Upstart Indian automaker Tata Motors (NYS: TTM) is best known for its little Nano, launched a few years back as "the world's cheapest car."
But Tata's hoped-for success with the Nano in emerging markets outside of India has proven elusive as more sophisticated rivals like General Motors (NYS: GM) and Volkswagen (OTC: VLKAY) introduced inexpensive cars of their own in places like China. A reputation for catching fire didn't help the Nano's case anywhere.
But Tata's booking pretty good profits anyway, powered -- perhaps surprisingly -- by the success of some offerings a long way up the price spectrum from the humble little Nano.
The luxurious British engines of Tata's success
When Tata, eager for a passport to the world stage, agreed to acquire Jaguar and Land Rover from Ford (NYS: F) for $2.3 billion in 2008, many observers figured that the venerable British brands would fade quickly into oblivion. If mighty Ford couldn't revive them enough to make them worth keeping, the thinking went, what chance did some little Indian company with zero experience in luxury cars have?
Quite a good chance, it turned out, thanks to some solid groundwork laid by the Blue Oval during its stewardship. With astute leadership in place, and a portfolio of striking cars penned by Jaguar design chief Ian Callum -- whose earlier credits include a series of gorgeous Aston Martins widely regarded as design milestones -- Jaguar, along with its corporate cousin Land Rover, found itself undergoing something of a global revival.
That revival began to gather steam in earnest in 2012. During the first six months of 2012, Jaguar sales were up 19% -- and sales of Jaguars and Land Rovers combined rose 34% in the second quarter versus the year-ago period. Here in the U.S., Land Rover sales are up 21% so far this year, led by the strength of the small Range Rover Evoque SUV. And plans are under way to expand the brands' presence significantly in China, where the market for luxury cars has boomed.
In fact, sales have been so strong that Jaguar and Land Rover have been doing something nearly unheard-of for European automakers in recent years: hiring.
Expansion in Castle Bromwich
By global automotive standards, Jaguar's Castle Bromwich plant is positively ancient. The factory started life making Spitfire fighter planes before World War II and was used for a variety of purposes before being acquired by Jaguar in the 1970s. These days, the much-modernized plant produces the XJ and XF sedans -- and it's looking to add workers.
Jaguar announced this week that it would be hiring 1,100 additional workers to produce the "Sportbrake," a station wagon version of the midsized XF sedan. This follows the addition of over a thousand jobs at the Evoque's Halewood factory earlier in 2012, and more than 8,000 hires -- a third of the company -- over the last couple of years.
Even more hiring could follow: Jaguar has announced that it will be launching a new two-seat sports car -- the F-type -- in mid-2013, and a compact sedan along the lines of the BMW 3-series and new Cadillac ATS is expected to follow. Both are likely to be made at Castle Bromwich, a move that could require further expansion.
The key to Tata's growth
Despite the success of Jaguar and Land Rover over the last couple of years, Tata's stock has fallen recently on concerns that the sales growth of its British icons may be fading. The XJ and XF are good cars that compete well, but they're becoming a bit long in the tooth -- both, like all of Jaguar and Land Rover's models, were originally designed during the days of Ford ownership. Meanwhile, rivals like VW's Audi division and Mercedes-Benz have invested big, and the luxury-sedan goalposts have been moving.
Tata's management appears to have heard those concerns. The company has committed to invest $12 billion in Jaguar and Land Rover over the next five years, money that is expected to fund those two new models for Jaguar as well as updates across the line.
How well those updates will be executed without access to Ford's vast global engineering and supply resources remains to be seen. Tata has a good thing going, here, and big opportunities for expansion in places like China beckon. If Tata manages to nurture its British charges, the little Indian company could see significant growth in coming years.
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The article The Surprising Factor Powering Tata Motors originally appeared on Fool.com.
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