Tata doubles Jaguar Land Rover funds
TATA Motors will double investments in its Jaguar Land Rover brands to £1.5bn a year, even as the Indian carmaker warned that it will be a challenge to sustain high margins at its key profit generator.
With soaring revenues and expanding margins, Jaguar Land Rover (JLR) has driven the company’s growth in recent quarters, as strong demand in emerging countries for the famous British brands offset sluggish performance in Tata’s home market.
“Over the past five to six years, JLR has spent around £700-800m annually on capital expenditure and product development. Going forward, we will double that,” CR Ramakrishnan, Tata’s finance chief, said yesterday.
JLR spending will be in the order of £1.5bn each year, Ramakrishnan told reporters, adding that the increase would apply in the current fiscal year ending in March.
JLR contributed 95 per cent of the company’s profit in the quarter to end-December, with a profit margin of 20 per cent, three times the profitability seen at Tata’s domestic business.
Sustaining such high margins in coming quarters would be “a challenge,” for JLR, Ramakrishnan added, as sales growth likely moderates.
Sales of its new compact Evoque SUV accounted for much of JLR’s revenue growth in the fiscal third quarter, alongside surging demand in emerging markets such as Russia and China.
Tata has selected a joint venture partner for manufacturing JLR cars in China and is awaiting approval from government regulators in the world’s fastest-growing auto market, Ramakrishnan said.
An announcement on the company’s China joint venture will be made “very soon”, he added.