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Tata Motors - Jaguar Land Rover | EV SUV giant in making?

Tata Motors today announced that its subsidiary Jaguar Land Rover Automobile Plc (JLR) has laid out a new strategy for future and before I share my view on that please have a look at below extract from that announcement. 

  • Start of journey to become a net zero carbon business by 2039
  • Re-imagination of Jaguar as an all-electric luxury brand from 2025 to ‘realise its unique potential
  • In the next five years, Land Rover will welcome six pure electric variants as it continues to be the world leader of luxury SUVs
  • All Jaguar and Land Rover nameplates to be available in pure electric form by end of the decade; first all-electric Land Rover model in 2024
  • Clean-hydrogen fuel-cell power being developed in preparation for future demand
  • On a path towards double-digit EBIT margin and positive cash flow, with an ambition to achieve positive cash net-of-debt by 2025 with a value creation approach delivering quality and profit over-volume
Image source: www.tata.com/business/jlr

A lot of points are not new in the press release like debt-reduction and focus on EV however this time management has clearly defined the target like double digit EBITDA margin by 2025 and exact number of EV cars. So, it is very clear from above that new CEO is reimagining JLR and EV and profitability is in the core of this strategy. As world is moving towards renewable sources of energy and electric is a clear leader in this, and Tata Motors is looking to go this way.  

Tata Motors is already leader in Indian EV market and have astonishing 64% market share. However, this number can be misleading as personal EV market of India is very small right now and majority of this sales is due to a very successful model Tata Nexon EV. And rivals like Kia and MG can grab this share by just one hit model. So, sustainability is a risk point here.

Further, Indian domestic car sales is not very significant at Tata Motors group level and most of the numbers at group level flows from JLR. After this JLR focused EV strategy, Tata Motors can turnaround the current business as JLR is one of the leading luxury car brand in the world, if implemented well and achieved. 

What is there for investors in this?

After debt-free announcement and Tesla collaboration rumours, stock is already more than 3 times from March 2020 low however as JLR is the main business of Tata Motors and future is looking bright at this time, stock still has a huge upside potential in my view. Investors must note one thing that it is a cyclical industry and right exit is very important in these kind of stocks. To understand this more, have a look at below 10 year stock price chart of Tata Motors.

Image source: Yahoo finance

Now, if an investor bought Tata Motors in 2013 and didn't sell in 2015 or 2017, his/ her investment value is more or less same even today, that too thanks to recent upsurge in stock price. So, only those who are actively tracking economic cycle and stock market should enter into these kind of stocks. Read my other post on economic cycle.

Let me know your views in comment section below.


Disclaimer - It is just an analysis and my personal view. Please consult your IA before investing. 

About author: 


Manish Negi is a Chartered Account and an experienced auditor. 

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