Just as Tata Motors' purchase of Jaguar and Land Rover last Wednesday was about to become a moot topic, I read something that sparked my interest in the topic. According to this article by an expat in Mumbai, the $2.3 billion invested last week represents " a major shift in the way Indian companies are able to obtain technological growth, in a manner that possibly outstrips the latent capabilities of China’s auto sector." Basically, the article says that in the long run, India's privately owned auto companies will compete better in the international market than China's state-owned industry as long as India buys into foreign luxury brands (such as Jaguar and Land Rover) than forming joint ventures (JV) with Western companies. This, I think, is only partly true.
If history has taught us anything, it would be that state-owned enterprises run less efficiently than privately-owned companies, especially in the manufacturing industry. It is without doubt that India's auto industry gain a grander exposure to research and development than China's. Yet R&D costs money, so where is this money coming from? In China, funds are being channeled to places in need thanks to an exponentially rising government budget. In India, advances in the car industry is based on the performance of a few leading firms, including Tata Motors, who are reponsible for undergoing R&D for the country.
I believe that the most important long term goal for developing countries, such as India and China, is to take on branding of its quality and nationalistic products. The article above argues that Tata Motors and Indian carmakers will soon be ahead of China because the South Asian firms are acquiring Western automobile technology that they can incorporate into their own models. China, on the other hand, has carmakers that are teaming up with foreign firms under JVs to create something better. In my opinion, what India is doing is not healthy in the long run. Yes, perhaps Tata Motors can steal technological tips from Ford’s leftovers and beat China to the short run race, but essentially they’re contributing to nothing but high-tech copying. China is branding on all fronts, creating something uniquely Chinese that first tailors to domestic tastes and later exportable. It’s two completely different worlds, but in the long run, branding may be more feasible.
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