* To double investments in JLR to $2.4 bln a year
* Sustaining JLR margins "a challenge"-CFO
* JLR has picked China partner, awaiting govt clearance
* Fiat JV not performing as expected, no plans to end it
By Henry Foy
MUMBAI, Feb 21 Tata Motors will
double investments in its Jaguar Land Rover brands to 1.5
billion pounds ($2.4 billion) a year, even as the Indian
automaker warned that it will be a challenge to sustain high
margins at its key profit generator.
With soaring revenues and expanding margins, Jaguar Land
Rover (JLR) has driven the company's growth in recent quarters,
as strong demand in emerging countries for the famous British
brands offset sluggish performance in Tata's home market.
"Over the past 5 to 6 years, JLR has spent around 700 to 800
million pounds annually on capital expenditure and product
development. Going forward, we will double that," C.R.
Ramakrishnan, Tata's chief financial officer, said on Tuesday.
"JLR spending will be in the order of 1.5 billion pounds
each year," Ramakrishnan told reporters, adding that the
increase would apply in the current fiscal year ending in March.
JLR contributed 95 percent of the company's profit in the
quarter to end-December, with a profit margin of 20 percent,
three times the profitability seen at Tata's domestic business.
Sustaining such high margins in coming quarters would be "a
challenge," for JLR, Ramakrishnan added, as sales growth likely
Sales of its new compact Evoque SUV accounted for much of
JLR's revenue growth in the fiscal third quarter, alongside
surging demand in emerging markets such as Russia and China.
Tata has selected a joint venture partner for manufacturing
JLR cars in China and is awaiting approval from government
regulators in the world's fastest-growing auto market,
An announcement on the company's China joint venture will be
made "very soon," he added, without giving details.
JLR had agreed in principle to develop a luxury car with
China's Chery Automobile in order to win approval for a
manufacturing venture, a Chinese newspaper reported in December.
FIAT JV TO STAY
Tata's joint venture with Fiat SpA, through which
the Italian automaker utilises the company's distribution
network in India, is not producing the expected financial
results or sales, Ramakrishnan said.
Fiat and Tata have held meetings to discuss new measures to
improve the Italian automaker's sales in the country,
Ramakrishnan added, but there were no plans to end the tie-up.
Tata, part of the global tea-to-technology Tata Group, has a
product range that includes the British luxury brands famous for
sleek saloons favoured by prime ministers and off-road vehicles
used by armed forces, and the ultra-cheap Nano car.
The company posted a 40.5 percent rise in profits in the
quarter to end-December, as sales by JLR, which Tata bought in
2008 for $2.3 billion, offset sluggish sales by its domestic arm
hit by high costs and interest rates.
The increased investment in JLR would mainly be spent on
developing new products and technology, Ramakrishnan said.
Tata's domestic business has been hit by rising input costs,
as demand moderates on high interest rates and increased fuel
costs. The entry of many global brands has also put pressure on
Tata's commercial vehicle business, where it traditionally has
enjoyed the lion's share of the market.
"The commercial market is certainly getting tougher," said
P.M. Telang, managing director of Tata's India operations.
"We expected over the past few years global competitors to
come in... and are upgrading our commercial vehicle range to
meet that," he added.
Swedish truck maker Scania AB said last month it
will invest 1.5 billion rupees ($30.1 million) in an assembly
plant in southern India, joining truck makers such as Daimler AG
and AB Volvo in the fast-growing market.