Buying out failing UK brands Jaguar and Rover in 2008 was the global debut of India’s Tata Motors (TTM) and in many ways the birth of a global automobile producer. With April and May sales growth of more than 10 percent back-to-back, there are indications that Tata may no longer be a niche trade but something worth getting into.
Bailing out Ford (F) from under the weight of its losing luxury strategy (it owned Jag and Land Rover) was the first time that investors outside of Tata’s home market had likely heard of India’s longtime auto producer.
The year before, it inked a deal with Fiat (FIATY) to boost the Italian brand’s presence in India, but turning around Fiat there is taking longer than thought.
Despite recent calls by UBS downgrading its stock to sell from buy based on rising interest rates and local politics, there’s still plenty of reason for excitement.
One is the push to open up the country to more parts and components from Europe under a proposed EU-India free trade agreement. The company has waved its finger at naysayers trying to protect an industry from foreign assemblers.
India’s auto industry is against losing its protections but, as one of only two domestic manufacturers, TTM wants access to the parts it needs at lower costs. Lower costs will always support Tata in its market dominance and, as a political powerhouse at home, it’s likely to get its way.
In addition, India is moving to introduce better road infrastructure and to move goods transport away from rail and onto roads. TTM is the market leader for commercial trucks, so the past months of 10 percent sales growth may be just the beginning for the truck division.
Tata also famously launched its new Nano, the car it touts as the cheapest car in the world (about $2,900). Many of India’s poor consumers are waiting to get their hands on their first symbol of arriving in the middle class — a car.
Even if rising production costs and an inability to raise prices pressure the company, having the one thing that hundreds of millions of Indians want to get their hands on is powerful stuff.
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