director on our board of directors, neither Tata Sons nor its subsidiaries has any special contractual or other power to appoint our directors or management. They have only the voting power of their shareholdings in Tata Motors. Except as set forth in the tables below under the heading Subsidiaries and Affiliates and except for approximately a 16.84% equity interest in Tata Services Ltd, a 19.62% equity interest in Tata International Limited, a 12.85% equity interest in Tata Industries Limited and an 8.79% equity interest in Tata Projects Ltd, our shareholdings in other Tata Sons promoted entities 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 shares of those companies.
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 under Indian Law as at March 31, 2015 are set forth in the chart below:
|1.||Acquired a 100% equity interest in Rajasthan Leasing Private Limited with effect from January 19, 2015 and renamed it Tata Motors Finance Solutions Private Limited with effect from March 18, 2015. On June 4, 2015 was converted into a public limited company, named as Tata Motors Finance Solutions Limited.|
|2.||Holding company of Jaguar Land Rover Automotive plc, TDCV, Tata Motors (Thailand) Limited, Tata Motors (SA) (Proprietary) Limited and PT Tata Motors Indonesia with effect from October 20, 2014.|
|3.||These subsidiaries are based in many countries outside India.|
|4.||Equity interest increased from 94.36% to 95.28% with effect from February 24, 2015.|
|5.||Equity interest in its subsidiary, Tata Daewoo Commercial Vehicle Sales and Distribution Co. Ltd. is 100%.|
|6.||Equity interest in PT Tata Motors Distribusi Indonesia subsidiary is 100%|
|7.||The equity interests in these 14 subsidiaries range between 72.32% and 72.52%.|
|8.||Tata Hispano Motors Carrocera SA wound down its operations with effect from September 20, 2013 and transferred its 100% equity interest in Tata Hispano Motors Carrocerries Maghreb SA with effect from June 23, 2014.|
|9.||Converted from a public limited company into a private limited company with effect from March 5, 2015.|
|10.||With two 100% subsidiaries in Spain of which one is presently under the process of liquidation and one affiliate in China with an equity interest of 22.48%.|
|11.||Out of the ten subsidiaries with equity interests ranging from 13% to 26%, two are presently under the process of liquidation and four joint ventures with equity interests of 13% in each.|
|12.||Chery Jaguar Land Rover Auto Sales Company Limited, a wholly-owned subsidiary of Chery Jaguar Land Rover Automotive Co. Ltd., whose name was changed from Suzhou Chery Jaguar Land Rover Trading Co. Ltd. (Interim JV) with effect from November 5, 2014.|
|13.||An affiliate of Tata Technologies Limited.|
|14.||Converted from a public limited company into a private limited company with effect from December 16, 2014.|
|15.||Converted from a public limited company into a private limited company with effect from January 19, 2015.|
Out of the above, the following are our three significant subsidiaries as defined under Regulation S-X:
|Country of Incorporation||Ownership Interest / |
Jaguar Land Rover Automotive Plc
Jaguar Land Rover Limited
Jaguar Land Rover Holdings Limited
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 directors participation clauses in the relevant joint venture agreement(s).
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 had 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 a ISO/TS 16949:2000(E) certification.
The manufacturing facilities of TDCV are based in Gunsan, South Korea. TDCV has received the ISO/TS 16949 certification, an international quality systems specification given by SGS UK Ltd., an International Automotive Task Force, or IATF, accredited certification body. It is the first South Korean automobile OEM to be awarded an ISO/TS 16949 certification.
Fiat India Automobiles Private Limited, our joint arrangement with Fiat Group, 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.
Tata Motors (Thailand) Limited is our joint venture with Thonburi Automotive Assembly Plant Co. Ltd, and has a manufacturing facility located in Samutprakarn province, Thailand. The facility is used for the manufacture and assembly of pickup trucks. Through our joint venture in Thailand, we intend on offering refreshed versions of Tata brand pickup trucks in Fiscal 2016 and to increase its product range by introducing Tata and TDCV brand M&HCV trucks in Thailand.
Through Jaguar Land Rover, we currently operate three principal automotive manufacturing facilities in the United Kingdom at Solihull, Castle Bromwich, and Halewood and have 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.
A new advanced engine facility has been established at Wolverhampton in the United Kingdoms Midlands area to manufacture the new family of Ingenium low-emission engines. The Wolverhampton facility, which opened in October 2014, is essential to our long-term strategic growth plans and is now producing the first of the new family of Ingenium engines, a 4-cylinder 2.0-liter engine first installed into the Jaguar XE. The GBP 500 million investment in this facility reinforces Jaguar Land Rovers commitment to manufacturing and innovation in the United Kingdom. The facility is the first in Jaguar Land Rovers history to be entirely designed and specified by Jaguar Land Rover and at full capacity is expected to employ up to 1,400 people. The engine plant includes an engine testing center alongside the manufacturing and assembly halls and endeavors to meet the highest standards of sustainable production, featuring a variety of energy efficiency technologies including the largest rooftop solar panel installation in the UK, comprising no fewer than 21,000 individual panels expected to generate more than 30% of the plants energy requirements.
The joint venture manufacturing plant for Chery Jaguar Land Rover Automotive Co. Limited, our joint venture company with Chery, in Changshu, near Shanghai, as part of a RMB 10.9 billion investment that also includes a new research and development center, was opened in October 2014 and began manufacturing the Range Rover Evoque for the local Chinese market. Retail sales began in February 2015. Construction of a new engine plant for production of fuel-efficient engines is also contemplated under the joint venture agreement.
Tata Motors (SA) (Proprietary) Limited, our joint venture with Tata Africa Holdings (SA) Pty Limited for the manufacture and assembly operations of our LCVs and M&HCVs in South Africa, owns and operates a manufacturing facility located in Rosslyn, South Africa.
Description of environmental issues that may affect our utilization of facilities
Tata and other brand vehicles
As with other participants in the automobile industry around the world, we are 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 as a result of fossil fuel scarcity, escalating price and growing awareness about energy efficiency among customers.
We have adopted the Tata Group Climate Change Policy which addresses key climate change issues related to products, processes and services. We are committed to reduction of greenhouse gas emissions throughout the lifecycle of our products and development of fuel efficient and low greenhouse gas emitting vehicles, as an integral part of our product development and manufacturing strategy.
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.
India, as a party to the United Nations Framework Convention on Climate Change, 1992 and its Kyoto Protocol, 1997, has been committed to addressing the global problem on the basis of the principle of common but differentiated responsibilities and respective capabilities of the member parties. At present, there are no legally binding targets for greenhouse gas reductions for India as it is a developing country. There are, however, opportunities for minimizing energy consumption through elimination of energy losses during manufacturing, thereby reducing manufacturing costs and increasing productivity.
In order to manage regulatory and general risks of climate change, we are increasingly investing in the design and development of fuel efficient and alternative energy vehicles, in addition to implementing new advanced technologies to increase efficiency of our internal combustion engines. We have manufactured CNG and CNG-electric hybrid versions of buses, LCVs, and the ACE Xenon, as well as a liquefied petroleum gas version of the Indica passenger vehicle.
Moreover, we are using refrigerants such as R134A in our products in order to minimize our contribution towards greenhouse gas emissions. We also ensure that no refrigerant is released to the atmosphere during any service, repair and maintenance of the air-conditioning systems of our vehicles by first recovering the refrigerant charge before the system is serviced and recharged. In addition, since 2009, we have voluntarily disclosed fuel-efficiency information for our passenger vehicles in India in accordance with a decision by SIAM. We are also continually in the process of developing products to meet the current and future emission norms in India and other countries. For example, we offer products which meet the Bharat Stage III and Bharat Stage IV norms in India and Euro V norms in International markets.
We also strive to increase the proportion of energy sourced from renewables. As one of our prime objectives, we have endeavored to incorporate environmentally sound practices in our processes, products and services. Our manufacturing facilities at Pune, Jamshedpur, Lucknow, Sanand, Dharwad and Pantnagar in India each have an Environmental Management System in place and have achieved ISO-14001 certification. We have been implementing various Environment Management Programs on energy conservation such as reduction in electricity and fuel consumption with resulting reductions in greenhouse gas emissions. We are actively working towards a shift to gas fuels to meet process heat requirements.
Jaguar Land Rover
Our production facilities are subject to a wide range of environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, accidental 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 safe conditions in the workplace. Many of our operations require permits and controls to monitor or prevent pollution. We have incurred, and will continue to incur, substantial ongoing 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, 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.
Our manufacturing process results in the emission of greenhouse gases such as CO2. The EU Emissions Trading Scheme, or EUETS, an EU-wide system in which allowances to emit greenhouse gases are issued and traded, is now in Phase 3 (2013 to 2020). We have managed our EUETS allowances during previous phases of the EUETS scheme and use these remaining allowances from these earlier phases to meet our compliance requirements. The automotive sector has also been given recognition of being at risk of carbon leakage in accordance with the EUETS rules. This means that we will receive an increase in free allowances from 2015 and 2019. As a consequence of these actions, we currently project that we will reach the end of Phase 3 without the need to purchase EUETS carbon allowances. In Phase 4 of the scheme, from 2020 to 2027, all organizations in the EUETS scheme will see free allowances diminish to zero by 2027, so we project that we will purchase EUETS allowances in Phase 4 of the scheme.
We have a Climate Change Agreement which covers our manufacturing energy use. This requires us to deliver a 15% reduction in energy use per vehicle by 2020 compared to the 2008 baseline. Our projections show that we are on track to achieve this target and consequently will not need to purchase carbon allowances under this scheme.
We are also registered as a participant in the Carbon Reduction Commitment Energy Efficiency Scheme, which regulates emissions from electricity and gas use primarily in our non-manufacturing activities in the United Kingdom.
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 ongoing refurbishment and rebuilding. 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 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, financial condition or results of operations could be material.
The following table shows our production capacity as at March 31, 2015 and production levels by plant and product type in Fiscal 2015 and 2014:
|As at March 31, 2015||Year ended March 31,|
Tata Motors Plants in India1
Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles, Passenger Cars,
Jaguar Land Rover2 5
Utility Vehicles, Passenger Cars
Other Subsidiary companies plants (excluding Jaguar Land Rover)3
Medium & Heavy Commercial Vehicles, buses, bus bodies and pickup trucks
Joint operations4 (Passenger Vehicles)
|1.||This refers to estimated production capacity on a double shift basis for all plants (except the Uttarakhand plant for which capacity is on three shift basis) for the manufacture of vehicles and replacement parts.|
|2.||Production capacity is on a three shift basis.|
|3.||The plants are located in South Korea, Morocco, South Africa and Thailand. Production capacity of plants at Morocco are on a single-shift basis.|
|4.||Excludes production of engines/powertrains.|
|5.||Excludes capacity at Chery Jaguar Land Rover Automotive Company Limited.|
We produce vehicles and related components and carry out other businesses through various manufacturing facilities. In addition to our manufacturing facilities, our properties include sales offices and other sales facilities in major cities, repair service facilities and research and development facilities.
The following table sets forth information, with respect to our principal facilities, a substantial portion of which are owned by us as at March 31, 2015. The remaining facilities are on leased premises.
Facility or Subsidiary / Joint Operations Name
Principal Products or Functions
|In the State of Maharashtra|
Pune (Pimpri, Chinchwad, Chikhali1, Maval)
|Tata Motors Limited||Automotive vehicles, components and research and development|
|Pune (Chinchwad)||TAL Manufacturing Solutions Ltd.||Factory automation equipment and services|
|Pune (Hinjewadi)1||Tata Technologies Ltd.||Software consultancy and services|
|Mumbai, Pune||Tata Motors Limited/Concorde Motors (India) Ltd./TMFL||Automobile sales and service and vehicle financing|
|Nagpur1||TAL Manufacturing Solutions Ltd.||Production of advanced composite floor beams, including machining of metal fittings for Boeing 787 Dreamliner|
|Satara||Tata Cummins Pvt. Ltd.||Automotive engines|
|Pune (Ranjangaon)||Fiat India Automobiles Pvt. Ltd.||Automotive vehicles and components|
|In the State of Jharkhand|
|Jamshedpur||Tata Motors Limited||Automotive vehicles, components and research and development|
|Jamshedpur||TML Drivelines Ltd.||Axles and transmissions for M&HCVs|
|Jamshedpur||Tata Cummins Pvt. Ltd.||Automotive engines|
|In the State of Uttar Pradesh|
|Lucknow1||Tata Motors Limited||Automotive vehicles, parts and research and development|
|Tata Marcopolo Motors Ltd.||Bus bodies|
|In the State of Karnataka|
|Dharwad||Tata Motors Limited||Automotive vehicles, components, spare parts and warehousing|
|Tata Marcopolo Motors Ltd.||Bus body manufacturing|
|Bengaluru2||Concorde Motors (India) Ltd.||Automobile sales and service|
|In the State of Uttarakhand|
|Pantnagar1||Tata Motors Limited||Automotive vehicles and components|
|In the State of Gujarat|
|Sanand||Tata Motors Limited||Automotive vehicles and components|
|Rest of India|
|Hyderabad2 & Chennai(1)||Concorde Motors (India) Ltd.||Automobile sales and service|
|Cochin, Delhi||Concorde Motors (India) Ltd.||Automobile sales and service|
|Various other properties in India||Tata Motors Limited/Tata Motors Finance Ltd.||Vehicle financing business (office/ residential)|
|Singapore||Tata Technologies Pte Ltd.||Software consultancy and services|
|Republic of Korea|| |
|Automotive vehicles, components and research and development|
|Thailand||Tata Motors (Thailand) Ltd.||Pick-up trucks|
|Tata Technologies (Thailand) Ltd.||Software consultancy and services|
|United Kingdom||Tata Motors European Technical Centre||Engineering consultancy and services|
|United Kingdom||INCAT International PLC, Tata Technologies Europe Ltd and Cambric UK Ltd||Software consultancy and services|
Facility or Subsidiary / Joint Operations Name
Principal Products or Functions
|Jaguar Land Rover Ltd||Automotive vehicles and components|
|Jaguar Land Rover Ltd||Automotive vehicles and components|
|Jaguar Land Rover Ltd||Automotive vehicles and components|
|Jaguar Land Rover Ltd||Research and product development|
|Jaguar Land Rover Ltd||Headquarters and research and product development|
|Jaguar Land Rover Ltd||Engine manufacturing|
|Spain||Tata Hispano Motors Carrocera S.A.||Bus body service|
|Morocco||Tata Hispano Motors Carrocerries Maghreb SA||Bus body manufacturing and service|
|South Africa||Tata Motors (SA) (Proprietary) Limited||Manufacture and assembly operations of vehicles|
|Indonesia||PT Tata Motors Indonesia||Distribution of vehicles|
|Rest of the world|
Various (United States, UK, China, Europe, Australia etc.)
|Tata Technologies Ltd.||Software consultancy and services|
|Jaguar Land Rover3||National sales companies|
|Regional sales offices|
|Note:||Excludes facilities held by our joint ventures, including the manufacturing plant held by Jaguar Land Rover Automotive Company Limited.|
|1.||Land at each of these locations is held under an operating lease.|
|2.||Some of the facilities are held under an operating lease and some are owned.|
|3.||National sales companies are held by various subsidiaries of the Jaguar Land Rover group of companies.|
Substantially all of our owned properties are subject to mortgages in favor of secured lenders and debenture trustees for the benefit of secured debenture holders. A significant portion of our property, plant and equipment, except those in the United Kingdom, is pledged as collateral securing indebtedness incurred by us. We believe that there are no material environmental issues that may affect our utilization of these assets.
We have additional property interests in various locations around the world for limited manufacturing, sales offices, and dealer training and testing. The majority of these are housed within leased premises.
For further details regarding the current legal proceedings with respect to the leased land in West Bengal, please refer to Item 4.B Business OverviewLegal Proceedings of this annual report on Form 20-F.
We consider all of our principal manufacturing facilities and other significant properties to be in good condition and adequate to meet the needs of our operations.
|Item 4A.||Unresolved Staff Comments|
|Item 5.||Operating and Financial Review and Prospects|
You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements prepared in conformity with IFRS and information included in this annual report on Form 20-F. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those set forth in Item 3.D and elsewhere in this annual report on Form 20-F.
All financial information discussed in this section is derived from our audited financial statements included in this annual report on Form 20-F, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
In Fiscal 2015, our total revenue (net of excise duties), including finance revenues, increased by 12.1% to Rs.2,625,265 million from Rs.2,341,761 million in Fiscal 2014. We recorded a net income (attributable to our shareholders) of Rs.128,291 million in Fiscal 2015, representing a decrease by 1.9% or Rs.2,426 million over net income in Fiscal 2014 of Rs.130,717 million.
Automotive operations are our most significant segment, accounting for 99.5%, 99.5% and 99.4% of our total revenues in Fiscal 2015, 2014, and 2013, respectively. In Fiscal 2015, revenue from automotive operations before inter-segment eliminations was Rs.2,612,303 million, as compared to Rs.2,329,582 million in Fiscal 2014 and Rs.1,881,621 million in Fiscal 2013.
Our automotive operations include:
All activities relating to the development, design, manufacture, assembly and sale of vehicles as well as related spare parts and accessories;
Distribution and service of vehicles; and
Financing of our vehicles in certain markets.
Our automotive operations segment is further divided into Tata and other brand vehicles (including financing thereof), and Jaguar Land Rover. In Fiscal 2015, Jaguar Land Rover contributed 82.9% of our total automotive revenue compared to 81.3% in Fiscal 2014 and 72.5% in Fiscal 2013 (before intra-segment elimination) and the remaining 17.1% was contributed by Tata and other brand vehicles in Fiscal 2015 compared to 18.7% in Fiscal 2014 and 27.5% in Fiscal 2013. The increase in Jaguar Land Rover revenue includes a translation gain from GBP to Indian rupees. For further detail see Item 5.A Operating ResultsFiscal 2015 Compared to Fiscal 2014Revenue.
Our other operations business segment mainly includes information technology services, machine tools and factory automation solutions. Our revenue from other operations before inter-segment eliminations was Rs.27,152 million in Fiscal 2015, an increase of 8.7% from Rs.24,989 million in Fiscal 2014. Revenues from other operations represented 1.0%, 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2015, 2014 and 2013, respectively. Earnings before other income, interest and tax before inter-segment eliminations (segment earnings), were Rs.3,448 million in Fiscal 2015 and Rs.2,634 million and Rs.3,294 million in Fiscal 2014 and 2013, respectively.
We have pursued a strategy of increasing exports of Tata and other brand vehicles to new and existing markets. Improved market sentiment in certain countries to which we export and a strong portfolio of Jaguar Land Rover vehicles has enabled us to increase its sales in these international markets in Fiscal 2015. Sales in China, which is its second largest single market in terms of volumes, after India, increased by 15.5% in Fiscal 2015. However, sales in China decreased by 20.4% in the fourth quarter of Fiscal 2015 to 23,526 units from 29,567 units in the same period in Fiscal 2014. The performance of our subsidiary in South Korea, TDCV, and TTL, our specialized subsidiary engaged in engineering, design and information technology services, contributed to its revenue from international markets. The proportion of our net sales earned from markets outside of India has increased marginally to 86.2% in Fiscal 2015 from 84.4% in Fiscal 2014.
The following table sets forth our revenue from our key geographical markets:
|Year ended March 31,|
|Rs. in million||Percentage||Rs. in million||Percentage||Rs. in million||Percentage|
United States of America
Rest of Europe
Rest of the World
The Rest of Europe market is geographic Europe, excluding the United Kingdom and Russia. The Rest of the World market is any region not included above.
Significant Factors Influencing Our Results of Operations
Our results of operations are dependent on a number of factors, which mainly include the following:
General economic conditions. We, similar to other participants in the automotive industry, are materially affected by general economic conditions. See Item 3.D Risk FactorsRisks associated with Our Business and the Automotive Industry.
Interest rates and availability of credit for vehicle purchases. Our volumes are significantly dependent on availability of vehicle financing arrangements and their associated costs. For further discussion of our credit support programs, see Item 4.B Business OverviewAutomotive Operations.
Excise duties and sales tax rates. In India, the excise and sales tax rate structures affect the cost of vehicles to the end user and, therefore, impacts demand significantly. For a detailed discussion regarding tax rates applicable to us, please see Item 4.B Business OverviewGovernment RegulationsExcise Duty.
Our competitive position in the market. For a detailed discussion regarding our competitive position, see Item 4.B Business OverviewAutomotive OperationsTata and other brand vehiclesCompetition.
Cyclicality and seasonality. Our results of operations are also dependent on the cyclicality and seasonality in demand in the automotive market. For a detailed discussion on seasonal factors affecting our business, please see Item 4.B Business OverviewAutomotive OperationsTata and other brand vehiclesSeasonality and 4.B Business OverviewAutomotive OperationsJaguar Land RoverSeasonality.
Environmental Regulations. Governments in the various countries in which we operate are placing a greater emphasis on raising emission and safety standards for the automobile industry. Compliance with applicable environmental and safety laws, rules, regulations and standards will have a significant impact on costs and product life cycles in the automotive industry. For further details with respect to these regulations, please see Item 4.B Business OverviewGovernment Regulations.
Foreign Currency Rates. Our operations and our financial position are quite sensitive to fluctuations in foreign currency exchange rates. Jaguar Land Rover earns significant revenue in the United States, Europe and China, and also sources a significant portion of its input material from Europe. Thus, any exchange rate fluctuations of GBP to Euro, GBP to U.S. dollars and GBP to other currencies would affect our financial results. We have significant borrowings in foreign currencies denominated mainly in U.S. dollars. Our consolidated financial results are affected by foreign currency exchange fluctuations through both translation and transaction risks. Changes in foreign currency exchange rates may positively or negatively affect our revenues, results of operations and net income. To the extent that our financial results for a particular period will be affected by changes in the prevailing exchange rates at the end of the period, such fluctuations may have a substantial impact on comparisons with prior periods. Furthermore, Jaguar Land Rover constitutes a major portion of consolidated financial position, the figures of which are translated into Indian rupees. However, the translation effect is a reporting consideration and does not impact our underlying results of operations. Please see Item 11 Quantitative and Qualitative Disclosures About Market Risk and Note 36(d) (i) (a) to our consolidated financial statements included elsewhere in this annual report on Form 20-F for further detail on our exposure to fluctuations in foreign currency exchange rates.
Political and Regional Factors. As with to the rest of the automotive industry, we are affected by political and regional factors. For a detailed discussion regarding these risks, please see Item 3.D Key InformationRisk FactorsPolitical and Regulatory Risks.
Results of operations
The following table sets forth selected items from our consolidated statements of income for the periods indicated and shows these items as a percentage of total revenues:
|Percentage of Total Revenue|
|Year ended March 31,||Percentage Change|
|2015||2014||2013||2014 to 2015||2013 to 2014|
Raw materials, components and purchase of product for sale (including change in inventories)
Depreciation and amortization
Other (income)/loss (net)
Interest expense (net)
Foreign exchange (gain)/loss (net)
Impairment of an equity accounted investee
Share of (profit)/loss of equity accounted investees
Net income before tax
Income tax expense
Net income attributable to shareholders of Tata Motors Limited
Net income attributable to non-controlling interests