Tata Motors Finds Success in Jaguar

Land Rover

A customer looks at the Range Rover Evoque models at showroom in India. Sales of the
Evoque have helped Tata Motors.Credit...Prashanth Vishwanathan for The New York
Times
By Vikas Bajaj
• Aug. 30, 2012

MUMBAI, India — This summer, Jaguar Land Rover cranked up production to 24 hours
at its plant near Liverpool, England, adding 1,000 jobs to help meet demand for its hot-
selling and acclaimed Range Rover Evoque. Now, the company is readying the release of
its much-anticipated Jaguar F-Type roadster.

Four years after being bought by an Indian company, the well-known but somewhat
faded British brands are regaining some of their lost luster, racking up big sales from
Shanghai to London.

The success has stunned analysts and investors, many of whom had said that Tata
Motors, the Indian auto company, was making an expensive mistake when it acquired
Jaguar Land Rover from Ford Motor for $2.3 billion in June 2008. At the time, Ford
was raising money to ensure its own survival, and it sold the brands for several billion
dollars less than it had paid to acquire them years earlier.

Analysts say Tata has done what few companies from emerging markets have been able
to do — turn around and successfully run a troubled Western company. Many others,
including Tata Motor’s sister company Tata Steel, which paid $11.3 billion for Corus
Steel in 2007, have struggled with acquisitions made in Europe and the United States in
the era of cheap money before the financial crisis.

Tata Motors appears to have succeeded in large part because it did not seek to run
Jaguar Land Rover from Tata headquarters here. Instead, it has left day-to-day
management in the hands of executives in England. It also benefited from projects
started under Ford ownership, including the Evoque, which has won fans, including the
exacting hosts of the BBC show “Top Gear” and the Chinese nouveau riche.

In its last fiscal year, which ended in March, Jaguar Land Rover posted a 27 percent
jump in retail sales, to 306,000 vehicles, and became the primary driver of growth and
profit for Tata Motors. The Indian car and truck business of Tata has stagnated in the
same time because of a slowing domestic economy and a weak product lineup that
includes about a dozen passenger cars. Sales of Tata cars were up an anemic 4 percent in
the previous fiscal year.

Analysts said that barring a global economic recession, they expected Jaguar Land
Rover to continue to do well because it was about to release several new models,
including a redesigned version of its flagship Range Rover and the F-Type.

“I think people were a bit skeptical and snobbish and maybe had some old colonial
hangover,” Tim Urquhart, a senior analyst at IHS Automotive in London, said about the
initial doubts about the acquisition. But he added, “If you look at Land Rover and
Jaguar now, they probably have the strongest product line in their recent history if not
ever.”

Tata’s takeover of Jaguar Land Rover did not always look promising. The financial crisis
hit soon after the deal closed, and demand for luxury cars tumbled in Europe and North
America — its two biggest markets. Struggling with a $3 billion debt it took on to pay for
the deal, Tata Motors was forced to put more money into the company after it failed to
secure financial aid from Britain.

Many analysts questioned whether the company paid too much and extended itself too
far, speculating that its chairman, Ratan Tata, a car buff and scion of the family that
built the Tata group of companies, had become too enamored of buying global brands.
Over the years, the group has acquired Tetley Tea, the Pierre Hotel in New York and
Daewoo Commercial Vehicles in South Korea.

“The acquisition has worked because the investment has been carefully targeted and
effective,” Phil Popham, global operations director for Jaguar Land Rover, said in a
written response to questions. “Our growth is supported by a disciplined financial plan
involving tight cost controls and targeted investments.”

A Jaguar XF Diesel at a showroom in India. Tata Motors bought Jaguar Land Rover in
2008, and has since turned the struggling company around.Credit...Prashanth
Vishwanathan for The New York Times

Analysts and competitors credit the turnaround to Tata’s financial reserves, which
helped it weather tough times, and its wisdom in granting autonomy to managers in
England.

“What has helped is that Tata had staying power,” said an executive at another auto
company who asked not to be named because he did not want to speak publicly about a
rival. “And Tata adopted a hands-off policy.”

The Ford effect extends beyond its past investments in the brands and the design and
engineering for the Evoque. Most engines in Jaguar Land Rover cars still come from
Ford, though the company is building its own engine factory in England.

Led by a former BMW executive, Ralf Speth, who took over as chief executive in early
2010, Jaguar Land Rover makes all of its cars, which range from $36,000 for an entry
level S.U.V. to $140,000 for a convertible, in factories in England, though it is now
starting assembly operations in other countries. The company reported this month that
its latest quarterly profit was up 7.5 percent from a year ago to £235.9 million, or $372
million.
In North America, the company’s sales were up 15 percent, to 58,003 cars, in the fiscal
year that ended in March. J. D. Power recently rated Jaguar as the “most improved” car
brand in its quality rankings.

Much of the success has come in China, a country that provided just 1 percent of Jaguar
Land Rover’s sales as recently as 2005 and is projected to generate sales in the double
digits this year. The company made a big effort to expand dealerships in the country,
where luxury car sales have been much stronger than in Western markets. Executives
expect China to become the company’s largest market soon, and last year they
announced that Jaguar Land Rover would begin building and assembling cars there.

High-end car buyers in China appear to be drawn to Jaguars and Land Rovers in part
because they are considered a novelty.

Liu Gang, a 33-year-old finance executive in Shanghai who confessed to not knowing
much about cars, recently bought a Jaguar XF sports sedan, for which he paid 700,000
yuan, or $110,000. He considered and dismissed comparable models from BMW and
Mercedes-Benz as passé. “Let me be honest, it’s just a symbol of status,” he said.
“Anybody in China can have a Mercedes-Benz.”

But analysts say the Jaguar Land Rover’s growing reliance on China suggests that a
sharp slowdown there and another euro-related shock in Europe could derail its growth.
Another concern is whether the company has enough models beside the Evoque to
power future sales. The Evoque accounted for 85 percent of sales growth in the last
fiscal year even though it was only on sale for the last seven months of the year. By
contrast, sales of Jaguars have been relatively muted, increasing just 5 percent in the
last fiscal year. More recently, Jaguar posted a 16.3 percent increase in global sales in
the first seven months of this year compared with the same period last year.

Mr. Popham said the company expected sales of Jaguars to pick up with the
introduction of the F-Type, a long-awaited sequel to its well-known E-Type roadster,
which was introduced in 1961 and is considered by many car aficionados as one of the
most beautiful sports cars ever made. A production version of the F-Type will make its
debut at the Paris Motor Show on Sept. 27.

“A lot is riding on the F-Type roadster,” said Hormazd Sorabjee, editor of AutoCar India,
a Mumbai-based car magazine, adding that Jaguar has made big strides but still has a
“fair amount to do.”

Still, analysts say that for Tata Motors, which recently hired a senior executive from
General Motors to help revive its flagging Indian auto business, Jaguar Land Rover is
likely to remain a driving force for the near future.

Gu Huini contributed reporting from Shanghai and Neha Thirani from Mumbai.