Jaguar Land Rover Drives Top Line Growth As India Sales Decline For Tata Motors

May 30 2014, 12:50pm CDT | by

Indian automobile manufacturer, Tata Motors, announced strong Q4 results on May 29, to cap-off a solid fiscal 2014 ended March. Revenues for the company rose 23% year over year to 2,328 billion rupees (around $39.46 billion), despite decline in sales for the domestic business and the impact of unfavorable currency translations. Tata reported an almost $60 million foreign exchange loss, which caused net profits to fall slightly in the fourth quarter over the previous year. Nonetheless, strong sales for the luxury British brand Jaguar Land Rover continued to drive top line and volume growth for Tata Motors this fiscal year. Increasing disposable incomes and a higher proportion of high net worth individuals are boosting sales of premium vehicles around the world. Going forward, Tata plans further expansion of Jaguar Land Rover into China and Brazil, in order to increase production levels and also tap into the growth potential of luxury vehicles in these markets. After incurring capital expenses of £2.68 billion this fiscal, the company now plans to increase investments to £3.5-3.7 billion for the development of Jaguar Land Rover next fiscal.

Our price estimate for Tata Motors is $38.95, which is roughly in line with the current market price. However, we are currently in the process of incorporating the latest quarterly data into our forecasts.

See Our Complete Analysis For Tata Motors

Jaguar Land Rover Volume Growth Boosts Tata’s Results

The British carmaker Jaguar Land Rover forms over 95% of Tata’s valuation by our estimates, with three-fourths of the value coming from the Land Rover brand alone. As expected, higher demand for premium vehicles globally boosted volume growth for Jaguar Land Rover this fiscal. Wholesale volumes grew by 15.5% year over year to nearly 430,000 during this period. The luxury car brand Jaguar witnessed a 37% jump in global retail sales to over 80,000 units. This increase in volumes can be attributed to strengthening of the U.S. premium vehicle market, rising demand for luxury vehicles globally (especially in China), and successful new model launches by Jaguar. North America retail volumes rose 50% this fiscal year for Jaguar, after having fallen 6% in the previous year. In fact, North America and China together constituted half of Jaguar’s net volumes. After suffering a dip through 2011 and 2012, the proportion of luxury vehicles in the overall U.S. auto industry rose to over 11% last year, showing promising signs of growth going forward.
/>

The British carmaker forayed into the sports car market with the launch of its F-Type convertible in February last year. Retail sales for the convertible two-seater this fiscal year stood at 8,566 units, contributing 11% to net Jaguar volumes and adding incremental sales. This bode well for the automaker as higher sales of this model not only boosted volumes, but also improved the average revenue per model. In fact, the F-Type is almost one-and-a-half times as expensive as the bulk-selling XF, which formed 60% of Jaguar’s net volumes this fiscal. On the other hand, introduction of the new Range Rover Sport last year also bolstered growth in the average revenue per unit. With the launch of the F-Type Coupe in May, Jaguar will look for further volume growth and higher revenue recognized per vehicle going forward. According to LMC Automotive, the F-Type coupe could sell around 9,600 units this year alone. The total tally for the F-Type (coupe and convertible) could thus reach 16,000 units this year, up from only 6,400 F-Type convertibles sold last year. Unit sales could further improve to 18,000 units by 2015, with China constituting one-sixth of the volumes, according to IHS Automotive.
/>
China Drives Growth For Jaguar Land Rover

China constituted 24% of Jaguar Land Rover volumes in fiscal 2014, up from 20.6% in the previous year. Jaguar volumes more than doubled in China this fiscal year, and the country is now the single largest market for the luxury car brand. On the other hand, Land Rover’s sales rose 23% to over 83,000 units in the country. Over 1.51 million luxury vehicles were sold in China last year by our estimates, representing a year-over-year growth of 21%. The premium segment is expected to outpace growth in the overall Chinese automotive market through 2020, and surpass the 3 million annual sales mark by then. Increasing disposable incomes and the rising proportion of high net worth individuals in China should drive growth in premium sales going forward.

In order to further expand into China, Jaguar Land Rover entered into an agreement with the domestic manufacturer Chery Automobile company, as part of a 10.9 billion RMB investment, to jointly produce and distribute vehicles in the country. Production of the first SUV built under this partnership is set to begin by the end of this year. The manufacturing plant in China will produce around 130,000 vehicles annually by next year. The British automaker presently imports vehicles into China, and is subjected to the 25% import tax, in addition to the value added tax and consumption tax. Domestic production will not only increase Jaguar Land Rover’s reach and availability in the region, but will also help the company compete with other luxury automakers such as Audi, BMW, Mercedes-Benz, and Lexus on a pricing front, as its vehicle prices are expected to fall by 15% on account of local production.
/>
Tata Branded Vehicles Continue To Struggle

Negative consumer sentiment due to high inflation, unstable fuel prices and high interest rates have hurt demand for automobiles in India. Passenger vehicle sales declined 6% year over year in fiscal 2014, whereas commercial vehicles saw a substantial fall of 20% in volumes. In fact, the Indian passenger vehicle market posted negative sales growth for the first time in 11 years this fiscal. With a fall of 38% in retail sales of passenger vehicles, Tata’s market share in this segment fell by more than 3 percentage points to 5.8%. Poor quality perception and higher acceptance in fleet have impacted retail sales for Tata Motors in the last few years. In order to reverse this trend, the company announced Horizonext, an aggressive strategic plan for its passenger vehicle business unit. According to this strategy, the main focus for Tata is to improve customer satisfaction, especially the after-sales services. Earlier this year, the company unveiled a new hatchback, the Bolt, and a new sub 4-meter compact sedan, the Zest. Both cars will be launched this year and could help improve passenger vehicle sales for Tata going forward.

On the other hand, Tata’s commercial vehicle retail volumes also fell 30% during this period. The automaker’s light commercial vehicle sales declined by 32%, after having risen 22% in the previous year. The decline in LCVs comes as investments in the Indian real estate sector stood at only $1.2 billion in the calender year 2013, down a massive 65% year-over-year. As pickup trucks are widely used for construction purposes, a decrease in construction projects significantly impacts commercial vehicle volumes. A possible uptick in the housing industry, bolstered by a stable central government and push for increasing infrastructure investment, could spur growth for Tata and the overall commercial vehicle market in the coming years.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Get Trefis Technology/>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 
 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

Pujara, Kohli slip in ICC rankings for Test batsmen
Dubai, Aug 1 (IANS) South Africa's AB de Villiers continues to head the Reliance ICC Rankings for Test batsmen while compatriot Hashim Amla returned to the top three. Poor performances from India's Chetseshwar Pujara...
Read more on Sport Balla
 
Two women injured in Pakistan acid attack
Islamabad, Aug 1 (IANS) A woman and her daughter were injured Friday in an acid attack in Pakistan's Punjab province. According to police sources, the two women, Momina and her daughter Amina, were inside their...
Read more on Politics Balla
 
Family of six murdered in China
Beijing, Aug 1 (IANS) At least six members of a family were murdered Friday in China's Hunan province, a police official said. According to the official, Cheng and his family were killed in their home in Jiutang...
Read more on Politics Balla
 
Seema, Krishna qualify for women's discus throw final
Glasgow, Aug 1 (IANS) Both Seema Punia and Krishna Poonia advanced to the women's discus throw final but while Seema's throw put her in second position, Krishna was placed a lowly 11th in the qualification round of the...
Read more on Sport Balla
 
James Bond script approved
'Bond 24's revamped script has been approved by movie bosses. Writers Neal Purvis and Robert Wade were rehired last month to ''rescue'' John Logan's original screenplay and insiders have now admitted they had a bigger...
Read more on Movie Balla
 
Samsung to launch two new smartphones
Seoul, Aug 1 (IANS) Samsung Electronics will launch two new high-end smartphones in next six months. Kim Hyun-joon, senior vice president at Samsung, told investors that one model will feature a large screen, while...
Read more on Business Balla
 
Weight issues - when Hollywood movies went wrong
Los Angeles, Aug 1 (IANS) Depictions of weight gain or loss we see in Hollywood movies are rarely true to life, and yet we believe them. Here's a list things movies get wrong when it comes to weight, reports...
Read more on Celebrity Balla
 
Orlando Bloom vaulted sofa to reach Bieber
Orlando Bloom jumped over a sofa to punch Justin Bieber. The 'Lord of the Rings' actor was involved in an altercation with the 'Baby' hitmaker at upmarket Ibiza eatery Cipriani earlier this week, and an onlooker claims...
Read more on Celebrity Balla
 
Amal Alamuddin celebrates bridal shower
Amal Alamuddin enjoyed a bridal shower on Tuesday (07.29.14). The British human rights lawyer celebrated her impending marriage to George Clooney with an ''intimate'' dinner hosted by Ellen Barkin at the actress' New...
Read more on Celebrity Balla
 
Sindhu joins Thulasi, Kashyap, Srikanth in quarters (Roundup)
Glasgow, Aug 1 (IANS) Indian badminton players had a great day at the Commonwealth Games when Pusarla Venkata Sindhu joined Parupalli Kashyap, Kidambi Srikanth, Rajah Menuri Venkata Gurusaidatt and Puthenpurayil...
Read more on Sport Balla