INTRODUCTION

In the beginning of 2011, top management at Marcopolo, the largest manufacturer of bus
bodies in Brazil and one of the largest in the world, was reviewing the status of its
international operations. After years of consistent headway towards a globalization strategy,
including several success stories, the company was facing hard times along several fronts, not
least because of the world economic crisis.

The Portuguese plant, its first abroad, was closed in 2009, after almost 20 years in
operation. Also in 2009 the company pulled out of the joint venture with the Gaz group
(formerly RusPromAuto) in Russia, closing the two plants it operated there. This represented
a significant setback, as Russia was one of the most attractive markets for buses and had been
one of the most important bets in Marcopolo’s recent internationalization efforts.

The situation with the Mexican joint venture had also been difficult since 2009, again
due to the global economic crisis. Political developments in Egypt, where the company
operated under an association with a local company, had brought production to a halt, and
prospects were unclear. Management faced the question of what should be the next move in
their internationalization efforts and how to cope with the uncertainties posed by the
expanding geographical scope of their operations.

The Bus Body Industry in Brazil and Worldwide

The evolution of the Brazilian bus body industry is strongly associated with the
Kubitschek government (1956- 1960), when incentives for the development of an
automotive industry made it possible for Brazilian companies to develop and control the
domestic bus body market. In addition, foreign chassis manufacturers (Mercedes-Benz,
Scania, and Volvo) started up local operations.
Main players in the industry in 2010 were Marcopolo, Induscar, and Comil. These
companies had competitive advantages that represented significant barriers to potential
foreign new entrants. Barriers included knowledge of the specificities of the local market,
such as road conditions, and the ability to adapt products to handle them. Once the
domestic market had been dominated, the bus body producers, particularly Marcopolo,
initiated their move into foreign markets. Exhibit 1 presents export unit figures for Brazilian
bus manufacturers for the 2000-2010 period.
There are two types of companies operating in the international bus body industry:
totally integrated producers, which manufacture bodies, chassis, and engines, and body
producers, which manufacture the body that will later be assembled on a chassis and engine
set. In general, the customer supplies the chassis and the engine on which the body is to be
assembled; however, in some cases, a joint-venture is established whereby the integrated
producer manufactures the chassis and the engine and uses the body of a third party in
order to assemble the final product.
The bus body can be exported in several ways: CBU (Completely Built Up), when the
final bus product is completely assembled; PKD (Partially Knocked Down), when only the bus
body is completely assembled; MKD (Medium Knocked Down), when the bus body is
shipped in modules; and CKD (Completely Knocked Down), when the bus body is totally
taken apart and shipped in kits to a local partner. Exhibit 2 shows the evolution of bus
production in selected countries in the period 2000-2010; Exhibit 3 presents data on global
production of selected bus manufacturers.
Company Background
Renamed Marcopolo in 1971 after a very successful and innovative bus model, the
company had been founded as Nicola & Co. in 1949 in Caxias do Sul, in the state of Rio
Grande do Sul in the south of Brazil. The company started out with eight partners and just
fifteen employees. Pedro Paulo Bellini, who was to become the main shareholder and
leader, joined them in 1950.
In 1953, the company pioneered in Brazil the manufacturing of steel structures for
buses, reducing their weight and manufacturing lead time. The company grew rapidly, and
by the beginning of nineteen sixties it was producing 240 bus bodies a year. Around the
same time the company signed its first export contract, to Uruguay. By the end of the
decade output had doubled, thanks to advances in production processes. By the beginning
of the nineteen seventies, Marcopolo began to export completely knocked down (CKD) bus
bodies to Venezuela, in an agreement that also involved the transfer of technology.
Marcopolo went public in 1978. In 1981, a second and larger plant was inaugurated
where all bus assembly activities were concentrated. By that time exports were already
worth some 39 million dollars; however, during the following decade the company was hit
hard by the country’s economic crisis, and was compelled to cut back on bus production.
During this period, the company was one of the pioneers in Brazil in the adoption of
Japanese production practices, and as a result benefitted from significant productivity and
quality improvements that allowed it to grow consistently for the next twenty years. Partly
due to growth in the domestic market, this expansion was also driven by
internationalization efforts in terms of exports and foreign production.
By 2010, Marcopolo produced buses in all segments in the industry, bus bodies and
components in eleven plants worldwide – four plants in Brazil (three wholly-owned and a 45
percent stake in another Caxias do Sul manufacturer); a wholly-owned plant in South Africa;
and plants in joint venture with third parties in Argentina, Colombia, Mexico, Egypt, and
India. The company also held interests in three other component manufacturers in Brazil.
Foreign operations accounted for 32.5 percent of total units sold and 31.5 percent of units
produced in 2010. Exhibit 4 shows the evolution of Marcopolo’s production in Brazil;
Exhibit 5 presents the distribution of units sold and production in 2009 and 2010 in Brazil
and abroad.
By 2010, Marcopolo produced buses in all segments in the industry, bus bodies and
components in eleven plants worldwide – four plants in Brazil (three wholly-owned and a 45
percent stake in another Caxias do Sul manufacturer); a wholly-owned plant in South Africa;
and plants in joint venture with third parties in Argentina, Colombia, Mexico, Egypt, and
India. The company also held interests in three other component manufacturers in Brazil.
Foreign operations accounted for 32.5 percent of total units sold and 31.5 percent of units
produced in 2010. Exhibit 4 shows the evolution of Marcopolo’s production in Brazil; Exhibit
5 presents the distribution of units sold and production in 2009 and 2010 in Brazil and
abroad.

 
COMPANY PROFILE

TATA MARCOPOLO MOTORS LTD.

Type Joint venture

Industry Automotive
Founded 2008, 13 years ago
Headquarters Dharwad, Karnataka, India
Founder Laxmiprasad Jahagirdar
Products Fully built buses and coaches
Parent Tata Motors(51% )
Marcopolo S.A. (49%)
Output 70 bus per day
Category Manufacturer
Number of employees 20,016
Area served the Americas, Western Europe, South Africa,
India, Australia, New Zealand

HISTORY
 Tata Marcopolo Motors, a joint venture between Tata Motors and Brazilian bus
manufacturer Marcopolo, has begun commercial production at the Dharwad bus
manufacturing facility in Karnataka, India.
According to the company, the plant will produce a range of buses. The range, to be marketed
under the starbus and Globus brands, includes 16 to 54-seater standard buses, 18 and 45-
seater luxury coaches and low-floor city buses.
The plant will have a capacity to produce 30,000 units a year, to be achieved in
phases. In 2009-10, the first full year of operation, production can be up to 15,000 units. The
joint venture has already invested about INR2 billion. The plant, at full capacity, will
generate over 6,500 direct jobs.
The Chairman of Tata Motors, Mr. Ratan N. Tata, said: “The rapidly expanding and
improving road network, connecting cities and also rural areas, is expected to substantially
grow passenger transport. The joint venture with Marcopolo, which is one of the largest body
builders, will enable Tata Motors to successfully address the growing demand in India, as
well as relevant markets abroad.”

The Chairman of Marcopolo, Mr. Paulo Bellini, said: “ Marcopolo’s buses and coaches have
a strong presence in Latin America, and overseas markets. The joint venture with Tata
Motors will help us extend our presence in the high-potential markets of India and also other
mutually agreed countries, which we can jointly develop.”

Tata Motors Limited is India’s largest automobile company, with consolidated revenues of
RS. 92,519 crores (USD 20 billion) in 2009-10. It is the leader in commercial vehicles in
each segment, and among the top three in passenger vehicles with winning product in the
compact, midsize car and utility vehicle segments. The company is the world’s fourth largest
truck manufacturer, and the world’s second largest bus manufacturer.

The compa