China to be Tata Motors' biggest revenue driver this fiscal year
Which country does Tata Motors earn most of its revenues from? The answer is no longer India, nor is it the UK, HQ to Jaguar Land Rover (JLR), the marquee brand Tata Motors acquired in 2008. It's not even Europe, another strong market for JLR. And the US is only fifth in line. In FY14, Tata Motors is likely to earn more revenues from China than any other country or region.
Already, in FY13, China accounted for 23.6% of Tata Motors' global revenues, just a whisker behind India, which brought in 23.9% of its revenues, according to the latest annual statements the company has filed with US SEC recently.
"This is a reflection of the sharp fall in Tata's core commercial vehicle and car sales in India and a surge in higher-priced luxury vehicles in China," says Ashvin Chotai, MD, Intelligence Automotive Asia, a London-based consultancy. In the first six months of this calendar year, Tata Motor's India sales have fallen by 25.4% while its China sales have gone up by 16%.
JLR's sales in China grew from 17,552 units to 77,144 units in three year, since it set up a National Sales Company there to import and sell cars. In rupee terms, its China revenues grew from Rs 11,464 crore to Rs 44,565 crore in the same period. Profitability in China, company sources say, is also better than most parts of the world.
The recent growth in China is now rapidly re-shaping the contours of Tata Motors, till recently very much an Indian industrial company that JRD Tata had founded in 1945. Even two years ago, China accounted for less than 10% of Tata Motor's global revenues and was only fifth in the list of countries it earned its revenues from. JLR made its first tentative drive into China in 2003 under Ford, its former owner. But it was only in 2010, under the Tata management, that JLR opened up full throttle.
The company now sells models like Evoque, Freelander and the Jaguar range through 120 dealer outlets in China. SUVs, hugely popular with Chinese customers, account for 90% of JLR's sales in the country and have helped it increase its share in the luxury cars market from 2.2% in 2006 to 5.8% in 2012. JLR is in line to sell over a 100,000 units in China this year.
"Having maintained a double-digit growth thus far this year, we have full confidence in sustainably growing our business here," said Bob Grace, president of JLR China. It is also setting up its first manufacturing plant in Changshu, near Shanghai, in an equal stakes joint venture with Chinese car maker Chery.
The plant, with an annual capacity of 1,00,000 units, is being built with a 10.9 billion RMB investment and is likely to start production in 2014. The JV will manufacture products from the JLR range and also develop other vehicles jointly with Chery. "The advantages of local production and lower costs will help JLR double sales," said Zeng Wang senior analyst - IHS Automotive, China.
"China will be a far more important market to service than India. With Chery, Tata Motors can also look at other opportunities like selling trucks in China," said Mahantesh Sabarad, analyst, Fortune Financials.
JLR is still a small player in China's luxury vehicle market dominated by Audi, BMW and Mercedes. After a frenetic few years, growth in China's luxury vehicle market has started to moderate, but smaller players like JLR still have opportunities to grow volumes and share. While JLR saw sales grow by 16% to 42,155 units in the first six months of the year, Audi grew by 13% to 2.26 lakh units and BMW by 19% to 1.75 lakh units.
But competition is intense. The big three German brands still see China as a hot spot and others like Cadillac, Infiniti and Acura are also keen to sell more. "JLR has to be on its toes and continue to be appealing and competitive," Chotai said.
China to be Tata Motors' biggest revenue driver this fiscal year - Economic Times
