It is my privilege to write to you and present the Annual Report for 2017-18 as theChairman of the Board at Tata Motors and its British subsidiary Jaguar Land Rover. Thisyear we mark the 150th year of the foundation of the Tata Group and TataMotors has been an integral part of the Tata Group's journey of industrializing India.
Tata Motors and Jaguar Land Rover are both iconic companies and brands. We aretogether preparing ourselves to leverage growth potential of the Indian economy whilefacing the headwinds of uncertainty due to market cyclicality Brexit and the decline indiesel demand.
The global automobile industry is undergoing a structural shift due to technology ledbusiness and market disruption evolving consumer preferences market cyclicalityregulatory overhauls and geopolitical uncertainty. The ACES (Autonomous ConnectedElectric Shared) phenomenon is likely to transform mobility and influence consumerpreferences going forward. Some of the key operating markets for the group are faced withdiverse market dynamics requiring specific interventions to ensure sustainable profitablegrowth. North America is nearing the peak of the demand cycle and growth is likely toremain muted in the near term. While regulatory restrictions on diesel marketcyclicality Brexit and taxation in UK pose specific challenges in Europe and UK the keyAsian markets of China and India offer high growth opportunities led by GDP growth strongdomestic consumption and favorable demographic support.
India's automotive industry is the fourth-largest in the world (by production) and theannual production in FY 2017-18 grew sharply at 14.8% yoy. This sector is well positionedfor growth given low rates of auto penetration rising incomes and increasingaffordability. In addition we expect to see government policy supporting auto growththrough lower excise duties and the National Electric Mobility Mission Plan 2020.Altogether by 2026 India is expected to be the third largest automotive market in theworld. The Indian auto industry is not without its challenges including adapting to astructural shift towards electric vehicles (EVs) shared mobility options withride-sharing permeating the urban landscape a pan-India shift to Bharat Stage-VI emissionby 2020 and enhanced safety norms. As such we will have to be more agile than ever andwork towards being future-ready.
I am encouraged to note that Jaguar Land Rover continues to set new standards forengineering excellence with the introduction of new automotive technologies and advanceddesign. This is reflected by the multiple awards for its various models. Jaguar Land Rovercontinues its investment for growth launched exciting new products and landmarkpartnerships during the year. The company also announced its electrification roadmap toaddress diesel challenges. The company will focus on optimization drive operatingleverage and manage capital spends prudently to offset the impact of headwinds facing thebusiness.
Tata Motors delivered a strong performance this year. Within the commercial vehiclessegment key gaps were identified and addressed through modular product designs. In thepassenger car segment your company focused on improving customer experience and providing"best in class" features which is driving changes in the brand perception. Thecompany will continue to focus on product development network expansion and costreduction.
The commitment to growth disciplined capital allocation and shareholder returns areshared goals for Jaguar Land Rover and Tata Motors. I am confident that both shallcontinue to work towards delivering Competitive Consistent and Cash Accretive Growth inthe coming years.
I would like to thank our employees as well as our extended partners includingdealers suppliers and other stakeholders for their hard work and commitment in thiscritical but exciting phase of your company.
Finally I thank you for your continued trust confidence and support.
Mumbai May 23 2018