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I worked in the automotive business for more than 25 years. I have owned only one automotive stock, and it was the only stock I have owned that I consider to have been a bad investment. But I drive a Jaguar convertible, so today’s report of stellar sales at the Jaguar Land Rover division of Tata Motors (NYSE:TTM) caught my attention. The share price of Tata gained 4.4% t0 30.27 on the NYSE.
Just like the leaping jaguar that is the logo of the vehicle that bears its name, Jaguar (and Land Rover) sales surged with such strength in the third quarter that it drove Tata’s net profit for the period from 16.28 billion rupees in the same period last year to 48.05 billion rupees. Even if you don’t know the relative value of the rupee, you can do the math. That is nearly a 200% increase. Net sales more than tripled at 39% to 635.36 billion rupees.
Okay. Let’s put some rational perspective on this.
- 16.26 billion rupees equals $300 million or £193 million
- 48.05 billion rupees equals $887 or £571 million
- 635.36 billion rupees equals $12 billion or £7.76 billion
What makes this so interesting for me – and should be for you – is that Jaguar has taken it on the chin all too often over the past 20 years. At least from my perspective, it has been a company that had become lost in the woods and couldn’t find its way out. Its relationship with Ford near the turn of the millennium was a debacle that took some of the shine off of the hood ornament. During the 2008-2009 financial crisis, investor confidence fell to an all-time low. But now, the resurgence of Jaguar Land Rover is the driving force (forgive the pun) that is keeping Tata going as sales of its own cars in its own market have been sagging.
The Tata report said that “The company is facing strong headwinds in India because of cutthroat competition in the car and sports-utility vehicle market, and also due to a shortage of new products. High ownership costs and fear of job losses in the Indian economy, which is growing at its slowest pace in several years, has also been hurting demand. However, sales of its British Jaguar Land Rover unit have been rising, helping boost profits.”
Although the report did not disclose specific numbers, it did say that sales of Jaguar Land Rover vehicles have grown in nearly every one of its markets and that China has now become its largest market. Indeed, the astronomical rise in the number of high net worth individuals in China is the perfect environment for Jaguars and Land Rovers. Profit at JLR alone more than doubled from £296 million to £619 million during the quarter.
JLR Operations Director, Alan Volkaerts, recently spoke with the BBC relating how the company used the economic crisis to drive research and investment so that it would be able to respond in Jaguaresque fashion when the opportunity was right. In JLR’s largest UK assembly plant, the company has added nearly 2,000 new jobs in the past two years. Volkaerts indicated that the plant will add yet another 1,700 jobs in 2014.
As much as I am inclined to not invest in the automotive sector, I’m going to give TTM a good look, solely on the impression that I have that we are just beginning to see the heights to which Jaguar can drive the company. In the meantime, I sit at my desk waiting for spring so that I can put the top down and drive my Jag along the beach roads. Maybe, just maybe, this year I might be smiling about more than my Jaguar convertible whilst driving. I might also be smiling about my Jaguar investment.
