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BW Businessworld

Tata Motors: Riding On Luxury

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Nano'-technology may not have worked for Tata Motors in the past three years — sales of the ‘people's car' have been disappointing. But the big bet on the Jaguar-Land Rover (JLR) acquisition has finally paid off, and handsomely. Domestic revenues — mainly from commercial vehicles — have remained stable, but it's JLR that put the oomph into Tata Motors' profitability.

Let us start with the fourth quarter of 2011-12 (FY12). Volumes for JLR were up 37 per cent, but domestic production was hit by high input costs (materials and marketing). Passenger cars (without JLR) account for 21 per cent of sales, but contribute only 5-6 per cent to the bottom-line. With JLR, margins are over 20 per cent.

Ravi Kant, Vice-chairman, Tata Motors
(BW Archive)

The new launches — the ‘revised' Range Rover Evoque, the mid-size XF and the newly-launched XJ saloon car — have all been successes, and Tata Motors continues to invest in their marketing (something that the brand's previous owner, Ford, did not do, say analysts). Of course, some of the performance was also due to the depreciation of the British pound against the US dollar, and China's emergence as a new market for JLR (16 per cent, in fact).

The growing sales of JLR and other high-end cars in emerging economies presents Tata Motors with new markets. Last year, it opened 100 new dealerships in China alone. The Evoque will be the big push (the company has a full order book, and about 50,000 of them have already been sold). The other newer models have also got great reviews. And word of mouth travels faster than you would think.

(This story was published in Businessworld Issue Dated 28-05-2012)