Beyond bumps

Tata Motors maintains JLR volume guidance at 360,000 units for FY13, with 100,000 units of Evoque and 5-7% growth in non-Evoque portfolio. The recent disappointment in JLR monthly volumes has been largely due to slower than anticipated ramp-up of the new Range Rover (RR) resulting in production loss of 20,000 units since August. The company expects production to ramp up from December.

JLR has multiple levers to improve its sustainable margins over the next 2-3 years. The new RR would be accretive at both the Ebitda (earnings before interest, taxes, depreciation and amortisation) and PAT (profit after tax) levels – the benefits would be fully reflected in FY14. As it fully executes its modular platform strategy—two models per platform by 2016 from 1.28x currently, sustainable margins would expand by 150-200bp. Further, over the next 2-3 years, its captive engine initiative and Chery JV (China) would help reduce costs.

As the new RR is built on an entirely aluminum platform (against 50% steel and 50% aluminum earlier), the company has replaced one-third of the Solihul plant entirely with new machinery. However, given the new assembly line, different production processes and consequent employee training involved, production transition from old to new RR has been slower than anticipated. As a result, wholesale dispatches of RR have been impacted by 20,000 since Aug 2012.

However, management expects production of the new RR to normalise this month with higher dispatches. Retail sales of the new RR would start in

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