A 41-per-cent year-on-year growth in net sales at Jaguar Land Rover (JLR) has been the driving force behind the 44-per-cent consolidated top line growth (Rs 45,260 crore) recorded by Tata Motors in the third quarter.
One reason for the strong performance at JLR is the robust volume growth of 37 per cent to about 86,300 vehicles.
Favourable product, market mix
This growth has been aided predominantly by two models, the Jaguar XF and the Range Rover Evoque. While other Land Rover vehicles such as the Defender, Discovery 3 / 4, Range Rover, Range Rover Sport and Freelander have seen tepid demand, the recently launched Evoque has seen an off-take of about 25,000 vehicles during the quarter contributing to about one-third of the total Land Rover volumes.
The second reason is a favourable market mix. With growth slowing down in the US, UK and Europe, its traditional markets, JLR saw its focus on Russia and China paying off. China brought in 17 per cent of the total volumes this quarter compared with 13 per cent a year ago. The third reason is favourable exchange rates.
JLR margins expand
Despite the strain on operating margins from the standalone entity, consolidated margins expanded to 16 per cent this quarter (13 per cent last year), thanks again to JLR. Greater pricing power enjoyed by most Land Rover vehicles (which constitute about 80 per cent of the total JLR volumes), lower raw material to sales proportion compared to Indian manufacturers, continued cost control efforts and favourable exchange rates have helped JLR margins move up to 20 per cent in this quarter from 17.4 per cent a year ago.
On the other hand, standalone margins were impacted by greater marketing spends, relatively lower utilisation of capacity and higher raw material costs (due to rupee depreciation).
These pressures coupled with a marked-to-market forex loss of Rs 83 crore, saw the standalone entity recording a 58-per-cent fall in net profits year on year. JLR though drove consolidated profits up 40 per cent to Rs 3,405 crore.
Domestic operations
For JLR, while the US markets have shown signs of recovery, uncertainty remains for UK and the rest of Europe.
On the domestic front, increased marketing spends in the highly competitive passenger vehicles market have started bringing in desired results. A leg up to CV volumes from an expected revival in industrial activity over the next few months will also help.
These, along with stabilisation in commodity costs and likely cut in interest rates should boost growth.