Tata Motors Group looks to JLR to boost profits
Jaguar Land Rover earnings drive Tata performance
|Source: LMC Automotive, Global Automotive Production Forecast, October 2013|
Tata Motors is experiencing very different performance for its vehicle brands in 2013. Production at the Jaguar and Land Rover (JLR) subsidiary in 2013 is on a path to reach 427 thousand units, an increase of 58 thousand units over 2012 volumes. Demand for the two premium brands continues to grow, particularly in China where the company has announced plans to open a JLR facility in 2014. The plant, with an annual capacity of 100,000 units, will be the first outside the UK for JLR. The company has also announced that it will build a new JLR plant in Brazil.
In contrast, overall production for the Tata Brand is expected to drop by nearly 300 thousand units in 2013 due to sluggish demand for the brand in India. Even the traditional spike in sales during the country's festive season is expected to fall short when compared to 2012. Ammar Master, senior market analyst for India at LMC Automotive said, "We expect OEMs to further trim production through extended holidays and reduced shifts to pare build with market demand." Because of the dramatic fall of Tata production, total volumes for the combined brands is expected to fall by (-22.2) percent in 2013.
Looking forward to the period from 2013-2016, LMC Automotive expects production growth for the three combined brands to reach 53.1 percent. Jaguar is forecast to nearly double production by 2016, Land Rover is expected to show steady growth, and Tata production is forecast to rebound very quickly. LMC states, "the Tata Brand is also expected to expand in the medium-term as the Indian market recovers to its high growth trajectory."
・India: Japanese OEMs to boost capacity in anticipation of long-term growth (Oct 2013)
・IAA Frankfurt Auto Show 2013 (2):JLR unveils Jaguar SUV concept and Range Rover HV (Oct 2013)
・Japanese suppliers urged to invest in India (Sep 2013)
Jaguar Land Rover sees tremendous growth in China; steady progress in other markets
|Source: Tata JLR Group|
JLR has been performing relatively well since the Tata Group's purchase of Jaguar and Land Rover from Ford Motor in 2008. Recently, the two brands have been responsible for nearly all of the company's profits due to the high margins when compared to the struggling Tata brand. In particular, the company has seen exceptional growth in China, where upscale brands have faring well in general. To meet this demand, JLR will open a plant in the country in 2014. LMC Automotive explains, "The introduction of successful new 'premium' models, targeted at growth segments, in healthy export markets such as China and the US, are expected to provide medium‐term momentum for Tata's British brands."
Tata sales suffer in the near-term; expected to rebound as the Indian market stabilizes
|Source: MarkLines and Industry Sources (UV=Utility Vehicles, MPV=Multi-Purpose Vehicles)|
The Tata brand has seen explosive sales growth from 2009 through 2012, increasing a total of 60.4%. Demand for light trucks and SUVs have increased across the entire Indian automotive Industry in the last few years. Tata was able to capitalize by launching new products in these segments such as the Safari Storme SUV in October 2012. Sales in the company's car segment have declined slightly over the past couple years due to multiple product launches from the competition.
However, with the vast majority of Tata vehicles sold in India, the brand has become particularly vulnerable to the recent economic downturn in that country. Economists cite high interest rates, increased fuel costs and overall inflation as major factors to the recent sales contraction in the Indian auto sector. Also, the decline of the rupee has increased the relative cost of imported raw materials used to build these vehicles, making them more expensive to Indian consumers. Consequently, Ammar Master of LMC states, "Our forecast for the rest of this year and the first half of 2014 is conservative because of the adverse market conditions."
Looking forward, LMC has a positive outlook for India over the longer-term. The company explains, "We also think that both business and consumer sentiment is unlikely to significantly improve until after the general elections in April/May 2014 clear out political uncertainty."
To reduce the risk associated with this vulnerability, Tata has begun looking beyond its borders. The company has announced that it has established relationships with local partners to begin exporting vehicles to Indonesia, Australia, Malaysia, and Nepal.
JLR to introduce new models; Tata to freshen several products
JLR to refresh or introduce eight passenger vehicles
|Source: Tata JLR Group|
Jaguar Land Rover has ambitious growth plans to release eight new or refreshed products beginning in 2013. Over the past few years, Land Rover has provided the bulk of unit sales for JLR, accounting for about 85% of retail sales in 2012 and about 82% through October 2013. This is largely due to Jaguar's limited vehicle lineup.
This product mix is expected to change as the Jaguar brand plans several new product introductions. The next new model to be introduced is the F-Type coupe shown at the Los Angeles and Tokyo motor shows in 2013. This coupe is based on the C-X16 concept shown at the Frankfurt Motor Show back in 2011 and will be released in Spring 2014. It will join the F-Type convertible that began selling in May 2013.
Tata has also spent USD 2.4 billion on an all-new aluminum architecture that was exhibited on the C-X17 concept in Frankfurt in 2013. This new platform is lightweight, strong, and very flexible. Speculation is that it will be used for several new and existing Jaguar models as well as future smaller Land Rover models.
Tata announces HORIZONEXT strategy
Although not as aggressive as JLR's product push, in June 2013, Tata announced the HORIZONEXT strategy for updating its passenger vehicle lineup. The company revealed newly released versions of eight cars that included additional features, different colors or updated styling modifications. The refreshed cars are the Indigo eCS small sedan, the Indica hatchback, the Nano Micro-car, the Sumo Gold SUV and the Explorer Edition of the Safari Storme SUV. The CNG versions of the Indica, the Indigo and the Nano are also scheduled to be released. Among these, the Indigo eCS was significantly modified, featuring an all-new powertrain and suspension. There has not been an all-new Tata-branded passenger vehicle since 2010. Rather, the company is focusing on adding features and making cosmetic changes to existing models to keep costs down while investing in new JLR models.
Significant model introductions from Tata and JLR
|2013||Jaguar F-Type Convertible||This two-seater is the first vehicle based on the C-X16 concept shown at the Frankfurt Motor Show in 2011. The entry model begins at USD 69,000 and comes with a supercharged 3.0 liter V6 380 HP supercharged engine. Also available is a 5.0 liter V8 495 HP supercharged engine in the "V8 S" version. Sales of the F-Type began in May 2013.|
|Range Rover Sport||Positioned between the Range Rover and the Evoque, the all-new Range Rover Sport launched in September 2013. The new car can be up to 420kg lighter than the previous version because of its new aluminum platform. Demand has been very high, especially in China, forcing the company to run the Solihull plant in the UK around the clock to try to meet the backlog of orders. Profit from the Range Rover Sport and the larger Range Rover vehicles have nearly funded the company's entire growth plan.|
|2014||Jaguar F-Type Coupe||The F-Type coupe was displayed at the LA and Tokyo auto shows in 2013. The entry model will start at around USD 65,000 and has a supercharged 3.0 liter V6 340 hp engine. The high-end "R" version starts at around USD 99,000 and has a 5.0 liter supercharged V8 engine that produces 550 hp and can go from 0-60 mph in just 4.0 seconds. It is expected to go on sale in Europe and the US in Spring 2014|
|Range Rover and Range Rover Sport Diesel Hybrids||Diesel Hybrid versions of the Range Rover and Ranger Rover sport are expected to be released in early 2014. The electric motor produces 170Nm of torque and drives the vehicle in EV Mode. Together, the output of the diesel engine and electric motor is 340PS with a torque of 700Nm. Initial markets will include Europe, China, Australia, Korea and Taiwan.|
|2015||New Jaguar Crossover SUV||If approved for production, this vehicle will be Jaguar's first entry into the crossover segment. It is based on the C-X17 crossover concept first shown in Frankfurt in September 2013 and in Los Angeles in November 2013. It will compete against similar crossovers offered by BMW and Audi. It is expected to be released in the second half of 2015.|
|New Jaguar Compact sedan||This C/D segment premium sedan will be based on an all-new advanced aluminum monocoque architecture exhibited on the C-X17 concept. It will be built in the Solihull plant with the V6 engines coming from the Wolverhampton plant. The sedan is expected to go on sale in late 2015 in Europe and early 2016 in the US. It is expected to compete against the BMW 3-series and Mercedes C Class. A wagon version is possible in the future.|
|Land Rover Freelander||The next version of the Land Rover Freelander medium SUV will be larger than the current model. It will also have a seven-seat version. The new version is expected to be released in 2015 and will continue to be built at the Halewood, England plant.|
|Tata X0||As of May 2013, Tata is reportedly considering production of a new compact car as an alternative to the Nano. The company recently conducted a feasibility study to produce the 'X0' based on the Indica platform. If approved, the new model is expected to roll out by 2015 at the Sanand plant.|
|N/A||Range Rover SUV||JLR may produce a new Range Rover SUV that would use the all-new aluminum platform (exhibited with the C-X17 concept). This model would fit between the Range Rover Evoque and the Range Rover Sport. Adding a Range Rover model will likely make this platform profitable.|
Source: MarkLines, Tata JLR Websites, INOVEV, Automotive News, General News Sources
Land Rover Defender to end production
JLR confirmed media reports in October 2013 that Land Rover will end production of its Defender SUV by the middle of the decade due to legislative reasons. It has not yet been disclosed when the replacement will be launched. The first model of the Defender was built in 1948. About 2 million Defenders have been sold. In 2012, approximately 10,000 units of the Defender were sold globally.
|Jaguar F-Type Coupe||Jaguar C-X17 Concept|
|Land Rover Range Rover Sport||Land Rover Range Rover Evoque|
New factories for JLR to be built outside the UK; Tata eyes ASEAN Markets
Jaguar Land Rover announced that it will invest GBP 2.75 billion throughout the fiscal year ending March 2014. This investment will go toward facility enhancements and product development to support the launch of eight new or refreshed models. Speaking in September 2012, JLR chief executive, Ralf Speth, said the firm's immediate manufacturing ambitions lie outside the UK, saying the firm needs to "go where the markets are".
Meanwhile, Tata is looking to expand its reach into other Asian markets. The company recently expanded a truck factory in Thailand and is also looking into opening a new manufacturing base in Indonesia to serve the country and the ASEAN region.
Significant investment announcements
|Castle Bromwich, England||GBP 200 million (USD 324 million)||Announced in May 2012, this investment increased capacity by 50 percent to allow for production of the new F-Type convertible and coupe. Approximately 1,100 jobs were created.|
|Wolverhampton, England||GBP 500 million (USD 754 million)||In March 2013, JLR announced that it is increasing the total investment to GBP 500 million from the previously announced GBP 350 million. The plant will build a new generation of lightweight 4-cylinder low emission diesel and gasoline engines. The first engines will come off the production line in 2015. The new engines will mark the first time since the 1990s that the company will manufacture an engine of its own design, having previously sourced them from Ford.|
|Coventry, England||GBP 100 million total (USD 160 million); JLR investment GBP 50 million; Tata Motors investment GBP 30 million||JLR, Tata Motors and the UK government plan to open an R&D center at the University of Warwick in 2016 to create the next generation of vehicle technologies. Construction is scheduled to begin in September 2014. Research projects include electrification, smart & connected cars and Human Machine Interface. Around 1,000 academics and engineers will work at the National Automotive Innovation Campus (NAIC). 200 company researchers and engineers are already based at the University.|
|Changshu, Jiangsu Province, China||GBP 1.1 billion total (CNY 10.9 billion)||In November 2012, JLR and its 50-50 Chinese JV partner Chery started building a vehicle manufacturing plant near Shanghai. Plans include a new research and development center and an engine production facility. The JV will be called Chery Jaguar Land Rover Automotive Company Ltd. The plant will manufacture established Land Rover and Jaguar brand models as well as models for a domestic brand tailored specifically to the Chinese market. The plant is expected to open in late 2014.|
|Itatiaia, State of Rio de Janeiro, Brazil||GBP 240 million (BRL 750 million)||Jaguar Land Rover stated in December 2013 that it will build a new manufacturing plant in Brazil. Construction is expected to begin in mid-2014 with vehicle production starting in 2016. The factory will have capacity to build 24,000 vehicles annually and will employ 400 people. It will build vehicles for Brazil and other nearby markets.|
|Thonburi, Thailand||THB 100 million||In September 2013, Tata announced that it will add a new production line to assemble multiple models including the Super Ace light-duty truck. The new line will be operational in April 2014. Present capacity is approximately 10,000 units annually, eventually increasing to a total capacity of 15,000 units.|
|Portland, Oregon, USA||N/A||Jaguar Land Rover announced in November 2013 that it will open a new R&D center with Intel to develop future vehicle infotainment technologies. The new "Open Software Technology Centre" will open in 2014 and will complement the infotainment team based in Gaydon, UK. It will also support other long-term research projects that will be undertaken at the National Automotive Innovation Campus (NAIC) at the University of Warwick when it opens in 2016.|
|Dubai, UAE||N/A||JLR announced in May 2013 that it will build a larger, 11,120 sq. ft. testing facility to replace the existing one in Dubai, where it has conducted testing for 12 years. It will perform a range of tests including durability, calibration and hot weather testing for heat and humidity.|
|Indonesia||N/A||PT Tata Motors Indonesia was established in September 2012 to show the company's long-term commitment to the country. The company is also evaluating options for a manufacturing base in Indonesia to serve the country and the ASEAN region. Tata Motors sees immense potential for growth in this market. Further details have not been released.|
Source: Company Press Releases, Automotive News, General News Sources
Revenues and EBITDA grow despite a sluggish Indian market
Revenue for Tata Motors continues to increase at impressive rates. For the fiscal year ending March 2013, net revenue reached USD 34.786 billion, an increase of 6.8 percent over the previous fiscal year. This increase is less than the growth over the past few years because of struggling Tata domestic sales. During 2013, the Indian market experienced low levels of transport freight and infrastructure activity, frequent diesel price increases, a tight financing environment and a general slowdown in economic activity. Furthermore, competitive pressures on pricing in certain segments impacted operating margins. The weak operating environment in the India market was more than offset by increases in wholesale volumes and profits at Jaguar Land Rover.
FY 2013 profit before tax and exceptional items shows a decrease of (7.1) percent in USD. However, because of currency fluctuations, this figure was actually down by only (.9) percent in the home currency (INR) from the previous year. EBITDA in USD increased a healthy 5.1% over the previous year. After-tax profits declined by (31.4) percent to USD 1.823 billion due to higher income tax expense. During the previous fiscal year, JLR booked a large credit for past income tax losses, which is largely responsible for the difference.
Tata Motors Group (Consolidated): selected financial data (in millions of US Dollars)
|Fiscal Year ended March 31||2009(1)||2010(2)||2011(3)||2012(4)||2013(5)||YoY 2012-13||H1 2013(6)||H1 2014(6)||YoY H1 2013-14|
|(Of which JLR)||-||-||-||21,912||23,988||9.5%||11,209||14,094||25.7%|
|EBITDA Margin||3.1%||9.3%||14.4%||14.3%||14.1%||(0.2) pts.||13.9%||15.5%||1.6 pts.|
|Profit before tax and exceptional items||(458)||738||2,290||2,824||2,623||(7.1%)||1,074||1,299||21.0%|
|(Of which JLR)||-||-||-||2,402||1,847||(23.1%)||876||1,312||49.9%|
|Source:||Tata Motors Business Reviews|
|Notes:||1) Conversion rates USD 1= (1)INR 46.47; (2)INR 47.75; (3)INR 45.5773; (4)INR 50.87; (5)INR 54.28; (6)INR 62.6175|
|2) * Excludes Other Income|
3) ** PAT is after Minority Interest and share of Profit/(Loss) in respect of associate companies
4) Figures in brackets ( ) indicate a negative value.
Tata Motors Financial Results for the Half Year ended September 30, 2013
For the Half Year ended September 30, 2013, the consolidated net revenues were USD 16.556 billion, posting a growth of 19.5 percent over USD 13.850 billion for the corresponding period last year. The consolidated profit before tax and exceptional items was USD 1.299 billion, a growth of 21.0 percent over USD 1.074 billion for the corresponding period last year. The consolidated net profit (PAT) for the Half Year was USD 841 million, a growth of 22.0 percent over USD 690 million for the corresponding period last year. This increase was due to the success of the Jaguar and Land Rover brands, whose significantly higher margins and increasing demand more than compensated for the decline in sales of the Tata brand.
Production Forecast by LMC Automotive: Tata/JLF production expands beyond traditional markets
|(LMC Automotive、October 2013)|
The Tata brand is expected to make a comeback from the lows it experienced in 2013. Economic conditions in India are expected to improve, leading LMC Automotive to forecast production in the country to exceed 700,000 units by 2016. This is nearly as many as it produced in 2012. The company is looking to expand the Tata brand to other ASEAN countries by establishing a manufacturing base in Indonesia and adding capacity to its existing operations in Thailand. Both facilities will see operations come online in 2014, significantly boosting production in the region by 2016.
Meanwhile, with the introduction of new products and the anticipated growth in premium brands, Tata has announced several investments in JLR's facilities in the UK. Historically, these vehicles have been shipped to markets around the world. China is already the biggest market for JLR branded products and many analysts expect that country to surpass the United States as the biggest premium car market by 2020. In order to meet this demand, the company is building its first major manufacturing facility outside the UK in China. The plant is expected to begin operations in late 2014. LMC Automotive forecasts this plant to produce over 80,000 units by 2016. Also, the company has recently announced intentions to build a new JLR facility in Brazil, further expanding its global reach.
Tata Group total production by country and brand (LMC Automotive)
|Source: LMC Automotive, Global Automotive Production Forecast, October 2013|
|(Note) 1.||Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.|
|2.||All rights reserved. Reproduction of any data will require permission of LMC Automotive.|
|3.||For more detailed information or inquiries of forecast data, please contact LMC Automotive.|
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