By Siddharth Philip - May 27, 2011
Tata Motors Ltd. (TTMT), India’s biggest maker of trucks and buses, will open a Land Rover sport-utility vehicle assembly unit at its factory in the city of Pune today in a push to supply luxury vehicles to emerging economies.
“Our India assembly unit is the start of building our house in India,” Ralf Speth, head of Tata’s Jaguar Land Rover division, said at a press conference in Pune. “We believe we have huge potential to grow in India. It has a rapidly increasing middle class and the second-largest population in the world.”
The assembly line will allow Tata to hold back costs as India levies a 100 percent duty on imported cars while high-end competitors from abroad expand. In the last two months, Aston Martin Lagonda Ltd. and Fiat SpA (F)’s Ferrari and Maserati brands have set up dealerships in the world’s second-fastest growing major economy as rising wealth spurs demand for luxury vehicles.
Aston Martin said when it opened its first Indian dealership in April that it’s targeting about 25 percent of its sales to come from Asia and the Middle East in the next five years, compared with 10 percent to 12 percent now. Ferrari, Fiat’s most profitable unit, expects to sell as many as 100 vehicles in India by 2014, its Indian dealer said yesterday.
Profit Triples
The Land Rover brand will initially assemble Freelander models in India, Speth said at a separate press conference in Mumbai yesterday. He declined to comment on the line’s capacity.
Tata’s net income in the year through March 31 more than tripled to 92.7 billion rupees ($2.05 billion) from 25.7 billion rupees, as consolidated revenue jumped 33 percent, the company said yesterday. Jaguar Land Rover reported a 1.04 billion-pound ($1.7 billion) profit compared with a year-earlier loss of 14.2 million pounds.
Even so, Tata Motors fell as much as 6.9 percent to 1081.75 rupees in Mumbai trading today to a three-month low after margins fell and quarterly profit, excluding the Jaguar Land Rover operations, fell 4 percent to 5.73 billion rupees. The stock has declined 17 percent in 2011.
“While Tata Motors’ fourth-quarter consolidated profit was in line with estimates, margin pressures were clearly visible with both India and JLR reporting a quarter-on-quarter margin drop,” CLSA Ltd. said in a report dated yesterday.
The Indian company, whose Nano model is the world’s cheapest car, paid $2.4 billion in June 2008 to buy the Jaguar car and Land Rover SUV brands from Ford Motor Co. (F), and it combined them into a single division. Chief Financial Officer Chandrasekaran Ramakrishnan said yesterday that capital spending on the unit will amount to 1.5 billion pounds annually.
Chief Executive Officer Carl-Peter Forster, who said in May that investments in Jaguar Land Rover will total 5 billion pounds, said yesterday that Tata Motors is willing to consider setting up an Indian engine plant for the division. Ford currently supplies engines to the unit.
“With good growth volume, we will have to think about our future engine strategy,” Forster said at the press conference.
26% Delivery Growth
Jaguar Land Rover’s fiscal 2011 deliveries rose 26 percent to 243,621 cars and SUVs. Sales jumped 43 percent in China and Russia, with the Chinese market accounting for 29,600 vehicles, Nicola Rzeznik, a spokeswoman for the unit in Warwick, England, said in a May 25 e-mail.
“Tata Motors’ main focus is on their international business,” said Walter Rossini, who manages 250 million euros ($356 million) in an India equity fund at Aletti Gestielle SGR SpA in Milan. “They are doing very well, not just in traditional markets such as Europe and the U.S., but also in emerging markets like China.”
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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