Tata Motors: JLR sales in China drive numbers

213% PAT growth driven by 450-bps jump in JLR margins and Rs 394-cr profit in India biz

The world simply cannot get enough of Jaguar Land Rover vehicles. To say that Tata Motors surprised the market with its June quarter numbers would be putting things mildly. JLR's rich product mix and geographical reach have driven both sales and profit of Tata Motors in the June quarter. The company's consolidated sales, comprising India business and JLR, grew 38.2 per cent year-on-year to Rs 64,683 crore, while profit after tax grew 213 per cent to Rs 5,398 crore.

While the India business continues to struggle, JLR has continued with its stellar performance. Across the world, JLR's products - Range Rover Sport, Range Rover and Jaguar F-Type - have been received rather well, which is why the company's sales across geographies have gone up substantially, compared to last year. China now accounts for 30 per cent of JLR's sales (wholesale), up from 21.2 per cent in the first quarter of FY14. Sales in Europe, JLR's second largest market, have also increased.

But the big beat in earnings, which have come 43 per cent higher than the Street's estimated Rs 3,776 crore, has been driven by a sharp uptick in JLR margins and Rs 394-crore net profit reported by the India business. The Street was expecting the domestic business to report a loss but that did not happen due to dividends of Rs 1,549 crore from subsidiaries. The big surprise came from JLR, which has seen operating margins rise by 450 basis points year-on-year to 20.3 per cent in Q1 of FY15.

Analysts claim that realisations per vehicle have gone up by three per cent, which has given a boost to margins. Land Rover's retail volumes were up 24 per cent to 18,800 units during the quarter, driven by Range Rover Sport, Range Rover, Evoque and Freelander. Jaguar's retail volumes rose 12 per cent to 2,000 units, thanks to the launch of the new F-Type. The domestic business continued to show weakness as volumes declined 28 per cent during the quarter to 110,612 units. Sales of medium and heavy commercial vehicles declined 13 per cent to 27,275 units during the quarter. Market share in M&HCV continues to remain strong at 54 per cent despite the fall in sales.

The biggest hit has come from the 37 per cent year-on-year volume decline in light commercial vehicles. The passenger car division continues to report weak sales, which declined 28 per cent to 25,346 units during the quarter. The operating margins during the quarter have gone into the negative zone as they declined 550 basis points year-on-year to -2.8 per cent during the quarter. The company expects discounts and marketing spends to remain high in India. The company is preparing to launch the new Discovery Sport, Jaguar XE, Ingenium family of 2l engines in the new engine plant and new China JV manufacturing plant.