India’s Tata Motors, making noises about becoming one of the world’s biggest makers of cars and buses, has made a move into the European Union with the acquisition of the remaining 79 percent stake in Spanish bus maker Hispano Carrocera, one of Europe’s main bus and coach manufacturers. Tata Motors, which is India’s largest automobile company by sales, said it bought the additional stake by exercising an existing call option with the other shareholder, Spain’s Investalia. The Mumbai-based firm had purchased a 21 percent stake in Hispano in February 2005.
“After the acquisition, the company will further strengthen the ongoing initiatives to improve operational efficiencies such as productivity improvement, cost reduction and new product development to improve market share of the company and enhance brand value,” Tata Motors said. “Tata Motors is confident that Hispano will now emerge as an even stronger force in the Spanish as well as global bus and coach markets,” it added. Tata had consolidated revenues of $14 billion in the financial year up to March 31, 2009. The company, which produces ultra-cheap cars like Nano and has luxury brands like Jaguar and Land Rover in its stable, has operations in Britain, South Korea, Thailand and Spain.
The company, part of the giant tea-to-steel Tata Group, lifted its stake in Hispano to 100 percent from 21 percent by exercising a call option or right to purchase, the statement by Tata Motors said. No details were disclosed about the price paid. “Tata Motors is confident that Hispano will now emerge as an even stronger force in the Spanish as well as global bus and coach markets,” Tata Motors said.  “This acquisition demonstrates Tata Motors? ongoing commitment to Hispano Carrocera,” Tata Motors said, adding that the acquisition will help strengthen its ongoing initiatives to improve operational efficiencies such as productivity, cost reduction and development of new products, to increase market share and enhance brand value.
Tata had paid $12 million in 2005 for buying a 21 percent stake in the Spanish company. Ravi Kant, now non-executive vice-chairman and then executive director of TM, was appointed chairman of Hispano. The stake buy gave TM the access to Hispano’s design and technology in bus building. It also acquired the license for brand rights of the Spanish company.
It was widely expected in the automotive industry that TM would eventually increase its stake in Hispano, mainly to reinforce itself as one of the world’s largest bus makers. The company currently ranks second in the world in bus making. “After the acquisition, the company will further strengthen the ongoing initiatives to improve operational efficiencies such as productivity improvement, cost reduction, and new product development, to improve market share of the company and enhance brand value. Tata Motors is confident that Hispano will now emerge as an even stronger force in the Spanish as well as global bus and coach markets,” a press release said.
The Spanish company currently manufactures a variety of city and intercity touring coaches from two of its facilities located in Zaragoza in Spain and Casablanca in Morocco, North Africa. It also has commercial relations with more than 50 countries and a capacity to make almost 2,000 units every year. Earlier this year, Tata started commercial production at its newest plant in Dharwad, Karnataka, which is also the world’s biggest bus making facility, spread across 123 acres and a capacity to make 30,000 a year. The plant is owned by Tata Marcopolo Motors, a 51:49 joint venture of Tata Motors and Marcopolo Motors, the Brazil-based, global leader in body building for buses and coaches.

A bus strategy
In response to a query from the Financial Express, a company spokesperson said, “The acquisition of the 79 percent  stake in Hispano Carrocera has been internally funded. It is a minuscule amount. Hispano has been converted into a wholly owned subsidiary to close integration with the company’s bus market strategy in all relevant markets.” The acquisition will help the company in further strengthening the ongoing initiatives, to improve operational efficiencies such as productivity improvement, cost reduction, new product development, help it improve market share, and enhance brand value. Positioned in the premium end in the city’s bus and coach market, currently has a 10 percent market share in Spain and the acquisition will help it integrate with Tata Motors better and grow the share in that market, said company’s spokesman. Hispano has two manufacturing units - one in Spain addressing the European market and the other in Casablanca that caters to the North African and Moroccan markets.
The company had been holding on the choice of increasing its stake in the Spanish company for a long time. But now after making Hispano Carrocera SA a fully owned subsidiary, Tata Motors will work on improving the operating efficiencies, production volumes, cost reduction, product innovation and development. This acquisition will not only help it in strengthening the market share but will also enhance its brand value. The company had, quite time back contemplated on the idea of increasing its stake so as to establish itself as the country’s largest bus makers. Currently the company is ranked second in the bus making industry.