NEW DELHI (AFP) — India's Tata Motors, named front-runner to buy Ford's Jaguar and Land Rover units, could make a huge technological leap and save years of development by acquiring the car icons, analysts said.
Ailing US automaker Ford Motor announced on Thursday it had entered "detailed talks" with Tata Motors, part of India's sprawling tea-to-steel Tata Group, for the sale of the luxury auto brands.
"From a technology point of view and given the Tatas' global ambitions, this purchase would make a lot of sense," said Chirag Shah, analyst at Mumbai's Emkay Securities.
"If they (Tata Motors) want to move into the league of the VWs and the Audis, they need to make these kinds of investments," Shah said.
"They -- in fact the Indian auto players -- don't have the technological capacity right now to match these global companies. They would be saving a lot of time and money by acquiring these brands."
If Tata drives off with the prestige marques, it would be another feather in the family-run group's cap after the purchase of British steelmaker Corus early last year for 13.7 billion dollars.
It would also be another sign that cash-flush corporate India's foreign acquisition drive has shifted into high gear.
Tata chief executive Ratan Tata, a 70-year-old credited with transforming the diverse group into a global player, had long promised the conglomerate would "spread its wings far beyond India."
Tata said separately it hoped the transaction could be completed in the coming weeks but added the talks would be complex.
Reports have said the offers put forward so far range from 1.5 to 2.0 billion dollars (1.0 to 1.4 billion euros).
Tata urgently needs to develop new technology to fend off competition from foreign carmakers such as General Motors, Hyundai and Ford which have invested heavily in plants in India to compete in the fast-growing domestic market.
Tata Motors, India's largest truck maker, started manufacturing cars a decade ago when its economy Indica hatchback rolled off assembly lines. It has been the only car the company has designed so far -- all its others being based on the Indica model.
Tata Motors' shares closed down Friday 9.95 rupees or 1.25 percent at 784.30 amid uncertainty about the balance sheet implications of the prospective deal that comes as its vehicle sales have sagged.
But analysts say Tata would be buying Jaguar and Land Rover just at a time when the large investments by Ford to turn around the brands are paying dividends.
"They would be buying in at the right time," said Hormuz Sorabjee, editor of leading Indian car magazine Autocar.
"Jaguar has a lot in the pipeline that's interesting," he said.
The acquisition "would represent a huge leap ahead in terms of product and product is king in this business," he added.
Analysts noted Land Rover now is making money and that Jaguar is expected to break even.
"Ford paid five to seven billion dollars for the companies depending on how you do the conversion and adjusted for inflation. And it has pumped in 10 billion dollars more in trying to turn the brands around," said Shah.
"Tata is getting the fruits of this investment at a fraction of the cost."
"The deal is prestigious and the (new) brands could emerge as strong revenue earners over a long term of five to six years," said Mahantesh Sabarad, auto analyst at Mumbai brokerage Prabhudas Lilladher.
Indian automaker Mahindra and Mahindra and US-based private equity firm OneEquity, headed by a former Ford boss Jacques Nasser, have also been pursuing Jaguar and Land Rover.
Tata could end up in the unusual position of manufacturing two of the world's most prestigious cars as well as one of the cheapest.
Tata plans to unveil on January 19 its "people's car" that will cost 100,000 rupees or 2,500 dollars.
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