10 April 2010

Tata's Shrewd Buy

When Tata bought Jaguar/Land Rover from Ford Motor Company for US$2 billion, many thought it was a poor decision. Ford rarely made money from either, especially Jaguar, which it owned from 1989.
At the time Mr Tata said he would be patient in his expectations and was in it for the long term. Well, he hasn't waited long as both brands have quickly moved into profitability. By the last quarter of 2009, sales were rebounding and the first quarter of 2010 Land Rovers sales in particular have been outstanding. This from a brand that sells medium to large SUVs.

For the first three months of 2010, Land Rover sales in selected markets are as follows: UK 15,000 +63%, USA 6,700 +15%, China 5,200 +190%, RSA 1,450 +50%, Spain 1,400 + 60%, Brazil 1,100 +50%, Korea 250 +100%, NZ 140 +200% and Poland 100 +330%.
Jaguar has been selling only two models and its sales have been amazing while it waits for the XJ to reach the market. A few markets it has done well in for the first quarter: China 600 +70%, Australia 275 +50%, Korea 160 +95% and Portugal 70 +75%.

So why the difference between Ford's and Tata's success with JLR. Well, Ford sold after it had done much to improve the brands so didn't gain the fruits of its efforts. Ford was in a financial mess at the time and had little choice. But the sale to Tata will benefit JLR in future because Ford always tended to be a hands on owner - usually not getting it right with Jaguar - to Tata's viewing JLR as a separate organisation within a conglomerate. This will allow JLR to make decisions and move quickly with them, something Ford ownership never allowed.
JLRs future will be about getting CO2 emissions and fuel consumption down. They are working hard at it but are behind on where they should be. Tatas's ownership should allow them the flexibility to make such improvements quickly.
Yes, some questioned the purchase but no one is thinking that now.

The bottom line: Tata gains credibility with JLR and JLR gains autonomy. A win win situation it seems.

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