Column : Jagged edge

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: Jaguar Land Rover has finally made its debut in the Indian luxury car market. Unfortunately, the high-profile acquisition seems to have had a negative impact on the balancesheet of Tata Motors, the country’s third largest passenger car manufacturer. The company, on Friday reported a consolidated loss of Rs 2,505.25 crore for the year ended March 31, 2009, against a standalone profit of Rs 2167.70 crore a year ago.

While the buzz is that the company is already planning to ink a deal with the country’s defence establishment for supply of Land Rovers, it is yet to find a suitable market for the supply of Jaguars in a sizeable enough number to make the venture profitable in the domestic market. After all, they don’t come cheap. While Jaguars in India range from Rs 54 lakh to Rs 92 lakh, Land Rovers bear a price tag ranging from Rs 63 lakh to Rs 1 crore. That can only mean a very niche market.

However, as part of its cost-cutting measures for the UK-based brands, the company is looking at sourcing components for JLR from low-cost countries. This is where India could stand to gain—auto components exports in this segment will get a boost. JLR is also trimming its capital expenditure plans, which could be accompanied by more job cuts and plant shutdowns in the West. Some of this activity may move to India. Of course, this may not happen if JLR and the UK government agree on a bailout package for the struggling firm—that will likely come with conditions attached.

Fundamentally though, there is more to worry about the state of JLRs major markets in the West which continue to reel under recession and where the appetite for luxury goods has been tempered by the downturn. Sales of JLR fell by 32% in the 10 months of the financial year to March 2009 at 1.67 lakh units as compared to 2.46 lakh units in preceding year.

Though Tata Motors inaugurated India’s first JLR showroom in Mumbai with a lot of fanfare and has plans for another five stores across the country over the next few months, it remains to be seen if all this is worth the investment that the company made to bring the two iconic brands to India.