India Watch : Jaguar Land Rover boosts Tata Motors’ profits

Automotive News Europe/Reuters, 26th February, 2010

MUMBAI (Reuters) Tata Motors Limited, India’s top vehicle maker, reported a rise in sales and margins at its Jaguar Land Rover unit as luxury buyers returned after the global crisis, helping send its shares up more than 6 percent.

JLR had been a drag on the company’s performance since it was acquired in 2008 from Ford Motor Co. for $2.3 billion, with the global downturn hitting consumer spending on its high-end vehicles such as Jaguar’s sedan and Land Rover’s SUVs.

“There has been a recovery, no doubt and the signs of revival in Europe and North America are encouraging, but it is still fragile,” said K.K.Mittal, head of portfolio management services at Globe Capital.

“At the domestic level, while commercial vehicles sales outlook looks good, its passenger car segment will be under pressure from increased competition,” he said.

Tata Motors reported a consolidated net profit of 6.5 billion rupees ($140.7 million) for the December quarter, on net sales of 259.8 billion rupees.

Shares in Tata Motors rose 6.3 percent to close at 711.05 rupees, helped by the results and a change in income taxes in the federal budget that will put more disposable income in the hands of middle-income consumers, said Jatin Chawla, analyst with brokerage India Infoline.

Jaguar Land Rover turned profitable in the December quarter with a net profit of 4.17 billion rupees ($90.3 million).

Recovery

Demand has started to pick up again and sales of JLR brands in the December quarter rose 28 percent to 56,700 units from the September quarter, with improvement in volumes coming mainly from North America, Europe and China, the company said.

“In the last four months or so we have seen a strong recovery. Cost reductions are happening, and that is reflecting in the bottom line,” Tata Motors Vice Chairman Ravi Kant said.

“It’s a big turnaround we are witnessing, and we hope to continue in this path in the future,” he added.

Evoking memories of its former glory, Jaguar this month announced its return to classic race 24 Hours of Le Mans this year with the Jaguar RSR XKR GT2, after being absent from it for more than a decade.

Tata Motors, whose mainstay is the trucks and buses in India, also produces the Nano, billed as the world’s cheapest car.

Last month, it reported a net profit of 4 billion rupees for its domestic operations in the December quarter on increased demand for its cars, trucks and buses.

Brokerage UBS, which has upgraded Tata Motors to a “buy” from “sell” said in a recent research note it had turned bullish on prospects of a significant turnaround at JLR and a growth in domestic commercial vehicles business.

Profit and price rise

Sales in India, one of the world’s fastest-growing markets, have been boosted by a better economic climate and government stimulus that reduced factory-gate duties on vehicles last year.

Tata Motors said it would pass on to customers the 2 percent rise in factory-gate duties announced in the annual budget, both for commercial vehicles and its cars.

Automobile sales in the country have risen an annual 24 percent in the first 10 months of 2009/10, with cars rising about 25 percent and trucks more than 30 percent.

The stock, valued at $7.7 billion, had risen 34 percent in the December quarter, outperforming the main index that climbed about 2 percent.

[Source: Automotive News Europe]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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