Jaguar Land Rover is continuing to boost profits for India's Tata Motors amid slowing economic growth in its home market.
Tata, India's largest car company by revenues, this week reported a 10.5 per cent increase in net profits to 20 billion (Dh1.35bn) Indian rupees in the second quarter of the financial year, between July and September.
Tata bought Jaguar Land Rover from Ford for US$2.3 billion (Dh8.44bn) in 2008.
The deal was met with some scepticism as it took place during the global financial crisis and was followed by plunging sales. Tata managed to turn the business around, however.
"They focused on the main products," said Umesh Karne, an analyst at Brics Securities. "They saw Jaguar was not doing much, but there was a very high scope in Land Rover.
"They priced it very well and they introduced new models like Evoque.
"They focused mainly on emerging markets like China and Russia, where they got very good growth, and they kept very good control of their costs."
Net revenues in the second quarter were up almost 20 per cent, said Tata, citing "growth in volumes and favourable market mix at Jaguar Land Rover".
The financial results, which were announced late on Wednesday, boosted Tata shares yesterday by more than 5 per cent, despite falling short of analysts' estimates because operating margins for Tata's India business decline amid the economic slowdown in its home market.
The growth in Jaguar Land Rover volumes "was driven by continued strong demand from China region ... and by sales of the Range Rover Evoque", it added.
Sales in China for Jaguar Land Rover represented 21.1 per cent of its sales for the quarter, compared with 16.3 per cent during the same period last year.
Jaguar Land Rover sales grew 13.9 per cent to 77,442 vehicles between July and September compared with the same period a year ago, according to the figures released by Tata. Of these sales, Jaguar volumes for the period reached 9,832 vehicles, while Land Rover was at 67,610 units. Tata said Jaguar Land Rover paid its first equity dividend, of £150 million (Dh880.5m), during the second quarter.
Still, economic weakness in Europe and the United Kingdom is having an impact on growth forecasts for the year, said Mr Karne.
Meanwhile, Tata's sales growth in India has been slower.
"The domestic market is not strong because India is facing the slowdown problem," said Mr Karne. "There is now very high competition in the Indian market. All the big names like GM, Ford, Volkswagen have come here and are very active."
Rising fuel price, interest rates, and the economic backdrop have prompted car makers in India to offer greater discounts, which are cutting into their profitability.
Tata said last month said it was seeking to improve its image following disappointing sales.
The company at the same time said it was eyeing the launch of a version of the Nano in the United States in three years.
The Nano is the world's cheapest car, at just 140,000 rupees in India.
Sales of the Nano have not met the company's initial expectations, with 215,000 of the cars sold since its debut in June 2009.
Projections were for sales of 20,000 of the cars every month.
