Tata to invest $2.5 billion annually in product development

Article by Christian A., on August 8, 2011

Tata Motors Ltd.’s British luxury vehicle brand, Jaguar, is set to compete with BMW AG with an entry-level sedan and a hybrid supercar to rival the BMW 3 series. The new vehicle models are part of the goal of Tata to invest GBP1.5 billion ($2.5 billion) each year in product development at Jaguar and sister brand Land Rover for the next five years while the inexpensive cut-rate Nano model reports a drop in sales. The expenditures will include 40 new models or upgrades, such as the Range Rover Evoque SUV.

The company is turning to the British luxury brands, which it bought in 2008 from Ford Motor Co., to drive international ambitions and to have growth. As Land Rover aims for record sales on the compact Evoque, Jaguar is targeting to reverse declining demand by rounding out its product offering.

According to managing director Ashvin Chotai at Intelligence Automotive Asia, the next challenge for the two brands is to maintain the product pipeline and to explore new product segments. The sales of the Nano, which is the cheapest vehicle in the world, declined 48 percent in the past two months.

The demand was burdened by higher borrowing costs for customers in India, which was Nano’s dominant market. On the other hand, the Jaguar Land Rover unit generated 57 percent of the revenue of Tata Motors for the year ended March 31, an increase from the 53 percent in the same period last year.

The division's pretax profit increased 20-fold to GBP1.12 billion for the same period. Valuation of the company is now at INR542 billion ($12.2 billion).

The Jaguar Land and Rover had been part of British Leyland until 1984, when they became part of separate companies. In 1989, Ford acquired Jaguar Cars, which became part of its new Premier Automotive Group in 1999. In 2000, Ford acquired Land Rover from BMW and placed it under the same group, thereby reuniting it with Jaguar. In 2006, Ford acquired the Rover brand name from BMW, reuniting the Rover and Land Rover brands.

In June 2007, Ford announced plans to sell Jaguar and Land Rover. Interested buyers included Tata Motors, which established Jaguar Land Rover Limited in January 2008 to serve as a holding company for acquiring Jaguar Cars Limited and Land Rover. Tata Motors completed the acquisition of Jaguar Cars Limited and Land Rover from Ford in June 2008.

After the acquisition by Tata Motors, both Jaguar Cars Limited and Land Rover commenced operations as two separate companies on an integrated basis.

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