Tata Motors goes low-cost with Jaguar Land Rover

Tata Motors’ Jaguar Land Rover unit will launch the smaller version of its Jaguar car in 2013, and will be central to the company’s plan for the marquee car division.

Apart from manufacturing leaner cars, the JLR unit will also strengthen efforts to source parts from low-cost countries such as Poland, China and India, an industry source said.

“Earlier Ford used to procure 17% of its cost from low-cost countries like Poland, China, and India where as Tata Motors is planning to increase it to 35%. Currently, the company is procuring 20% of its parts from low-cost countries,” the source said.
Tata Motors acquired JLR from Ford Motor Co for $2.3 billion in 2008.

The company has also made moves on outsourcing low-end design and development work for the JLR operations.
Enthused by the demand for Jaguar and Land Rover in China, Tata Motors hopes to sell 25,000 units in China in 2010-11.
Tata Motors sold 17,000 JLR units in 2009-10.

The Jaguar XJ model launched in May has received “good” response and the company hopes to sell 20,000 units of the car “this year”, the source said. JLR intends to launch the Jaguar LRX in 2011 and the smaller Jaguar in 20103, the source said.

Tata Motors sees JLR’s 2010-11 margins at 14-15% because of favourable product and geographical mix, and at 10-10.5% for the domestic operations, the source said.

Consolidated operating profit margin, in April-June 2010, was 14.6% for Tata Motors.    

Tata Motors also has plans to deleverage by raising funds via selling stake in its finance subsidiary and diluting some equity.

It had recently made presentations to institutions to raise $700 million via sale of its differential voting rights shares.

Tata Motors has maintained it plans to cut the company’s net debt-to-equity ratio to 1:1 from the level of 1.96 as on June 30.
The company has net debt of `19,983 crore as on June
30.

NewsWire18