New Jaguar Land Rover models will revive Tata Motors’ luxury car segment

Tata Motors was under huge financial pressure when it bought British car brand Jaguar Land Rover from Ford Motor Company. The acquisition was followed by the worst economic recession in the history of the world which brought down car sales around the world and India. Now, the car market is recovering but the sales did not go up much. Tata Motors is hopeful that the new car brands from Jaguar Land Rover will rejuvenate its luxury car business. Due to economic recession, the demand of luxury car has fallen significantly in the international market.

On July 9, 2009, Jaguar is going to unveil its new supermini XJ Sedan. The car will be available in V6 diesel variant and 510hp V8 engine variant. Analysts are hoping for good demands for luxury cars but there will be less car from Jaguar as it is a luxury brand. The official launch of the XJ Sedan will take place in London and delivery will start from 2010. Booking will start immediately after the car. The Jaguar XJ Sedan is similar to Mercedes Benz S Class, BMW 7 Series and Lexus LS. In January 2009, Jaguar launched the upgraded versions of the XF and XK sedans, the XFR and XKR.

The Land Rover brand is also developing a new model based on “the LRX concept vehicle platform.” In addition, upgrades of Range Rover, Range Rover Sport and Discover 4 were launched in April 2009.

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Can Tata Motors handle Jaguar and Land Rover?

There is perhaps nothing shocking that Tata Motors posted some loss in revenue for the last financial year. $520 million is a huge amount of money to lose. However, it is the time of economic recession and some other companies have posted much bigger loss. A good part of the loss came for Jaguar and Land Rover. It is also natural as because of economic recession, most people are not that much interested to buy expensive cars in rich countries. It is a same story in all the rich countries for all the auto makers.

Economic Times wrote:

Jaguar and Land Rover posted a loss of Rs 1,777 crore for the year. The deepening recession in the US and UK worsened the demand for luxury vehicles, forcing Tata Motors to cut jobs and consider plant closures. JLR has already shed 2,000 jobs and Tata Motors senior executives warned on Friday that more will be needed.

We will have to wait until the end of the recession to realize whether Tata Motors can handle expensive brands like Jaguar and Land Rover. These days, the company is getting a lot of attention from the media and the consumers because of its Nano- the cheapest car in the world.

Will Tata Nano turn around Tata Motors’ luck?

Tata Motors is finally launching Tata Nano, the ultra-low-cost car, on March 23, 2009. Had things gone according to the plan, Tata Motors would have launched Nano six months earlier. Tata Motors was supposed to build its Tata Nano manufacturing facility in West Bengal. Due to political pressure, the project was scrapped and replaced in the industry friendly Gujarat province. Tata Nano which costs Rs. 100,000 ($2050) is the cheapest car in the world. The snub nosed car is 10.2 feet long. It comes with a windshield wiper, a 623cc rear engine and diminutive trunk. There are no extra-safety or comfort features. The car does not have any air bags, anti-lock brakes, air-conditioning, radio, or power steering. If buyers want to have these features, they would have to pay extra money.

Now, the million dollar question is: Will Tata Nano see the face of profit? Had Tata Nano released the car six months earlier, the question could be answered with a positive note but now, the gloom of economic recession is hanging over India and stalled its economic growth.

Like many other companies Tata Motors is also facing the heat of the recession. Only two years ago, Tata was on the path of unprecedented growth. Last year, it bought Jaguar/Landrover from Ford for $2.3 billion. The company took huge loan to buy the two brands. Now, everything has changed for Tata Motors. In the economic recession, commercial vehicles which make up Tata’s core business had been badly hit. The company registered a loss of $54 million in the last October-December quarter.

Moreover, the relocated factory of Tata Nano has not been finished yet. Tata officials said that it would take at least one year to finish the new Tata Nano manufacturing facility. Initially, Tata announced to roll out 250,000 Nanos but analysts think that the company would not be able to produce more than 50,000 units. According to Vaishali Jajoo, auto analyst, Angel Broking, even if Tata can achieve its target it would only add 3% to the total revenue of the company and it would make much of a different.

Like it or not, I like what Paul Polman, CEO, Unilever Group said, “Recession can’t be an excuse for business to go down.” It is true that companies are suffering for economic recession but they must continue and try their best to survive this recession. Tata is going to launch Tata Nano tomorrow. I wish them all the best with the car.

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(This entry was originally published in March 2009.)