Tata Motors' 100-Fold Profit Surge

| About: Tata Motors (TTM)

If you were not bullish on Tata Motors (NYSE:TTM) before, the Indian car maker's latest profit report might change your mind. Net profit soared from $5 million to $502 million -- a 100-fold improvement.

TTM attributed the increase in profitability to its resurgent luxury brands Jaguar and Land Rover, which together accounted for only a chunk of its overall sales but 77% of its profits.

In particular, these brands, bought from Ford (NYSE:F) two years ago, are gaining significant share in the growing luxury markets of China and Russia, where sales of the cars are up 72% and 52%, respectively, on an annualized basis.

Tata's more traditionally low-end business continues to deliver significant sales growth but exceedingly slim margins. The Nano, still billed as the world's cheapest consumer car, now costs $2,260 straight from the factory, and there are hints that rising input prices -- everything from steel to rubber -- will force the company to keep raising its prices to maintain profitability.

But in the meantime, simply having higher-margin brands in the Tata family definitely seems to be taking the pressure off the company's overall bottom line.

The most interesting thing to watch will be whether the company establishes a consumer financing unit to sell cars like the Nano on credit. Lending helped build the empire of U.S. car makers like General Motors, and it could help fatten Tata's profits as well.

Disclosure: No position

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Tagged: , Auto Manufacturers - Major, India
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