Mumbai: Sales at luxury car maker JaguarLand Rover (JLR) continued their strong run from the previous three months, rising to 18,000 units in April, a 12% jump from the corresponding period in the previous fiscal.
The increase at Tata Motors Ltd’s wholly owned subsidiary was driven largely by the launch of new models and a surge in auto sales worldwide.
Paul Chadderton, a London-based spokesman for JLR, told Mint the firm saw strong demand in key markets such as the US, the UK and China, a new emerging market for JLR where sales doubled, albeit from a small base.
Since buying the embattled UK auto maker in June 2008 for $2.3 billion, Tata Motors has had to implement a raft of restructuring measures, battle high costs and a then-shrinking auto market, before it returned the iconic JLR to profitability in the third quarter of fiscal 2010.
Top gear: A Jaguar Land Rover showroom in Mumbai. Analysts say the good run at JLR may not last due to the debt crisis in Europe. Adeel Halim/Bloomberg
In April, JLR reported profit of Rs416 crore for the fiscal ended March, the first time after Tata Motors acquired the UK-based auto firm.
New models such as the Range Rover Sports, Freelander 2 and Discovery pushed sales from the Land Rover stable 30% higher to 14,200 units. However, retail sales of Jaguar, which competes with German car makers BMW AG, Mercedes-Benz and Audi AG, fell 25% to 3,900 units.
This, Chadderton said, was because of the gap between the supply of the new Jaguar XJ and the outgoing Jaguar X-Type. The firm unveiled XJ in January and deliveries are likely to begin in the current quarter. It will compete with the Mercedes S Class and BMW 7- Series, among others.
Analysts, however, are reluctant to fully embrace the good run at JLR, questioning its sustainability in the face of the debt crisis in Europe, precipitated primarily by Greece and to some extent by similar fears over Portugal and Spain, which they say might dampen consumer sentiment.
Chadderton, however, disagreed, saying the firm’s exposure to those nations was negligible and that none of those three nations were “volume markets”.
Greece, he said, accounted for less than 100 units in 2009-10.
Also, global currency movements are likely to help JLR even if it loses a bit in volume sales, said Joseph George, an analyst at the Mumbai-based brokerage BNP Paribas Securities.
“JLR is a net importer from Europe and net exporter to the US. So an appreciating USD (US dollar) and depreciating euro versus GBP (the pound) works in its favour,” George wrote in a 12 May report, along with colleague Manish Gupta. The firm also forecast that the euro would depreciate 7% while the US dollar would rise 10% against the pound by the end of calendar 2010, which the firm says could lead to a positive margin surprise.
JLR will also benefit from the pickup in the luxury car market following the end of the so-called “scrappage incentive” programmes in Europe and the “cash for clunkers” schemes in the US that allowed owners to trade in their old vehicles for newer compact cars, said Ashvin Chotai, managing director of consultancy firm Intelligence Automotive Asia.
“We expect the market to normalize this year,” he said in a telephone interview from London, adding that the segment will be immune to the current macro economic scenario in Europe.
But he warned that Jaguar has a long way to go before it can catch up with its German rivals.
“While I am not undermining Tata Motors’ restructuring efforts, there is still a lot of work to be done,” he said, adding that it would be critical for JLR to sustain healthy numbers through the product cycle, particularly after its models hit mid-life.