Home mkt tough, but Tata Motors net doubles on Evoque sales

For the second time in a row, robust demand of its British subsidiary JLR vehicles, largely driven by the Evoque compact SUV,and a Rs 1,900 crore tax gain helped Tata Motors to post an over two-fold jump in its consolidated net profit at Rs 6,234 crore for the quarter ending March 31, despite sluggish sales in home market.

The Evoque SUV, which Tata Motors introduced last year, has a waiting list of about three months, Chirag Shah and Siddhartha Bera, analysts at Emkay Global Financial Services wrote in a note dated April 23.

[caption id=“attachment_325485” align=“alignleft” width=“380” caption=“China’s boost to JLR’s bottom line comes as global automakers, hit by sluggish sales in established markets such as Europe, shift their focus towards developing economies to drive future growth”]  [/caption]

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In the January-March period, Jaguar Land Rover (JLR) reported an over two-fold rise in net income at 696 million pounds (over Rs 6,000 crore) from 262 million pounds (over Rs 2,380 crore) from the same period last year, group chief financial officer C Ramakrishnan told reporters in Mumbai on Tuesday.

JLR’s growth in overseas markets - it sells imports in India and recently began assembling some Land Rover models there - has helped insulate Tata from a sluggish domestic car market which grew just 2.2 percent in the last financial year.

Tata Motors Managing Director (India operations) Prakash M Telang said the company would invest over Rs 3,100 crore in the country during the current fiscal, while this will be 2 billion pounds (Rs 17,400 crore) in the JLR operations, which would be used to develop more fuel efficient models apart from ramping up capacity in Britain.

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Ramakrishnan said JLR profit was aided by a one-time income by way of deferred tax gains worth 217 million pounds or around Rs 1,888 crore during the quarter. This makes over 95 percent of the net income coming from the JLR business, which the Tata Group company had bought in 2008 for $2.3 billion from Ford Motor. JLR sales was primarily boosted by runaway demand for the Range Rover Evoque compact SUV launched last year, JLR’s revenue grew 51.5 per cent to 9.87 billion pounds in the quarter to March.

JLR sales grew a record 29.1 percent boosted by roaring sales in overseas markets, especially Russia and China. However, Tata Motors’ domestic sales, especially the passenger car segment, were sluggish with just a 2.2 per cent growth.The Economic Times, quoted an industry analyst as saying, “There are hardly any positive triggers in the domestic market. Pressure on commercial vehicles will remain, since the cost of acquisition has gone up due to increase in excise duty and very high interest rates.”

New JLR models and increased focus on Russia and China helped boost sales by 48 per cent for the fiscal. Against this, standalone numbers for Tata Motors India were disappointing with net profit sliding 1.4 percent to Rs 565 crore in the March quarter from Rs 573 crore a year ago.

To meet rising demand and future product launches, the company has added 1,000 new employees at each of Halewood and Solihull plants, in addition to a third shift.

Its overall sales grew 14.4 per cent to Rs 16,391 crore in the quarter. The company reported better operating margin at 9.5 per cent after a 3 percent price hike in early January.Telang said the company is expecting regulatory approval from China for its JLR assembly plant in the Middle Kingdom. “We see very strong growth in China. The demand for our vehicles, especially the Range Rover and Range Rover Sport, is very high. If the dynamic continues, China will be our number two market,” this financial year, JLR Chief Executive Ralf Speth said. However, Surjit Arora, an analyst with Prabhudas Lilladher is skeptical about the company’s growth momentum in China as demand slows in one of the biggest markets for luxury cars, said a Mint report today.

Late last year, the company had announced that Chery Automobiles would be its Chinese partner. The venture, to be based in the eastern city of Changshu in Jiangsu province, will have a production capacity of 130,000 vehicles annually, according to a statement posted on China’s Ministry of Environmental Protection’s website.

Telang said Tata Motors’ consolidated net income during the fourth quarter also rose 44.27 per cent to Rs 50,907.90 crore from Rs 35,287.06 crore a year ago. For the full fiscal, consolidated net rose 45.75 percent to Rs 13,516.50 crore from Rs 9,273.62 crore. The consolidated net sales jumped 35.64 percent to Rs 1,65,654.49 crore compared to Rs 1,22,127.92 crore in FY'11.

Tata Motors total sales, including CVs and PVs, in India were up 10.7 percent in FY12 to 9.26 lakh units, led by strong growth in LCVs like Ace and diesel PVs. Tata Motors had a market share of 59.4 percent in CVs and 14.2% in PVs last financial year.

Currently diesel vehicles account for 70% of the company’s domestic PV sales, said PM Telang, MD, India operations. He said the company would continue to focus on improving fuel effeciency in its PVs in the wake of sharp rise in petrol price in India.

Tata Motors is also adding 300 touch points to boost Nano sales, especially in smaller towns and rural areas, Telang said.

While he refused to comment on a diesel version of the Nano, a CNG version will be launched some time this financial year, he said.

For 2011-12 fiscal, JLR’s PAT stood at 1,481 million pounds (over Rs 12,900 crore) as against 1,036 million pounds (over Rs 9,020 crore) in FY'11, up 42.95 percent. JLR revenue went up by 36.89 percent to 13,512 million pounds (over Rs 1,17,800 crore) from 9,871 million pounds (over Rs 86,020 crore) in the previous fiscal, Ramakrishnan said.

He added that in terms of volume sales, JLR witnessed a jump of 29.1 per ent in FY12 at 3,14,433 units. Tata Motors had sold a total of 9,26,353 units of passenger and commercial vehicles during 2011-12, registering a rise of 10.7 per cent over the previous fiscal, he said.

Agencies