3 New Reasons to Buy This Automotive Growth Stock
In the past three weeks, Indian automaker Tata Motors (NYS: TTM) made three announcements that continue to show that this company isn't spinning its tires. A focus on growth with a respect for quality has helped Tata succeed in the past, and these newest announcements push the company even further into the global marketplace. Keep reading to find out whether this Indian manufacturer has what it takes to race with the big guys.
Sell, baby, sell
Yesterday, Tata reported that its August global wholesales are up 13% compared with last year. Commercial vehicles grew by 4% and passenger vehicles by 23%.
These numbers come at a sensitive time for global auto sales, as China's auto growth slumped to 3.7%. General Motors (NYS: GM) and Ford (NYS: F) announced higher-than-average sales in China, but GM's 7.3% growth hardly compares to Ford's 39%.
With all eyes on China, the media largely failed to report India's August auto sales declines of 19%, a massive drop compared with China's slowing growth. Despite its home country's auto woes, Tata's sales growth shows that this company is taking a larger percentage of the market share, while also focusing on international expansion.
Tata's 2008 purchase of Land Rover Jaguar from Ford first put this automaker on its international pedestal, but new developments show that Tata isn't stopping with a luxury line.
India goes to Indonesia
Last week, Tata announced that it will open up shop in Indonesia. As the largest automobile market in Southeast Asia, Indonesia represents a strategic international entry point. The country's proximity and similar vehicle demands to India will allow Tata to replicate, rather than re-create, its successful India business model. Indonesia's market is open to more intense competition, however, and Tata will have to fight for customer loyalty in the years to come. Earlier this year, Toyota (NYS: TM) announced plans to more than double its current output in Indonesia.
But with the highest light-vehicle sales growth of any major Asian country, there just might be room for everyone. Tata will begin selling in Indonesia in 2013 and hopes to expand to 60 full-service dealers by 2016.
Go big or go home
Tata Motors, the company brought to fame for the world's cheapest car, seems to be supersizing its offerings. Yesterday, the company announced that it will add six heavy-truck models to its expanding fleet.
These trucks are meant to be the burros of industrial development, specifically designed to meet India's (and other emerging markets') demand for heavy-duty transportation. The description of one truck describes its specialization in transporting "dimensional cargo like windmill components, transformers, and rail coaches." Another vehicle has a fortified chassis built specifically for mining.
Five of the six new trucks will be powered by Cummins (NYS: CMI) , an American engine manufacturer known for its quality and technological innovation. Just today, Cummins earned a spot on InformationWeek's list of top 500 technology innovators across America. With these engines in its trucks, Tata can offer commercial buyers superior products at competitive prices.
Say hello to Tata
Expansions and innovations like these have come to be expected from Tata, which is excellent news for investors. The company is currently trading at a P/E of 7 (compared with an industry average of 25) and its gross and operating margins continue to separate Tata from the competition. Economic uncertainty and a focus on China have kept Tata's stock artificially low, so fill up on this Indian automaker today and keep your portfolio pulling profits for years to come.
Tata's global profiteering hasn't gone without notice, and Ford's CEO, Alan Mulally, is making moves to get in on the action. Ford is set to produce more than 1 million vehicles in China by 2015 and will be ramping up efforts in India and Russia in the coming years. Motley Fool analyst Brendan Byrnes has prepared a special report outlining the key opportunities and risks for Ford, both at home and abroad. It comes with a full year of free updates and is available for a limited time only, so grab your copy today.
The article 3 New Reasons to Buy This Automotive Growth Stock originally appeared on Fool.com.Fool contributor Justin Loiseau has no material interest in any companies mentioned in this article, but he does wonder how many Tata Nanos can fit in the bed of an F-350 pickup truck. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool owns shares of Cummins and Ford.Motley Fool newsletter serviceshave recommended buying shares of Cummins, General Motors, and Ford and creating a synthetic long position in Ford. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.
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