Jaguar, Land Rover see opportunities in new markets

MUMBAI, June 6 (Reuters) - Jaguar and Land Rover, now owned by Tata Motors (TAMO.BO), face considerable challenges from a tougher global economic climate and stiffer carbon controls, but see great opportunities in emerging markets, officials said.

The luxury British brands have shown improved profitability, and new launches are expected to boost sales further, David Smith, chief executive of Jaguar and Land Rover (JLR), said on a conference call on Friday.

Tata Motors, India's top vehicle maker, said earlier this week it had completed the $2.3 billion purchase of the brands from Ford Motor Co (F.N), which has contributed about $600 million to their pension plans and will support the transition.

"The stiffer carbon norms are a challenge for the whole industry, and we are taking it very seriously," Smith said.

"We are also seeing some slowdown in North America, but we should be able to compensate for that with more sales in new growth markets like Russia, China, the Middle East and elsewhere, where we are investing significant resources."

China, the world's fastest-growing auto market, is expected to be Land Rover's No. 5 market this year, and Jaguar's seventh largest, Smith said. Russia will likely be Land Rover's No. 3 and Jaguar's No. 8 market, he said.

"In time, they will be even more significant markets."

JLR will also explore opportunities in India, where a booming economy has created growing numbers of millionaires.

"We can't bank on too many numbers, but Mercedes and BMW are doing well," said Tata Motors' managing director Ravi Kant.

Daimler (DAIGn.DE) sold 2,491 Mercedes cars in India in 2007, nearly a fifth more than the previous year, while BMW (BMWG.DE) aims to sell 2,000 cars in the fast-growing market this year.

Stiffer emission norms of 120 g/km for new cars that are proposed to come into effect in the EU from 2012 posed considerable challenges, Smith said.

Compounding this was high costs of oil and commodities such as steel, as well as greater competition from premium car makers.

"But profitability has been improving, and we will focus on cost reductions, improved efficiency and look at opportunities to reduce material costs and for price increases," Tata Motors' chief financial officer C. Ramakrishnan said.

JLR will operate as a standalone business within Tata Motors, he said, with both companies "exposed to each other" and with access to each other's technology and R&D.

Tata Motors, which is scheduled to start selling the Nano, the world's cheapest car, in India later this year, has entered into long-term agreements with Ford for the supply of engines, stampings and other components. Other areas of transition support from Ford include IT, accounting and access to test facilities.

The companies will also cooperate in areas such as design and development through sharing of platforms and joint development of hybrid technologies and powertrain engineering, Tata Motors has said.

The Ford Motor Credit Company will continue to provide financing for Jaguar and Land Rover dealers and customers for a period, and Tata Motors has said it was in advanced talks with auto finance providers in the UK, Europe and the United States. (Reporting by Rina Chandran; Editing by Richard Hubbard)