A year and three months after acquiring British brands, Jaguar and Land Rover, Tata Motors has launched the vehicles in India. It was in April last year that BrandWagon had written about how the company had truly become a force to reckon with in the global arena following the acquisition. It was a tough battle acquiring the brands given that Tata Motors had to convince the Jaguar Land Rover (JLR) management as well as its strong workers? union that it was the best bet in the wake of Detroit-based Ford Motors? decision to put the company on the block.

Tata Motors clinch ed the deal for a whopping $2.3 billion, but the road has hardly been smooth for the auto major since the acquisition. India?s largest manufacturer of vehicles has had to cut jobs, cut costs at JLR to stay fit. Its consolidated results showed a net loss of Rs 2,505.25 crore for the year ended March 31, 2009, mainly due to the poor showing by JLR. Tata Motors is said to be negotiating with the UK government for financial assistance for the beleaguered company.

Finding new markets then is important for both JLR and its new owner, Tata Motors India. Emerging markets Brazil, Russia and China are important from a growth point of view. JLR has the capacity to produce and India has the capacity to consume. Despite this inherent advantage enjoyed by the Indian market, the way forward is hardly going to be easy for the two brands, especially, for the marquee Jaguar. For consumption to take off in a significant way, the price tag has to be reasonable.

Both the Jaguar and the Land Rover, for the record, are available in the brackets of Rs 63-92 lakh and Rs 63-89 lakh respectively (prices are ex-showroom, Mumbai). Each has three models on offer. The Land Rover has the Discovery 3, Range Rover and Range Rover Sport, while the Jaguar has the XF, XFR and XKR in India. These models are at the mid- (Discovery 3, XF) to high- end (Range Rover, Range Rover Sport, XFR, XKR) of the price and product range of the company.

The Land Rover, by some accounts, may still find a larger customer base especially when it launches its diesel-run, compact SUV Freelander in October this year for a competitive Rs 32 lakh. Bob Grace, director, overseas operations, Land Rover, says, ?In terms of volumes, we see the Freelander doing significant numbers, followed by the Range Rover Sport, Discovery and Range Rover.?

The Jaguar?s market could be smaller, say some, mirroring what exists worldwide. Globally, it is the Land Rover, which is the volume driver for JLR, and not the Jaguar. But in calendar year 2008, Jaguar?s wholesale volumes grew 29% over the previous year. Land Rover?s volumes, in contrast, came down 19%, according to a report prepared by brokerage firm Anand Rathi.

Retail volume?which indicates the actual number of vehicles delivered to customers?was also in favour of Jaguar. It grew 8% for the latter in calendar 2008 over 2007, coming down for Land Rover by 21%. Russia and China showed positive growth for both. Retail volumes for Jaguar in Russia and China grew 54.5% and 40% respectively in 2008 over 2007. For Land Rover, it was higher, at 61% and 68%.

?So there is hope,? say observers. ?Jaguar?s customers have been buying it for the brand that it is. That should work.? Says Mick Razza, director, overseas operations, Jaguar, ?It?s a beautiful, fast car, technologically superior. This pedigree should hold us in good stead in India.?

Pedigree notwithstanding, garnering significant market share may not be easy for Jaguar in India. It will come into the country as a completely built unit (CBU)?so will the Land Rover?which increases the incidence of tax on it. On CBUs, duties and taxes are a whopping 114% in comparison to completely knocked-down (CKD) units, where the incidence of tax is about 55%. There lies the catch. The price tag shoots up because of the high incidence of tax on the vehicle.

For any meaningful presence then in the domestic market manufacturing or assembling locally is imperative. International luxury car makers operating in India have realised this. Says Peter Kronschnabl, president, BMW India, ?For a serious play in the luxury car market, you have to have the ability to produce locally.?

And to justify local production an aggressive push in terms of sales is important. At about 7,400 units, the luxury car market is a fraction of the 1.2-million-unit passenger car market in India. The Society of Indian Automobile Manufacturers pegs both the premium and luxury end of the market at about 9,069 units, that is, 8,313 units for the premium end (A5) and 756 for the luxury end (A6). ?This is the size of the market at the end of the last financial year. It only shows how small the base is,? points out an analyst.

Though the luxury car market has been growing at 20-25% for the last few years, the overall base is not likely to be huge. This presents an opportunity as well as a challenge for players. The opportunity: To grow the market by pushing aggressively in terms of sales. The challenge: To do so without compro- mising on brand equity.

Players in the segment seemed to have learnt how to do so quite effectively. ?It?s a question of marrying aspiration and price perception,? says an executive at Mercedes-Benz. ?It?s also about having a healthy mix of products that straddle the price-value equation.?

The big three?Audi, BMW and Mercedes-Benz?are doing this with a mix of CKDs and CBUs in their product portfolios. For instance, Audi?s CKD models include the A4 and A6. BMW?s CKD models are the 3 and 5 series, while Mercedes-Benz?s CKD models include the C, E and S class vehicles.

Typically, the CKD models are volume drivers with the companies in a position to adjust price with market reality quite effectively. For instance, the C class Mercedes Benz is available in the Rs 25-34 lakh bracket, going up to about Rs 30 lakh. The E class has a price tag of Rs 38-39 lakh going up to about Rs 44 lakh. The S class has a price tag of Rs 74-79 lakh. A CBU variant of the S class is also available Rs 90 lakh onwards (all prices are ex-showroom, Mumbai). Says Wilfried Aulbur, managing director and chief executive officer, Mercedes-Benz India, ?The cost of ownership is competitive that way. It helps in customer acquisition.?

Arch-rival BMW is not far behind in the price game. The 3 series, for instance, is available for Rs 27-33 lakh. The 5 series is priced at Rs 36-46 lakh, while the 7 series has a price tag of about Rs 77-93 lakh (prices are ex-showroom). ?Product-wise, the Jaguar falls between the 3 and 5 series,? says Kronschnabl of BMW. ?But price-wise, it falls more or less in the 7 series. That makes it a bit steep in my view.?

For Tata Motors to make headway in the luxury car market it is imperative for the company to switch to a CKD model for some variants at least at some stage, say observers. ?For that, the company would need sales of about 1,000 units for Jaguar and Land Rover each,? says Abdul Majeed, auto analyst, PricewaterhouseCoopers. ?That will take time.?

Though details about the brand building exercise for the Jaguar and Land Rover are not clear, Rohit Suri, head, premier car division, Tata Motors, says it will be in line with the worldwide positioning of the two vehicles. ?Jaguar stands for beautiful fast cars, while Land Rover epitomises authentic 4x4s that define premiumness, luxury and breadth of capability in their segments. Advertising will be appropriate to the brands positioning,? he says.

At the moment the company has one showroom in Mumbai to showcase the two brands. Plans include extending the network to other cities in the coming months. ?Our focus in the initial phase is to establish the brands appropriately rather than push volumes,? adds Suri.