Tata’s purchase of Jaguar and Land Rover signals that India and China are turning the old hierarchy of global trade on its head

The cost to Tata of purchasing Land Rover and Jaguar may have been small, but its wider symbolic significance is enormous. Western societies are slowly becoming used to the idea that India and China are set to emerge as major economic powers, but there remains an underlying assumption that the process starts in the economic and technological foothills and only much later reaches the summit.

Japanese companies, after all, started their long march to a position where their consumer products are regarded as the benchmark for others by producing for the cheap end of the market. Remember the Datsuns and Toyotas of the 1960s? They sold on price. And before they even tried to conquer western markets, they cut their teeth in the much less sophisticated markets of east Asia.

Tata is following a not dissimilar logic in India with its new small car, priced at less than £1,300 and aimed at the new Indian middle class, which Tata is hoping will forsake their scooters for its new Nano, as the car is known. Just as the Japanese pioneered a new form of manufacturing – lean production and quite new standards of reliability – so Tata, too, is embracing new forms of manufacture in order to revolutionise the price to meet the consumer needs of a poor, developing country. Think of the first Citroen 2CV, or the Volkswagen Beetle. On the face of it, this approach seems to confirm that Indian and, indeed, Chinese car makers will follow the well-worn path of the Japanese and take several decades to reach the competitive standards of western markets.

Even the challenge of the Nano, though, cannot so easily be parked. The automobile markets of western Europe, North America and Japan are now relatively saturated. The growth markets of the present and the future lie in the developing world, especially China and India. Western, Japanese and Korean manufacturers have enjoyed a head start there. But the Tata Nano suggests that the local manufacturers will be far better at innovating for such markets.
The same processes are clear in China. Local car makers account for a growing share of the Chinese market, steadily pinning back the share enjoyed by western and Japanese makers. In the long run, brands like Tata and Chery could well win the battle for the developing markets.

The Tata takeover of Land Rover and Jaguar, meanwhile, represents an entirely new kind of challenge. Far from an Indian manufacturer starting at the bottom of the value chain, Tata has suddenly bought itself a place among the elite of luxury brands, which are in possession of some of the most sophisticated automobile technology. Ford, lest we forget, then the second largest car maker in the world, was willing to pay a small fortune for exactly the same brands just a few years ago. It is possible, of course, that Tata will find that it has bitten off more than it can chew and that it will preside over brands whose products will slowly lose their cachet and which will fail to prove sufficiently profitable. That is what happened to Ford. But don’t bet on it.

Far from Indian and Chinese manufacturers starting at the bottom and slowly working their way up, we are faced with a rather different scenario. They are certainly doing that, but in the process, they are acquiring vast resources, and using them to acquire state of the art manufacturing companies in the west. This might be described as a pincer movement. There has been an assumption in the west that if we constantly move up the value scale, specialising in those things that the emergent giants cannot yet do, that somehow this will provide a safe haven from their competitive prowess. This kind of reasoning is seriously flawed.

Meanwhile, we must adjust to the idea that once quintessentially British brands like Jaguar and Land Rover are no longer American-owned, let alone British-owned, but emanate from the subcontinent. Little more than half a century ago, India was still a British colony. When the sixties generation showed a keen interest in India, it was for its mysticism and its music. Now the well-heeled middle class will be displaying their status by driving around in Indian-owned cars. How the world has changed.