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Jaguar Land Rover props up Tata

UK luxury car maker, Jaguar Land Rover (JLR) has released figures that sum up the complexity of the global car industry. The firm is owned by Indian motor giant Tata Motors, who bought JLR from Ford in 2008. This parent company has just announced a slump in profits of around 23%, which it says is due to weak demand in its home market of India.

UK luxury car maker, Jaguar Land Rover (JLR) has released figures that sum up the complexity of the global car industry. The firm is owned by Indian motor giant Tata Motors, who bought JLR from Ford in 2008. This parent company has just announced a slump in profits of around 23%, which it says is due to weak demand in its home market of India. However, profits on sales of JLR vehicles have increased by 29% year on year, providing a rare bright spot in Tata's accounts. Tata's chief financial officer, C. Ramakrishnan, acknowledged JLR's contribution and commented: "Our consolidated earnings were powered by a very good performance by Jaguar-Land Rover."

Tata's purchase of JLR from Ford for $2.3 billion was intended to extend the company's reach outside of its home market in India and the acquisition has proved to be an astute one. The company's Indian operation is less successful, however, with sales there declining now for eight quarters in a row. Tata has blamed 'weak macro-economic conditions' in India for its performance. The company expects these conditions to continue into next year, with Mr Ramakrishnan adding: "The external environment is relatively weak, particularly for the automotive industry. Generally, margins will be under significant pressure this year for all."

Tata has become increasingly reliant on its JLR subsidiary over the past few quarters, where export sales have been particularly strong. Last year JLR sold almost 72,000 vehicles in China, a rise of 71% on the previous year. This has meant that China has now overtaken the UK as JLR's largest market and the company is pressing ahead with a sales drive in the country. JLR has said that it aims to sell 100,000 cars in China in 2014. This has given us a British car company, owned by a struggling Indian firm, whose main market is now in China.

Tata Motors is owned by the vast $100 billion Tata group. Their net profit for the quarter to June 2013 was £281 million (17.26 billion rupees), a drop of 23% from 22.45 billion rupees for the same quarter in 2012. This was significantly below market expectations for a net profit for the quarter of around 22.34 billion rupees. Sales did rise though by 8%, to 467.51 billion rupees. Tata's purchase of JLR in 2008 for approximately £1.5 billion is beginning to look like one of the car industry's best ever deals. That purchase price was more than recouped by JLR's profits in 2012 alone, when they made a record £1.7 billion.

 

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