Tata Motors plans to double its investments in its Jaguar Rover brands to $2.4 billion a year, although the company is aware that it will be a challenge to sustain high margins at its key profit generator.
Jaguar Land Rover (JLR) has driven the company’s growth in recent quarters, with soaring revenues and expanding margins.
“Over the past 5 to 6 years, JLR has spent around 700 to 800 million pounds annually on capital expenditure and product development. Going forward, we will double that,” declared C.R. Ramakrishnan, Tata’s chief financial officer.
JLR contributed 95 percent of the company’s profit in the quarter to end-December, with a profit margin of 20 percent, three times the profitability seen at Tata’s domestic business. To sustain such high margins won’t be easy, as sales grow likely moderate. The new compact Evoque SUV sales accounted for much of JLR’s revenue growth in the fiscal third quarter, with surging demands in Russia and China.
There is bad news coming from Tata’s joint venture with Fiat SpA, which is not producing the expected financial results or sales. The two companies try to find solutions to improve Fiat’s sales in the country.