Tata Motors Ltd. (Bombay: 500570) is looking to its UK luxury car unit, Jaguar-Land Rover, to drive global sales growth, particularly in emerging markets like Brazil, by shifting production of the Freelander model out of the U.K. to free up assembly line space for its popular premium model, the Range Rover Evoque.
Tata Motors plans to move Land Rover Freelander assembly to Brazil.
Tata Motors Group, which includes Tata, Tata Daewoo, Tata Hispano Carrocera and Jaguar Land Rover, increased global sales by 6 percent to 94,055 in June, the company announced Monday. While overall sales increased 6 percent, the majority of the growth came from the company's Jaguar Land Rover brands, which surged 39 percent. Jaguar Land Rover sales accounted for almost a third of total Tata Motors sales in June.
"The growth of Tata Motors has been essentially driven by Land Rover in the last 24 months," BNP Paribas head of international coverage Guido van Hauwermeiren said Monday.
However, Tata Motors Ltd.'s share price fell 2.63 percent to 229.30 rupees Monday following weaker-than-expected June sales numbers.
Follow usFollow @IBTimesUK
To compensate, India's largest carmaker, Tata, appears to be looking toward Brazil for continued sales growth. The company is planning to begin assembling Jaguar Land Rover vehicles in Brazil within a year and a half, according to the Financial Times, Monday. The company plans to export "kits" to assemble the Freelander model in Brazil.
"The whole strategy that Tata had when they bought Jaguar and later Land Rover was to aim at the whole emerging market ... a strategic plan that was actually the only reason for this acquisition in the first place," van Hauwermeiren said.
The Brazilian automotive market is expected to become the third largest in the world by 2017, with car sales of 3.125 million vehicles in 2012, according to the Hindu Business Line.
The Brazilian market is ripe for intro-range luxury models like the Freelander. "We have seen a significant expansion of the premium segment in the last few years. Brazil is one of a handful of markets globally that present growth opportunity for coming years," IHS analyst Guido Vildozo said Monday.
The Freelander is the oldest and least expensive Range Rover model and has been replaced in global sales by the new Evoque. However, "the price point and the model seems to be right for the market," according to van Hauwermeiren. Moreover, by shipping the components of the Freelander as a kit to Brazil, UK assembly line space will be free up for the premium Evoque model while expanding Jaguar Land Rover's footprint in South America. Jaguar Land Rover has faced capacity problems in the UK, which may be eased by removing Freelander assembly to Brazil.
Beyond improving UK production capacity, moving Freelander assembly to Brazil may help Tata Motors beat a 30 percent tax hike on imported cars, according to Vildozo. Ultimately, "there is intention to add Brazil to [Jaguar Land Rover's] global manufacturing footprint."