Tata Motors looks to JLR as domestic brands fail to deliver
04 Jun 2018
British luxury carmaker Jaguar and Land Rover, owned by Tata Motors, is increasingly looking at the Indian market as other markets like China mature and sales growth is likely to taper.
Research firm Namura expects overall JLR volumes to grow 9 per cent in 2018-19.
Nomura has maintained a "buy" rating on Tata Motors with a price target of Rs495 per share.
The company's JLR US retail sales were better than expected at 17 per cent in May 2018. Land Rover drives volumes for the company, while Jaguar continued to remain weak, said Nomura.
The research firm expects 9 per cent growth in overall JLR volumes in 2018-19.
The company has registered a strong growth of 58 per cent in auto sales for May 2018, driven by solid performance of commercial and passenger vehicles business.
The Tata Group firm sold 54,295 units during the month against 34,461 units sold in same month last year.
Commercial vehicles sales during the month increased a whopping 56 per cent YoY to 36,806 units.
In India, however, Tata Motors has been riding on medium and heavy-duty commercial vehicles that have been the fastest-growing segment of India’s rapidly expanding auto market. Tata Motors’ sales of commercial vehicles were up more than 60 per cent in May from a year earlier, helped by new breeds of medium trucks and pick-ups.
This has helped Tata Motors to reduce its net losses at its local operations in the financial year ended 31 March.
Tata Motors’ attempts to boost India passenger car business haven’t worked out well. With rising truck sales, Tata Motors Finance Ltd has also returned to growth mode with loan disbursements up 66 per cent year-on-year.
Analysts expect Tata Motors to turn to its crown jewel JLR to drive sales in India as well.
The UK unit contributes most of the company’s revenue and profits and accounts for more than 70 per cent of Tata Motors’ value per share. But, with Jaguar’s value steadily eroding, JLR is looking to spending cuts.
Jaguar has plowed more than £4 billion ($5.4 billion) into new products and technology, or upwards of 16 per cent of revenue. At the same time, that investment is necessary because the company remains highly exposed to diesel fuel and sagging auto markets.
JLR has also continued to pay dividends up to its parent — averaging £150 million a year. The payout increased to £225 million this year, around a fifth of Jaguar’s net income, and will rise further to a quarter of the unit’s profit.