28 November 2011
Detailed Report | Sector: Automobiles
Tata Motors
(JLR)
On the right track
Jinesh Gandhi
(Jinesh@MotilalOswal.com) + 91 22 3982 5416
Mansi Varma
(Mansi.Varma@MotilalOswal.com) + 91 22 3982 5418

Tata Motors
Tata Motors: On the right track
Page No.
Summary
..........................................................................................................
3-4
Outlook for luxury vehicles remains positive
.................................................
5-9
Premium SUVs: Land Rover commands strength
.....................................
10-14
Evoque - Key to growth, can add 70,000-80,000 unit/year
........................
15-17
Premium cars: Jaguar's weak presence offers significant
headroom for growth
....................................................................................
18-22
China - a big opportunity; higher local presence to
enhance competitiveness
.............................................................................
23-28
JLR on an aggressive product development plan;
to invest GBP7.5b over five years on new products and capex
................
29-32
Improving volumes, market mix coupled with cost efficiencies
to offset cost push
........................................................................................
33-36
Domestic business a key contributor with high visibility
..........................
37-41
Valuations remain attractive, Buy with target price of INR235
................
42-44
Annexure
......................................................................................................
45-46
Financials and valuation
..............................................................................
47-48
Note: All exhibits sourced from the company / Industry with MOSL analysis, unless otherwise stated
Stock price and Indices as on 25 November 2011
28 November 2011
2

Detailed Report
Sector: Automobiles
Tata Motors
BSE SENSEX
S&P CNX
15,695
4,710
CMP: INR172
On the right track
TP: INR235
Buy
Niche presence, new launches, wider market reach to be key drivers
Bloomberg
Diluted Eq.Shares (m)
52-Week Range (INR
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
TTMT IN
3,323.0
276/138
-1/-13/-10
570.9
10.9
Y/E March
2011
2012E 2013E
1,495
197
91
14.9
1,690
224
105
19.2
Sales (INR b) 1,231
EBITDA (INR b) 178
NP (INR b)
91
Norm. EPS(INR)
-
EPS Gr. (%)
BV/Sh. (INR)
Norm. P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Sales (x)
RoE (%)
RoCE (%)
503
60.1
-
-
-
-
47.3
24.6
Under Tata Motors parentage, JLR is all set to emerge as a bigger, better and
stronger global luxury vehicle player. It is taking several initiatives to fortify its
strength in luxury SUVs and improve its weak positioning in luxury car market.
Outlook for luxury vehicles remains positive, JLR can drive secular growth.
Land Rover commands strength; Evoque to drive growth, market share
gains.
Jaguar's niche presence offers significant headroom to grow.
China a big opportunity; JLR's local presence will boost competitiveness.
Improved volumes, market mix, cost efficiencies to offset cost push.
TTMT's domestic CV business has seen reduced volatility driven by higher
LCV contribution.
0
15
82.1 105.8
11,5
9.0
2.1
1.4
0.2
34.5
24.3
1.6
1.0
0.1
29.8
24.1
Outlook for luxury vehicles positive, JLR can drive secular growth
The luxury vehicle market will post CAGR of 8.9% to 9m units over 2011-15. We
expect China and BRIKT (Brazil, Russia, India, Korea and Turkey) to be key growth
drivers with CAGR of 11.4% and 8.6% respectively. Jaguar Land Rover's (JLR) luxury
vehicle market share (~4% or 0.23m units), comprising 1.3% in luxury cars and 9.9%
in luxury SUVs, is small compared with the top three players. JLR's weakness in cars
offers headroom for growth, driven by planned launches over 2-3 years. JLR's entry in
the lower luxury segment will give it access to higher volume segments, where it has
no presence.
Shareholding pattern % (Sep-11)
Domestic
Inst, 15.0
Promoters
35.1
Land Rover commands strength; Evoque to drive growth, market share
In the global premium SUV segment, Land Rover's volumes are comparable with those
of BMW (excluding X1), Mercedes Benz and Audi. Within Land Rover brand, Range
Rover portfolio enjoys a relatively more premium image. The luxury SUV segment
registered 11.6% CAGR over CY00-10 and we expect it to post 9.7% CAGR over
CY10-15. JLR's launch of Evoque in the high volume potential compact luxury SUV
segment will be a key growth driver over 2-3 years.
Foreign
41.2
Others
8.7
Stock performance (1 year)
Tata Motors
Sensex - Rebased
280
240
200
160
120
Jaguar's niche offers significant headroom for growth
Land Rover competes well with the top three luxury SUV makers, but Jaguar's volumes
lag its peers. It has just three models and seems to be weak, with volumes of only
~54,000 units (1.3% market share). Jaguar's small product range and absence in the
high volume, entry-level luxury segment are major reasons for its comparatively smaller
size. We foresee strong potential for Jaguar in the entry-level luxury segment (D2), a
market of over 1.1m units a year. Jaguar can leverage its brand heritage to gain market
share in the luxury car segment. JLR's European peers sell ~1m cars in the segment
in which Jaguar is present and ~1.2m units in the compact luxury car segment, which
Jaguar plans to enter by CY14.
25 November 2011
3

Tata Motors
Evoque key to growth, can add volumes of 70,000-80,000 a year
Range Rover Evoque
Evoque is positioned as the smallest, lightest and most fuel efficient Range Rover. Range
Rover intends to leverage its brand heritage to enter a lower priced, high volume potential
luxury compact SUV segment. Evoque has garnered high interest with ~20,000 order
backlog (after ~15,000 dispatches) and the management expects volumes of 70,000-
80,000 a year. The compact SUV segment is expected to post CAGR of ~36% over 2010-
15 to 0.7m units. Evoque enjoys distinct brand positioning and is not expected to cannibalize
the existing product. Some deterioration in Land Rover's product mix is expected, the
impact of which would be offset by higher volumes.
JLR is a recent entrant in
China
China a big opportunity for JLR; Local presence to improve
competitiveness
In 10 years' time, China is expected to account for 22% (2.1m units) of global premium
vehicle volumes from 13% currently. China's luxury vehicle market will post 11.4% CAGR
over next 10 years. Premium pricing compared with other markets and a better product
mix will result in higher realizations and make China one of the most profitable luxury
vehicle markets. With its strong growth potential, luxury carmakers are increasing their
presence in China. Since JLR is a small player in China (4% market share) the market
offers potential to ramp-up volumes. JLR will increase its China presence by almost doubling
its dealer network to 100 by CY11 and set up a manufacturing presence (through a JV as
mandated by Chinese law) to circumvent high import duty.
China volumes (units)
JLR
BMW Audi Mercedes
Group
Benz
Improving volumes, market mix, cost efficiencies to offset cost push
We estimate JLR's overall volumes will grow 17% YoY to ~286,000 units in FY12 and
realizations will improve by 7% in FY12 due to an improved market mix. It will expand
regional coverage in emerging economies with growing sales potential, especially in China,
its most profitable market. We expect short-term EBITDA margins to contract due to high
raw material and marketing costs. However, the benefits of higher operating leverage, cost
efficiency and a better market mix will kick-in in the medium term. We expect JLR to
generate free cash flow of GBP364m and GBP582m in FY12 and FY13, respectively,
despite annual capex of GBP1.5b.
Increasing contribution of
LCVs
Domestic business a key contributor with high visibility
JLR is the largest contributor to Tata Motors' (TTMT) consolidated performance, contributing
~23% to normalized EBITDA and 46% to fair value estimates. TTMT's domestic business,
in which CVs are key contributor, offers better visibility. The increasing contribution of
LCVs to CV volumes (~60% currently v/s ~49% in FY08) reduces the cyclicality of the CV
business. We expect TTMT's passenger vehicle (PV) business to underperform the domestic
PV industry and lose market share.
Valuation and view:
TTMT's stock corrected ~26% over the past six months and
underperformed the Sensex by 13%. As a result, valuations at 11.5x FY12 and 9x FY13
normalized EPS for ordinary share, and 6.3x FY12 and 4.9x FY13 normalized EPS for
DVR shares is very attractive.
Buy
with target price of INR235 (SOTP) for the ordinary
share.
LCV volumes as a % of total
CV
60%
47%
FY08
FY12YTD
28 November 2011
4

Tata Motors
Outlook for luxury vehicles remains positive
Global luxury vehicle market is expected to clock ~9% CAGR over CY11-15
driven by rising affluence in emerging markets, especially China and BRIKT.
JLR has a much smaller market share relative to the top 3 (BMW, Mercedes
Benz and Audi), implying significant headroom for growth.
We believe JLR's new compact SUV, Evoque, and planned entry into the
executive car segment (3-Series competitor) to be key growth triggers over
the next 2-3 years.
Global luxury vehicle market to clock ~9% CAGR over CY11-15
Over the past 10 years the global premium vehicle segment posted CAGR of ~3% to
5.8m units in CY10. While North America and Western Europe dominate the market with
~73% market share, China's 13% market share offers high growth potential and is fast
becoming the hotbed of luxury carmakers. According to IHS Automotive, the luxury vehicle
market is estimated to clock 8.9% CAGR to 9m units over 2011-15.
Global premium vehicle to grow at 8.9% CAGR (m units)
Premium vehicle
7%
2%
4%
4%
6%
Grow th (YoY)
5%
0%
16%
10%
4%
4%
13%
8%
5%
10%
-15%
4.4
4.5
4.7
4.9
5.2
5.4
5.6
5.9
5.9
5.0
5.8
6.4
7.2
7.8
8.2
9.0
Source: IHS Automotive/ MOSL
Luxury SUVs to grow faster than luxury cars
The growth of luxury SUVs has been racing ahead of luxury cars over CY05-10. Over
the last decade, luxury SUVs posted 11.6% volume CAGR against luxury car volume
growth of just 0.5%. Over CY11-15, luxury SUVs are expected to maintain their lead
over luxury cars, with volume CAGR of 9.7% against 8.5% for luxury cars.
Global premium car to grow at 8.5% CAGR (m units)
Car (m units)
grow th (YoY)
14%
11%
5%
2%
5%
-4%
0%
Global premium SUV to grow at 9.7% CAGR (m units)
SUV (m units)
29%
grow th (YoY)
10%
6%
9%
6%
8%
8%
7%
-7%
11% 10% 14%
4%
12%
-16%
Source: IHS Automotive/ MOSL
28 November 2011
5

Tata Motors
Developed markets dominate luxury car market
RoW, 8%
BRIKT, 4%
Proportion of Premium car segment in the overall market
28.8
22.4
Of every 100 cars sold globally,
% of car market
World average
Western
Europe, 43%
China*, 13%
14.1
~9 are premium cars
12.2
8.9
7.3
6.0 5.6
3.4
3.2
0.9
0.5
Japan, 3%
North
America,
30%
Source: BMW; * Includes Mainland China, Hong Kong & Taiwan
Source: BMW
Rising affluence in emerging markets a key growth driver
While North America is expected to post CAGR of 4.3% and Western Europe 2.6%,
emerging markets like China and BRIKT are expected to be key growth drivers for
luxury vehicle demand with 11.4% CAGR in China and 8.6% CAGR in BRIKT (Brazil,
Russia, India, Korea and Turkey). The share of emerging markets is expected to increase
from ~24% currently to ~37% by CY20, on the back of rising affluence in these regions.
~37% of incremental demand to come from China, in next 10 years ('000 units)
Region
World
RoW
BRIKT
China*
2010
5,715
456
251
707
2020
9,529
901
572
2,080
225
2,580
3,170
CAGR
(%)
The share of emerging
markets is expected to
increase from ~24%
currently to ~37% by
CY20
5.2
7.0
8.6
11.4
4.6
4.3
2.6
Mix - 2010 Mix - 2020 Incremental
(%)
8.0
4.4
12.4
2.5
29.5
42.8
(%)
9.5
6.0
21.8
2.4
27.1
33.3
demand
3,814
445
321
1,373
81
893
722
Proportion
(% of total)
12
8
36
2
23
19
Japan
144
North America
1,687
Western Europe 2,448
Premium segment growth in emerging market ('000)
239
210
147
107
83
59
59
57
30
CY10
CY20
128
84
67
42
16
9
84
85
37
28 November 2011
6

Tata Motors
Emerging markets contribution for luxury vehicals has increased over last few quarters
With strong growth potential in China and other emerging markets, the luxury vehicle makers have been increasing their
exposure to these countries.
BMW - Automobile market mix
Rest of Europe
China
5%
21%
8%
7%
21%
North America
Germany
6%
18%
13%
7%
20%
Asia ex china
Others
6%
17%
14%
8%
20%
35%
Audi - market mix
Germany
China (incl. Hong Kong)
Other
9%
9%
17%
41%
4%
9%
21%
38%
21%
CY10
Europe ex Germany
USA
15%
9%
23%
34%
19%
9M CY11
38%
36%
24%
CY09
CY09
CY10
9M CY11
Mercedes Benz market mix
Western Europe
9%
6%
7%
22%
NAFTA
Asia ex China
10%
13%
8%
20%
China
10%
16%
8%
19%
RoW
JLR: Trend in retail market Mix
USA
UK
16%
4%
8%
24%
27%
Europe (excl Russia)
16%
5%
12%
22%
24%
21%
FY11
China
Russia
18%
5%
16%
20%
20%
20%
1HFY12
ROW
57%
50%
46%
20%
CY09
CY10
9M CY11
FY10
Growing number of millionaires augurs well for luxury vehicles
A study by Deloitte indicates that over 2011-20, number of millionaires in BRIKT will
compound at 10.8% (to 7.7m). Likewise, number of millionaires in China will grow at the
rate of 7.4% (to 2.5m). These rates are much faster than the growth rate of 5.7% in
developed markets (to 45.7m by 2020). Thus indicating, China and BRIKT will be one of
the key drivers of luxury vehicle market.
Number of millionaires in established markets ('000)
45,701
Number of millionaires in BRIKT markets ('000)
2011
2020
CAGR 10.8%
27,764
CAGR 5.7%
2011
2020
Brazil
Russia
India
Turkey
S.Korea
China*
28 November 2011
7

Tata Motors
JLR
enjoys
the
highest
realization among peers
Realizations in CY10 (EUR)
JLR's limited presence implies significant headroom for growth
The luxury vehicle market is dominated by European carmakers, with BMW, Mercedes
Benz and Audi accounting for ~65% of the premium vehicle market. BMW is the world's
largest premium vehicle maker with 1.2m units in CY10 (~21% market share). Mercedes
Benz (excluding Smart) is a close second with 1.17m units (~20.5% market share) and
Audi is a not-too-far third with 1.09m units (~19% market share). In comparison, JLR is
a very small player with 0.23m units and ~4% market share - 1.3% share in luxury cars
and 9.9% share in luxury SUVs. JLR is a niche player in the luxury segment compared
with the top-three players, as reflected in its premium realizations over peers.
While JLR is strong in the SUV segment, its weakness in cars offers significant headroom
for growth, driven by a refreshed product portfolio and planned launches over next 2-3
years. We believe JLR's entry in the lower luxury segment would be a significant
development for both its brands, giving it access to higher volume segments:
1.
Compact SUVs:
Evoque is set to increase JLR's share in this segment, where till
recently BMW X1 and JLR's own Freelander were the only models. While the size of
the segment stood at just 0.15m units in CY10, we believe with increase in competition,
this segment has the potential to become a high volume space.
2.
Executive cars segment (D2):
JLR has also made its intentions clear to enter the
executive (D2) car segment with a smaller Jaguar (due for launch in CY14), which
will compete with Audi A4, BMW 3 series and Mercedes C class. This segment
represents volumes of over 1m units.
Premium SUV volumes in CY10 (units)
MS (%)
16%
Luxury SUV volumes
X1
MS (%)
*BMW includes Mini & Rolls Royce
**JLR realizations are for FY11
Premium car volumes in CY10 (units)
Luxury Car volume
23%
24%
23%
99,990
11%
11%
10%
929,704
975,500
902,033
1%
53,860
194,586
BMW
202,800
Mercedes Benz
190,339
Audi
178,586
Land Rover
BMW
Mercedes Benz
Audi
Jaguar
Volume momentum
continues in 9MCY11
Total volumes
Grow th (YoY)
17%
14%
8%
13%
Luxury vehicle makers remain bullish on demand
Volume guidance by luxury carmakers looks positive with Audi revising upwards its earlier
guidance of 1.2m units to 1.3m units in CY11, implying ~19% growth in CY11. BMW's
(including Rolls Royce and the Mini) guidance of over 1.6m vehicles implies ~10% growth
while Mercedes Benz's guidance of 1.25m units implies flat CY11 growth. Given that
9MCY11 volume growth numbers are much higher, we believe Mercedes and BMW's
guidance is influenced by by company-specific model changes and might be conservative,
given economic uncertainty in developed markets.
28 November 2011
8

Tata Motors
Growth outlook of the luxury cars manufacturers remain positive
Players
BMW
Guidance for the company
Volumes for CY11 to increase by
more than 10% to over 1.6m units.
Guidance for the market
Remarks
China's growth rate is likely to be in the high single digit Sales volume will, however, be
range, whereby the premium segment should continue held down during 2HCY11 by
to grow more rapidly than the market as a whole.
changes affecting some of the
Worldwide market expected to grow by 5%.
BMW Group’s high-volume models
Sales growth to continue in
4QCY11.
Daimler
(Mercedes
Benz cars,
includes
Smart)
Volumes for Mercedes Benz cars
to increase to more than 1.25m units
in CY11, implying flat volume growth
in CY11.
Strong demand for numerous new
models in C-Class segment and
continued market success of the S-
Class to drive volumes.
Overall Western European market expected to decline Launch of the new 1-series in
slightly; however, Germany to grow by 10%.
4QCY11 and the new 3-series in
1QCY12 will drive volumes in
CY12.
Audi
Raised its overall gudiance for CY11
to 1.3m Audi vehicle from 1.2m,
implying volume growth of 19%.
US expected to grow ~10%, Asian emerging markets
to grow but at signficantly lower rate than recent years.
All regions apart from Western Europe (ex Germany) Succesor generation of Audi A6,
to record growth in 4QCY11.
Q3 to provide additional stimulus
28 November 2011
9

Tata Motors
Premium SUVs: Land Rover commands strength
Luxury SUV segment is expected to grow faster than luxury cars at 9.7% CAGR.
In the global premium SUV segment, Land Rover is a significant player having
nearly comparable volumes with Mercedes Benz and Audi.
Land Rover brand in itself has two strong and distinct positioning viz. Land
Rover and the relatively more premium Range Rover brand.
Positioned in high volume potential Compact Luxury SUV segment, Evoque
to be a key growth driver over next 2-3 years.
A significant player in the premium SUV space
In the global premium SUV segment, Land Rover is a significant player having nearly
comparable volumes with Mercedes Benz and Audi. It enjoys 9.9% market share in the
segment, while BMW has the highest market share at 16.4% closely followed by Mercedes
Benz at and Audi at 11.3% and 10.6% respectively. Although, BMW remains the segment
leader, it is important to note that its volumes got boosted by the contribution of its low
priced compact SUV X1. Recently, Land Rover has launced Evoque in this segment and
Audi Q3 is also due to enter this space soon.
JLR, with ~10% market share of the premium luxury SUV segment, closely competes with its peers
Premium SUV volumes in CY10 (units)
16%
Luxury SUV volumes
99,990
11%
11%
Market shares in the luxury SUV segment
X1
MS (%)
6%
10%
BMW X1 (Compact Luxury SUV)
Luxury SUV
16%
11%
194,586
BMW
202,800
Mercedes Benz
190,339
Audi
178,586
Land Rover
BMW
Mercedes Benz
Audi
Land Rover
11%
10%
Land Rover has two distinct and strong SUV brands
Although Land Rover (LR) is acknowledged as the SUV arm of JLR, Land Rover itself
has two strong and distinct brand positioning viz. Land Rover and Range Rover portfolio,
with the latter enjoying a relatively more premium image -
1. Land Rover - Defender, Freelander 2 and Discovery 4 models, and
2. The more premium, Range Rover - Range Rover, Range Rover Sports and the newly
launched Range Rover Evoque).
28 November 2011
10

Tata Motors
Product portfolio of Land Rover
Models
Base model
Land Rover
Defender
Freelander 2
Discovery 4
20,185
22,055
36,785
OTR price (in GBP)*
Top end
30,635
36,260
50,785
New model year (MY12) modifications
MY12 to be equipped with a 2.2l diesel engine (v/s 2.4l earlier) to
ensure compliance with EU legislations and would be introduced in Nov'11
A model with 2l GTDi will be introduced in December 2011 for specific
markets with minor changes to the front grille & interior seating.
MY12 will include infotainment and an 8 speed automatic in the 3.0TDV6
for the EU5 markets, which will reduce CO2 emissions from 244g/km to
230g/km.
Launched in September 2011.
MY12 will include infotainment and an 8 speed transmission for EU5
markets, which will reduce CO2 emissions to 224g/km. It will also have
front and rear refreshing and a new power tailgate
MY12 will have feature packs for for the Vogue and Autobiography
models. The Ultimate Range Rover has been revealed and will be available
in March 2012.
Range Rover
Range Rover Evoque
Range Rover Sport
27,955
48,035
39,995
72,545
The Range Rover
68,985
85,745
*Price for UK market
Luxury SUV segment growing faster than luxury cars, with estimated 9.7%
CAGR over CY11-15E
The growth of luxury SUVs has been racing ahead of luxury cars over CY00-10. In that
period, luxury SUVs posted 1.6% volume CAGR against luxury car volume growth of just
0.5%. Over CY11-15, luxury SUVs are expected to maintain their lead over luxury cars,
with volume CAGR of 9.7% against 8.5% for luxury cars. In 9MCY11, the top four
industry players registered aggregate growth of 27% YoY with Land Rover growing at
23%. We model Land Rover volume growth of 23.5% YoY in FY12, driven by Evoque
volumes.
Global premium SUV to grow at 9.7% CAGR (m units)
SUV (m units)
43%
2.2
29%
20%
17%
0%
0%
20%
1.4
8% 8% 7%
-7%
11% 14%
10%
1.8 2.0
22%
31%
29%
23%
Premium SUV volumes in 9M CY11 (units)
Luxury SUV volumes
Grow th (YoY)
grow th (YoY)
12%
4%
0.6 0.6 0.7 1.0 1.2 1.2 1.3 1.4 1.5
2.5 2.6 2.9
BMW
Mercedes Benz
Audi
Land Rover
JLR's limited presence in standard luxury SUV segment offers opportunity
The premium SUV market is divided in three segments:
(a) Compact, the entry level luxury segment,
(b) Standard SUVs and
(c) Luxury or premium SUVs.
28 November 2011
11

Tata Motors
For a better understanding of the competitive landscape in of the premium SUV segment,
we analyze its various segments by mapping the product-price positioning of LR against
its European peers i.e. BMW, Mercedes Benz and Audi. While BMW, Audi and Land
Rover are present in all the segments, Mercedes Benz's SUVs are positioned mainly in
the luxury segment.
Premium SUVs: Product positioning (GBP'000)
While
recently
launched
Evoque would cater to high
potential Compact SUV
segment, JLR has weak
presence in Standard SUV
segment which would be
addressed by future launches
Some key observations
a)
Compact SUV offers - significant growth potential:
JLR is represented in this
space by its Freelander 2 which at 57,000 units, accounted for ~30% of its FY11
volumes. BMW X1 is the largest selling model in this segment with ~0.1m units,
contributing 34% to its SUV sales. Being relatively lower priced, we believe the SUV
C segment has the potential to become a high volume space. The compact SUV
segment has the highest growth potential with expected CAGR of 28% over 2011-16.
However, the competition is set to increase with the recent launch of Range Rover
Evoque and the forthcoming launch of Audi Q3. In our view, Evoque will strengthen
JLR's position in this segment and is expected to be its key volume driver going forward.
b)
Standard SUV - JLR has a weak presence:
The Standard SUV segment (SUV D)
includes Land Rover's Defender, Audi Q5 and BMW X3. Defender, despite being the
lowest priced in the segment, it has a weak positioning with volumes of just ~18,000
units (~10% of its SUV volumes) compared with X3's ~46,000 units (contributing
~16% to BMW's SUV portfolio) and Q5's ~147,000 units (~77% of Audi's SUV
portfolio). However, at the recent Frankfurt show, JLR showcased two concept models
of Defender. We expect these models to be launched by 2014, strengthening its presence
in this segment. Further, media report suggests that JLR would be launching 'Grand
Evoque', which is also likely to be positioned in this segment.
c)
Luxury SUV- highly competitive:
Having the largest number of models, the Luxury
SUV segment (SUV E) is highly competitive segment. Here, Mercedes Benz is the
segment leader with its product line catering largely to this segment. JLR's Discovery
28 November 2011
12

Tata Motors
4 (LR range) is positioned at the lower end of this segment and Range Rover and
Range Rover Sports are positioned towards the premium end of the segment. Apart
from Mercedes Benz cars, for which volume breakup is not available, BMW X5 is the
segment leader with 0.1m units (contributing ~35% of its SUV volumes), whereas
Range Rover Sports sells ~48,000 units (25% of LR's volumes) and the higher priced
Range Rover ~25,000 units (13% of LR's volumes).
Compact SUV segment offers the highest growth potential with CAGR of ~28% over 2011-16
(volume in m units)
SUV-C
SUV-D
SUV-E
1.1
1
0.8
0.9
0.2
0.1
2008
0.7
0.4
0.1
2009
0.5
0.2
2010
0.6
0.2
2011F
0.4
2012F
0.9
0.9
0.6
0.6
0.6
2013F
0.6
2014F
0.7
2015F
0.7
0.8
1
1.1
0.9
0.7
2016F
Premium SUV segmentation
Segment
SUV C
Model
BMW X1
LR Freelander 2
Audi Q3
LR Range Rover Evoque
Audi Q5
BMW X3
LR Defender
BMW X5
LR Range Rover Sport
BMW X6
Audi Q7
LR Discovery 4
LR Range Rover
Mercedes R-Class
Mercedes M-Class
Mercedes GL-Class
Mercedes G-Class
* as a % of company’s total SUV volumes
Pricing (GBP)
24,270
22,055
24,560
27,955
27,980
31,140
20,185
45,055
48,035
46,385
40,975
36,785
68,985
41,955
42,225
58,270
81,665
CY10 Volumes
99,990
57,402
NA
NA
147,088
46,004
18,438
102,178
47,587
46,404
43,251
40,368
25,292
202,800
Proportion*
34%
30%
NA
NA
77%
16%
10%
35%
25%
16%
23%
21%
13%
NA
Remarks
Has the potential to become a high
volume segment. Launch of of RR
Evoque & Audi Q3 to increase
competition.
JLR has a weak positioning in this
segment.
Having the largest number of models,
the SUV E segment is highly
competitive segment. Mercedes Benz
is the segment leader with its product
line catering largely to this segment.
SUV D
SUV E
Evoque platform to fill gaps in Land Rover's portfolio
While Land Rover is well represented in the SUV segment but gaps remain in Range
Rover's portfolio. In price terms, we see a significant opportunity for new Range Rover
models to be positioned between Evoque and RR Sports. While Evoque is available at a
starting price of GBP27,955 (on-road price), RR Sports' base model is available at
GBP48,035. We expect JLR to leverage Evoque's platform to develop new products that
can be positioned in this gap. As per media reports, the company appears to be already
planning a Mini and a Grand Evoque.
28 November 2011
13

Tata Motors
Land Rover's - New product pipeline
Launch schedule
We expect JLR to
leverage Evoque's
platform to develop new
products to address gap
in the product portfolio
Sep-11
2012
2013
2014
2015
2016
2016
Model
Evoque
New Range Rover
New RR Sport
Grand Evoque
New Defender
New Freelander
New Discovery
Comments/ features
Smallest Range Rover
Ligher than current model
New ZF eight-speed gearbox
Based on Evoque's platform
Defender replacement
Strong volume growth complemented by improved product and market mix
Land Rover's FY11 retail volume growth of 20% was complemented by improvement in
both product and market mix. The improvement in the product mix was driven by higher
contribution of the more profitable Discovery 4 and its flagship Range Rover model. With
the exception of Defender, which declined by 31%YoY, all other models grew more than
20%. The mix improvement continued in 1HFY12 with higher contribution from both, the
Range Rover models and Discovery 4.
While Land Rover's volumes grew in all geographies, growth was particularly strong in
emerging countries with China volumes increasing 74% YoY, Russia 33% and RoW 18%.
The market mix improvement was driven mainly by increased exposure to China (its most
profitable market) by 430bp, taking China's contribution in the mix to 13.8%. On the other
hand, the company reduced its exposure to the UK and Europe by 490bp to 44.9% in
FY11 due to the slowdown in these regions. In 1HFY12, its exposure to China further
increased to 17.3%.
Higher contribution of Range Rover & Discovery (%)
Defender
Range Rover Sport
13
26
21
13
24
18
31
13
CY08
Freelander
Range Rover
13
25
20
31
12
FY10
Discovery
Evoque
13
25
21
30
10
FY11
3
14
26
24
23
10
1H FY12
Increasing contribution from China (%)
North America
China
14
7
3
31
22
22
CY07
9
11
6
37
19
18
CY08
UK
Russia
17
5
10
25
25
19
FY10
Europe (ex Russia)
ROW
17
6
14
23
22
19
FY11
19
6
17
21
18
18
1H FY12
29
10
CY07
28 November 2011
14

Tata Motors
Evoque - Key to growth; can add 70,000-80,000 unit/ year
Evoque comes with the more premium Range Rover tag in a lower priced,
high volume Compact SUV segment, which is estimated to grow at ~36%
CAGR (CY10-20).
While it got an overwhelming initial response with ~35,000 pre-bookings, but
competition is set to stiffen with launch of Audi Q3; concerns also hover
around cannibalization of its own models and product mix deterioration
We anticipate some deterioration in LR's product mix, but expect the impact
on profitability to be off-set by higher volumes
Evoque comes with the premium 'Range Rover' tag in high volume segment
Range Rover products used to be restricted to the high end of the luxury SUV segment,
but this has changed with the launch of Evoque, which marks Range Rover's entry in the
compact SUV segment. Evoque is positioned as the smallest, lightest and the most fuel
efficient Range Rover. The car has been given a more stylish look, which makes it a more
urban off-road vehicle compared with JLR's existing range.
Although LR's Freelander is also positioned in the same space, we believe one of the
important distinguishing factors for Evoque is the Range Rover tag, which is associated
with a more premium image. By positioning Evoque in the lower luxury segment, Range
Rover intends to leverage its brand heritage to enter the lower priced, high volume segment.
More importantly, we believe the introduction of Evoque represents a significant evolution
of the Range Rover brand itself, which would now appeal to a wider audience base.
Evoque: Models and Pricing (GBP)
By positioning Evoque in
the lower luxury segment,
Range Rover intends to
leverage its brand heritage
to enter the lower priced,
high volume segment
Model
Evoque
Variants
Pure
Prestige
Dynamic
Pure
Prestige
Dynamic
Base Model
27,955
35,630
37,380
28,950
36,625
38,380
High end Model
Evoque Coupe
32,315
39,990
39,995
Initial response has been overwhelming
Based on the Freelander's platform, Evoque has already garnered high interest with pre-
bookings of ~35,000 units (of which ~15,000 already dispatched). The SUV competes
against BMW X1 and the yet-to-be launched Audi Q3 and is available in three models,
Pure, Prestige and Dynamic, in five-door and three-door coupe versions. The retail launch
took place in mid-September 2011 in the UK, US and Europe, the company dispatched
8,000 units of Evoque in 2QFY12, while the retail sales stood at 3,000 units. The inventory
build up is reflection of the roll out of Evoque in more markets from Oct-11 onwards. The
Halewood plant, which houses production of Freelander and Evoque has expanded capacity
by 50,000 units to 150,000 units.
28 November 2011
15

Tata Motors
Autocar UK - Evoque review
The Evoque feels not unlike Land Rover's Freelander in a way. Not in the way it drives,
looks or feels, you understand, but in the impression it leaves on you. A few of our testers
came away feeling merely satisfied with the Evoque - neither disappointed nor blown
away. Yet the same was true with the Freelander, and its true appeal and enduring
qualities only really told later; it was a four-star car when we tested it, and its rating
hasn't diminished at all with time. Similar longevity will be the making of the Evoque.
Several of our testers fell for it completely; its showroom and visual appeal is second to
none and its dynamics are able enough to make it the premium compact SUV of choice.
But, especially at this price, the Evoque will have to prove it is more than a firework car
(whiz, bang, fizzle) to become a stand-out car in its class for years. Our bet is that it will.
What Car? (UK) - Evoque review
The Evoque backs up its concept car looks with a grown-up driving experience. Stylish,
good to drive and with desirability that none of its rivals can match, the Evoque is the
leaner, trendier Range Rover we've been waiting for. Against It isn't as practical or as
green as some rivals, and there's too much wind noise at motorway speeds.
Competition set to stiffen with Audi's launch of the Q3
Prior to the launch of Evoque, the compact SUV segment was represented by only two
players, Land Rover's Freelander and BMW's X1. However Audi will soon enter this
space with its Q3, slated for launch in 4QCY11. Of the four models (including the yet to
be launched Q3) in the compact SUV segment, Evoque is the most expensive, starting at
GBP27,955 in the UK followed by X1 (GBP24,270), Freelander (GBP22,055) and Q3
(GBP24,560).
SUV C segment to grow at ~36% CAGR over 2010-2015 (m units)
SUV-C
Currently, the compact
SUV segment size
stands at only ~0.15m
units (considering the top
three players) with X1's
CY10 volumes at ~0.1m
units and Freelander
57,000 units
0.6
0.4
0.1
0.2
0.2
0.6
0.7
Currently, the compact SUV segment size stands at only ~0.15m units (considering the
top three players) with X1's CY10 volumes at ~0.1m units and Freelander 57,000 units.
However, we believe the segment offers huge growth potential. Our view is further
corroborated by (1) Evoque volume guidance of 70,000-80,000 a year and (2) Audi's Q3
production target of 100,000 units a year, (3) Strong growth potential in compact SUV
segment, expected to post CAGR of ~36% to 0.7m units by CY15. We model in 35,000
units of Evoque in FY12, in line with YTD volumes of 15,000 units till Oct-11 and 20,000
pre-orders.
28 November 2011
16

Tata Motors
Evoque - attractively positioned in the compact SUV space
We model in 35,000
units of Evoque in
FY12, in line with YTD
volumes of 15,000
units till Oct-11 and
20,000 pre-orders
Concerns hover around cannibalization, deterioration in product mix
Evoque has been launched in a similar price segment as Land Rover's Freelander and
Discovery 4. However, JLR management sees no significant cannibalization of its other
models, as it believes Evoque enjoys a distinct positioning as the cheapest, lightest and
most fuel efficient Range Rover. In line with management's guidance, we expect some,
though not meaningful, cannibalization to occur.
The management has also indicated Evoque would not be margin dilutive as it enjoys
better contribution than Freelander (~30% of LR volumes), but less than the Range Rover
Sports (~25%). However, we do anticipate some deterioration in the Land Rover's product
mix but we believe higher volumes will dilute the impact on the company's profits.
Audi Q3 could be a serious competitor for Evoque
Audi will launch its new SUV, Audi Q3 in the compact segment at a lower price than
Evoque. Given that Audi is also a strong player in the SUV space, we believe Q3 can
prove to be a formidable competitor to Evoque. With Q3 expected to be launched in
November 2011, Audi aims at production of 100,000 units a year.
Evoque-smallest, lightest & most fuel efficient RR
Audi Q3 could give Evoque strong competition
28 November 2011
17

Tata Motors
Premium cars: Jaguar's niche presence offers significant
headroom for growth
Unlike Land Rover, Jaguar lags its luxury car peers with a market share of
only 1.3%.
Its small product range of just 3 models and absence in the high volume, entry
level luxury segment are the major reasons for its comparatively smaller size.
Strong product development pipeline coupled with launch of "Baby Jaguar"
in CY14 to be key for gaining traction.
Jaguar's volume lags its peers by a wide margin
While Land Rover competes well with the top three luxury-SUV makers, Jaguar significantly
lags its luxury car peers with only 1.3% market share. Mercedes Benz leads the luxury-
car market with 24.4% market share (0.98m units), followed by BMW with 23.2% share,
(0.93m) and Audi with 22.6% share (0.9m).
Premium car volumes in CY10 (units)
Jaguar has potential ~1.2m units p.a of
market at disposal
BMW
A udi
Merc ed es Benz
Jaguar
1,158
1,026
67 6
257
417
342
399
Potential
52
228
411
335
Ex is ting
Lu x ury Ca r v olume
23%
JLR's European peers sell ~1m
cars in the segment where
Jaguar is present and ~1.2m
units in the compact luxury car
segment, which Jaguar plans
to enter by CY14.
MS (% )
23 %
24%
1%
BMW
Me rc edes
Ben z
A ud i
Ja gua r
222
196
Non-fo c us *
* Below Executive segment;
28 November 2011
18

Tata Motors
With only three models in its product portfolio, Jaguar appears a weak competitor with
volumes of only 54,000 units in FY11. It might not be completely fair to compare Jaguar's
volumes against the top three luxury car players due to its absence in the lower end of the
luxury segment. The lower end of luxury segment contributes 0.6m-0.7m units to the
volumes of its European peers. But even excluding this segment, Jaguar lags the competition
by a wide margin with its nearest competitor, Audi, having ~4x Jaguar's volumes. Jaguar's
absence in the entry level luxury car segment reflects the huge growth opportunity, especially
as it enters the lower luxury segment by launching a compact saloon in 2014.
Positioned at the higher end of the luxury cars market
Jaguar is positioned towards the higher end of the luxury cars market, with XF in the
luxury segment and its other two models, XJ and XK, in the high luxury E2 segment.
However, Jaguar is conspicuously absent in the Executive segment (D2). This we consider
a potential opportunity as we expect Jaguar to enter this space with a new compact saloon
by CY14. The company has already clarified that it does not intend to compete in the
entry level D1 segment (BMW 1-series, Audi A1 and Mercedes A/B class) and in the
super and ultra luxury segment (Bentley, Rolls Royce, Ferrari).
Luxury cars: Product positioning (GBP'000)
Jaguar is absent in the
executive segment (D2),
which contributes 0.6m-
0.7m units to the volumes
of its European peers
28 November 2011
19

Tata Motors
Here are the key observations from segment analysis of the luxury car market:
a)
Executive (D2) - Jaguar absent, but offers good potential:
The top three luxury
carmakers are present in the executive (D2) segment, deriving 35-48% of sales from
this space. While Audi is the segment leader with two models, the A4 and A5 in this
space and volumes of ~0.41m units, BMW is a close second with three models and
~0.4m units. This is followed by Mercedes Benz's C class, with volumes of ~0.34m
units. Media reports suggest Jaguar plans to launch a compact saloon in this segment
(codenamed X760) by mid 2014. We believe the executive segment, with volumes of
over 1m among the top three players, offers significant volume opportunity for Jaguar.
b)
Luxury (E1) segment - Jaguar a niche player:
Jaguar's lowest priced model, XF,
is positioned in the luxury segment, where it competes against Mercedes E Class,
BMW 5 Series and Audi A6. Although XF is the top volume contributor for Jaguar,
comprising 63% of its car volumes, however, its volumes of ~33,000 units are small
compared with BMW 5 Series' 240,000 units, Audi A6's 200,000 and Mercedes E
class' 330,000 units.
c)
High luxury (E2) segment - Jaguar a niche player here as well:
Jaguar has two
models, XJ and XK, in this segment with volumes of ~14,000 and ~5,000 units
respectively, the latter being a relatively more premium model. Here, BMW is the
segment leader with volumes of ~112,000 units, followed by Mercedes with ~80,000
units and Audi with ~20,000 units.
With expected CAGR of 10.7% (CY11-15), the executive segment offers highest growth potential
D2 - Executive
E1 - Large and/or Luxury
0.4
0.3
1.2
0.2
1
1.8
1.2
0.3
0.3
1.3
1.5
E2 - High Luxury
0.4
1.5
0.4
1.5
0.4
1.6
Jaguar plans to launch a
compact saloon in this
segment (codenamed X760)
by mid 2014
1.4
1.5
1.6
1.8
2
2.2
2.4
CY08
CY09
CY10
CY11E
CY12E
CY13E
CY14E
CY15E
Limited product range restricts Jaguar growth; entry in executive luxury
segment to support volumes
Jaguar's small product range and absence in the high volume, entry level luxury segment,
capped its growth. With only three models in its portfolio, it offers limited choice to customers.
We foresee strong potential for Jaguar in the executive-level luxury segment (D2), a
1.1m-units-a-year market. Media reports suggest that Jaguar is developing a compact
saloon (also called baby Jaguar, XE Type) to be positioned in this space. Besides this, we
believe there also exists an opportunity to position a new model between XF (starting
price GBP30,950) and XJ (GBP55,515). Furthermore, we believe Jaguar can leverage its
brand heritage to gain higher market share in the luxury car segment.
28 November 2011
20

Tata Motors
Premium car segmentation
Segment Model
B
C1
C1/C2
C2
C2
Executive (D2) luxury car
segment, a 1.1m units/
year market, would be
target of Jaguar's under-
development compact
saloon
D2
D2
D2
D2
E1
E1
E1
E1
E2
E2
E2
E2
E2
E2
E2
Audi A1
Mercedes A Class
Mercedes B Class
BMW 1 Series
Audi A3
Mercedes C Class
Audi A5
BMW 3 Series
Audi A4
Mercedes E Class
BMW 5 Series
Audi A6
Jaguar Jaguar XF
Mercedes S Class
BMW 7 Series
BMW 6 Series
Audi A8
Jaguar Jaguar XJ
Jaguar Jaguar XK
Audi A7
Pricing
(GBP)
13,420
16,040
19,635
18,030
16,735
30,220
25,455
22,695
22,190
28,915
29,430
29,090
30,950
60,140
57,420
55,405
55,995
55,515
65,000
45,220
CY10 Proportion* Remarks
Volumes
27,898
3 Entry level luxury car segment
222,400
23 is not a focus area for Jaguar
196,004
204,325
341,900
114,533
399,009
302,060
330,800
238,454
204,309
32,665
80,400
65,814
46,404
17,039
13,679
5,239
3,795
21
23
35 With market size of over 1m
13 units p.a, Executive (D2)
42 segment offers huge
34 opportunity for Jaguar
34 Jaguar is a niche player in
25 Luxury (E1) segment and has
23 headroom to grow with
63 category volumes of ~0.8m
8 Jaguar is a niche player in high
7 luxury (E2) segment and
5 competes largely with
2 BMW and Mercedes
27
10
0
E2
Mercedes CL class**
92,280
NA
NA
E2
Mercedes SL class**
63,525
NA
NA
The following color coding for segments has been used:
Not a focus area for Jaguar
Potential opportunity for Jaguar
Jaguar is already present
* as a % of company's total car volumes; ** volumes of SL class and CL class are not available separately
Premium Car volumes in 9M
CY11 (units)
Luxury Car volume
Grow th (YoY)
16%
9%
4%
-19%
Expect Jaguar's declining volumes to stabilize
Jaguar volumes significantly underperformed the luxury car market in 9MCY11, declining
19% YoY against its European peers' aggregate growth of 9% YoY. We believe Jaguar's
weakness in volumes was driven by (a) high base of CY10 due to cessation of the X-type,
(b) model year change for XF, and (c) weak pick-up of XJ in China. However, now with
base correction due to X-type cessation behind us, a refreshed XJ for China and the
launch of MY12 XF, we expect Jaguar volumes to stabilize going forward. After a 9%
YoY volume decline in Apr-Oct11, we expect Jaguar volumes to somewhat recover going
ahead. We factor in 5% YoY decline in FY12, implying residual de-growth of ~2.5%.
Improvement in product, market mix to continue
The X-type which was launched by JLR on the Ford Mondeo platform under the leadership
of Ford Motors was a burden on Jaguar's profitability. The cessation of the X-type model
and higher contribution from XJ led to significant improvement in Jaguar's product mix in
FY11. The product-mix improvement continued in 1HFY12 with an increase in proportion
of XJ.
Jaguar also improved its market mix in FY11, with higher share of sales in China, Russia
and other emerging economies. China's share rose 160bp to 5.6%, Russia up 40bp to
1.8%, and RoW up 60bp to 13.1%. In 1HCY11, China's share further increased to 11.6%.
28 November 2011
21

Tata Motors
1HFY12 saw higher contribution of more profitable XJ
XF
24
XJ
3
25
11
10
XK
17
12
5
X-Type
10
26
S-Type
10
31
Increasing contribution from China
North America
China
12
2
2
26
13
2
3
27
31
24
CY08
UK
Russia
13
1
4
23
35
Europe (ex Russia)
ROW
13
2
6
21
31
27
FY11
12
2
12
18
28
28
1H FY12
39
20
17
CY07
66
51
63
58
31
27
24
FY10
CY08
FY10
FY11
1H FY12
CY07
28 November 2011
22

Tata Motors
China - a big opportunity; higher local presence to
enhance competitiveness
China's luxury vehicle market offers strong growth potential with expected
CAGR of 11.4% over CY10-20.
Premium pricing as compared to other markets coupled with better product
mix makes China one of the most profitable luxury vehicle market.
Being a small player in China with 4% market share, China offers a significant
growth potential for JLR for ramping-up volumes.
High import duty necessitates local manufacturing to ramp up volumes; JLR
to set up JV in China, augment dealership network to increase local presence
and enhance competitiveness.
China's luxury vehicle market to post 11.4% CAGR over CY10-20
With its luxury vehicle market registering 45% CAGR over the past five years to 0.7m
units in CY10, China has become a significant market for premium vehicle makers,
contributing 13% of the global luxury vehicle market. China's growing importance is reflected
in the fact that Audi considers China a 'home' market after Germany, and BMW believes
China has the potential to become its biggest market globally. Going ahead, Global Insight
estimates China's luxury vehicle market to post 11.4% CAGR over CY10-20 to 2.1m
units, accounting for 22% of the global premium vehicle market in 2020. While, JLR
expects China to grow faster, clocking 14.4% CAGR over 2010-16 to 1.8m units, implying
China will account for ~20% of the global premium vehicle market by 2016.
Premium segment grew at 45% CAGR over CY05-10…
Premium segment volumes in China ('000 units)
Grow th
50%
47%
36%
21%
24%
1,600
707
2,100
...& is expected to grow at a CAGR of 11.4% over CY10-20
Premium segment volumes in China ('000 units)
70%
CAGR 18%
CAGR 6%
2005
2006
2007
2008
2009
2010
2010
2015E
2020E
China to form c22% of global luxury car market in 2020
Ro W
Ja p a n
China's growing importance is reflected
in the fact that Audi considers China a
'home' market after Germany, and
BMW believes China has the potential
to become its biggest market globally
BRIKT
No r th A me r ic a
Ch in a *
W e s te r n Eu r o p e
43%
30%
3%
13%
4%
8%
2010
33%
27%
2%
22%
6%
9%
2020
28 November 2011
23

Tata Motors
Increasing per capita income, a growing upper middle class and rising urbanization are
key growth drivers of China's premium vehicle demand. BMW estimates the number of
households with income greater than RMB250,000 (~GBP24,760) to post 34% CAGR
over CY10-20 to 37.7m households, which in turn will drive demand for luxury goods.
Increase in purchasing power to drive luxury demand
Number of households w ith annual income
>250,000 RMB (millions)
CAGR 34%
37.7
11.9
2.0
2010
2015
2020
0.9
2008
1.3
2009
Robust outlook for luxury vehicle market in China
After phenomenal 31% growth in CY10, the mass market vehicle segment in China is
moderating. However, premium vehicle sales are strong, with 9MCY11 volumes for BMW
up 46% YoY, Mercedes Benz up 38% YoY and Audi up 29% YoY. The growth rate is
expected to moderate in 4QCY11 due to the high base. Despite this, European players are
bullish on China demand. BMW is targeting ~225,000 units in CY11, implying 23% growth.
Mercedes Benz expects growth in China to exceed its previously stated 15% target and
Audi aims at 300,000 units, implying 32% growth.
Outlook of China’s premium vehicle market in CY11
Company
BMW
Mercedes Benz
Volume outlook for China
It is looking for “double digit” growth in 2011 to c225,000 units’
Believes that growth in China may even exceed its 15% target (resulting in
sales of c200,000 units in 2011e). It is targeting to sell 3,00,000 units in 2015
from 1,60,000 in 2010
Audi expects growth at “a high pace” and targets sales of 300,000 units in
CY11, implying 32% growth.
It expects China volumes to increase from 26,000 units to 40,000 units in FY12
Audi
JLR
Audi with 32% market share, has a first mover advantage in China
With strong growth potential in China, luxury carmakers are increasing their presence in
the country. Being the first player to enter the market, Audi has the highest market share
(32%) in China, followed by BMW with 26% and Mercedes Benz with 23%. JLR is a
small player in the market with just 4% share. China is Audi's second largest market (after
Europe), comprising 21% of its sales, whereas it accounts for ~15% for BMW and ~16%
of Mercedes Benz. Although China's contribution to JLR's volumes at ~14% is comparable
with its peers, JLR's China volumes of 26,914 units, is far smaller than that of Mercedes
Benz (0.16m units), BMW (0.18m units) and Audi (0.23m units). Thus, going ahead, we
see significant growth potential for JLR to ramp up volumes in China.
28 November 2011
24

Tata Motors
Audi has the highest market share in China
Premium vehicle market share in China
32%
26%
23%
4%
JLR
BMW Group
Audi
Mercedes Benz
China's contribution to volumes
China as a % of total volumes
However, absolute numbers give the overall picture
China volumes (units)
21%
14%
13%
13%
227,938
183,328
159,974
26,914
JLR
BMW Group
Audi
Mercedes Benz
JLR
BMW Group
Audi
Mercedes Benz
Local manufacturing crucial to ramp up volumes
Car imports to China attract duty of ~80% on CBUs to ~30% on CKD and hence OEMs
with manufacturing operations in China have a competitive edge over importing OEMs.
However, global OEMs seeking to set up manufacturing operations in China have multiple
riders/risks, such as:
A joint venture must be set up with a local player, with the foreign partner's stake
restricted to 50% in the venture;
~40% of the foreign manufacturer's sales must be routed through the joint venture,
restricting the company's sales through imports to ~60%;
Lack of respect for IPR and the risk of technology being 'copied' by a JV partner is
high, especially as the Chinese government pushes for higher localization.
We believe that while this may prove detrimental to the health of foreign players in the
long term as it would involve technology transfer to the JV partner, we see luxury carmakers
have limited options if they want to leverage the growth opportunity in China. Having a
manufacturing or an assembly unit in China gains importance due to high customs duty,
and can thus translate into a competitive edge by enabling better pricing of vehicles. Audi,
BMW and Mercedes Benz have a local presence in China through joint ventures, but JLR
is still scouting for a partner, which it expects to finalize by the end of this year.
28 November 2011
25

Tata Motors
China operations of European premium vehicle manufacturers
Company
BMW
JV partner
Brilliance
Production facility
One plant in Shenyang, Northern
China; a new assembly plant
(capacity: >100,000 units p.a) is
being constructed in Shenyang-
Tiexi from 2012.
Models manufactured
3- and 5-series models; X1 at the
end of 2011 and X3 in 2013,
which will be produced at a
second planned plant, also in
Shenyang.
Currently, C-class and LWB E-
Mercedes
Benz
Beijing Automotive
Industry Holding
(BAIC)
CKD plant at Changchun
Audi
First Automobile
Works (FAW) -
VW JV
JLR
Scouting for a JV
partner to set up
an assembly plant
NA
class are being locally produced
in China while rest of the cars are
imported as CBUs. It plans to
further localize the production of
B Class and GLK.
It produces Produces A6L, A4L
And Audi Q5 in China and imports
the rest of the models
At the moment, all its models are
imported into the country
Believes that growth in China may
even exceed its 15% target
(resulting in sales of c200,000
units in 2011e). It is targeting to
sell 3,00,000 units in 2015 from
1,60,000 in 2010
Audi expects growth at “a high
pace” and targets sales of
300,000 units in CY11, implying
32% growth.
It expects China volumes to
increase from 26,000 units to
40,000 units in FY12
Volume outlook for China
It is looking for “double digit”
growth in 2011 to c225,000 units'
On analyzing the luxury vehicle models manufactured in China, we find that though the
manufacturers add more models for indigenous production, the higher-end models such
as the BMW 7 series, Mercedes S class, Audi A8 in premium cars and BMW X5 and X6,
Mercedes M & G class, Audi Q7 in premium SUVs are still being imported.
However, localization to come at the cost of sharing profits with JV partner
To reduce the impact of import duty, global OEMs are setting up local manufacturing
operations through joint ventures with local partners with 50% stake. JLR is exploring the
market for potential partners to set up a JV. Given the strict regulatory norms, it will take
some time to set up a facility. However, most of JLR's competitors have localized production
in China, enabling them to offer products at competitive prices.
Local manufacturing operations come with reduced flexibility and sharing of profit with
the local JV partner. Local laws also require at least 40% of foreign manufacturer's sales
to be routed through the JV, thus restricting the company's total sales through direct imports
to ~60% of China volumes. While local JV would result in lower prices and drive volumes,
it would require sharing of profits with local player.
Vehicles in China priced at a premium to other markets…
Vehicles in China are sold at a steep premium to those in the home market of luxury
vehicle makers, largely due to the high import duty. For the purpose of uniform comparison,
we compare prices of models in the UK to those of the closest models available in China.
Although most of the vehicles are available at a 35-120% higher price than in UK, even
locally assembled models sell at a premium of 35-60% due to lower localization/ CKD
assembly.
28 November 2011
26

Tata Motors
Comparison of prices in China and UK
Manufacturer Model in China
Luxury Cars
Mercedes
BMW
BMW
Audi
Audi
Jaguar
Jaguar
Luxury SUVs
BMW
Mercedes
Audi
Audi
Range Rover
Price in China
(GBP)
139,520
62,634
118,562
69,850
92,614
207,611
252,787
105,289
77,644
37,904
81,936
187,934
92,160
Model in UK
Price in UK
Pricing
(GBP) differential (%)
65,680
38,940
64,405
41,640
60,290
77,300
97,000
47,130
44,360
28,000
42,160
69,485
54,340
112
61
84
68
54
169
161
123
75
35
94
170
70
S350 L *
535i Luxury
740Li *
A6L 3.0 TFSI quattro
A8L 3.0TFSI quattro®(213kW) *
XJ 5Ltr Petrol Panorama Luxury
XKR-S 5.0L V8 supercharged coupe
X6 xDrive35i *
ML 300 4MATIC *
Q5 2.0T FSI quattro
Q7 3.0 TFSI quattro (200kW) *
Range Rover 4.4 TDV8 Diesel *
S 350 BlueEFFICIENCY L
535i SE
740Li
A6 3.0 TFSI quattro S tronic300
XJ 5.0 V8 Petrol Portfolio
XKR-S 5.0L S/C Coupé
X6 xDrive35i
ML 350 CDI BlueEFFICIENCY SE
Q5 2.0 TFSI quattro manual
Q7 3.0 TFSI quattro
Range Rover vogue 4.4 TDV8 Diesel
RR Sports
Range Rover
RR Sports 3.0TD V6HSE Diesel *
Source: Company * imported models; all prices are OTR
…this coupled with better product mix results in higher realizations from
China
Luxury carmakers also benefit from a better product mix in China as the market preference
is skewed towards higher priced models. Top-end models are being imported to China
against indigenous manufacturing of the lower end of the portfolio. This, along with higher
pricing leads to premium vehicle manufacturers deriving higher realizations from China.
In July 2010 JLR established National Sales Company (NSC) in China, through which it
improved local realization by 82% to GBP61,299 per unit, making China its most profitable
market.
JLR draws the highest realizations from China
FY10
Establishment of NSC
in China, coupled with
improving product mix
boosted JLR's
realization in China
FY11
N. America
UK
Rest of Europe
China
ROW
JLR to expand dealer network in China
To capitalize on China's growth potential, JLR will double its dealership network in China
to 100 each for Jaguar and Land Rover by the end of CY11 (~50 each in March 2011).
Furthermore, to offer products at competitive prices and increase its presence in China, it
is also looking to establish a manufacturing base in the country. In addition, JLR also
intends to strengthen related business operations such as spare-part sales and service/
maintenance contracts.
28 November 2011
27

Tata Motors
Dealer network in China (CY10)
No. of dealers
JLR will double its dealership
network in China to 100 each
for Jaguar and Land Rover by
the end of CY11 (~50 each in
March 2011)
210
180
166
105
BMW
Audi
Mercedes Benz
JLR (FY11)
Launching customized products for China
The significance of China for JLR can be gauged from the fact that it has launched
customized products for the Chinese market. Initially, XJ volumes failed to pick up in
China as it lacked rear-seat entertainment system. Consequently JLR upgraded the car to
include a new executive package and a rear-seat comfort package. Also, it replaced the
five-liter engine, available in other markets, with a three-liter V6 petrol engine, which led
to savings on import duty.
28 November 2011
28

Tata Motors
JLR on an aggressive product development plan; to invest
GBP7.5b over five years on new products and capex
JLR restarts investments in its business to enhance and diversify its product
range; forty new products expected over five years, R&D gets high priority
JLR's R&D capitalization at ~80% is higher than its peer's capitalization rate
of 25-35%
Accounting for capitalization in line with peers, JLR's EBITDA margins would
decline by ~450bp
JLR restarts investments in its business under TTMT's parentage
JLR plans to strengthen its business by diversifying and enhancing its product range in the
premium car and SUV segment. Under Ford's ownership there was significant under-
investment in the business, especially on new product development. Now, JLR plans to
catch up with its peers.
JLR will spend GBP7.5b over five years on investment in product development and capex.
Besides investing in technology to improve fuel economy and cut carbon dioxide emissions,
JLR will invest in new and replacement models, derivatives and power-train action. It
aims to complete 40 new product actions over five years, which includes a new platform
every seven years, major refreshes every four years and minor refreshes every two years
for each model.
Also, it will invest GBP355m to set up an engine facility in the UK to make four-cylinder
diesel engines, though it will continue to source V6 and V8 engines from Ford. Further, it
is at advanced stages of negotiating for setting up a manufacturing JV in China.
JLR makes up for under investment during its Ford
ownership years
Total Capex incl R&D (GBP)
12.6
12.0
9.1
Capex (as a % of sales)
12.1
10.4
7.7
5.2
4.4
JLR's investment is lowest among its peers (CY10)
R&D
Capex
11.4
Total Invest (% of sales)
10.5
9.4
2,088
7.8
1,964
1,288
125
650
CY05
CY06
CY07
FY09
FY10
FY11
FY12E FY13E
2,151
2,356
2,659
JLR
Audi
BMW
Mercedes Benz
28 November 2011
29

Tata Motors
New product pipeline (Jaguar)
Launch schedule Model
It aims to complete 40 new
product actions over five
years, which includes a new
platform every seven years,
major refreshes every four
years and minor refreshes
every two years for each
model
2011 (late)
2012 (mid)
2012 (late)
2013 (early)
2013 (late)
2013
2014 (mid)
2014 (late)
2015 (mid)
2017
2018
2020
2023
Codename
X150
X250
X152
X351
X151
X760
X760
X260
NA
NA
NA
NA
Comments/ features
First mid-sized Jag with utility body
All-new Boxter competitor
Reskin. Launches new styling theme
Sportscar
Moves Jag into 3-series market
Platform variant of Saloon/ SUV E segment
Alloy-Chasis-5-series rival
Possible high performance hybrid powertrain
Likely to launch new styling direction
XK Facelift
XF estate and facelift
XE sports car
XJ Facelift
New XK
C-X75
Compact saloon
Crossover
New XF
XJ Coupe
Third-gen alloy XJ
Second-gen XE
Third-gen XK
Land Rover’s - New product pipeline
Launch schedule
Sep-11
2012
2013
2014
2015
2016
2016
Model
Evoque
New Range Rover
New RR Sport
Grand Evoque
New Defender
New Freelander
New Discovery
Comments/ features
Smallest Range Rover
Ligher than current model
new ZF eight-speed gearbox
Based on Evoque’s platform
Defender replacement
R&D focus on reduction in carbon dioxide emissions
The European Union has set carbon dioxide emission target of a fleet average of 130g/km
by 2012 and 95g/km by 2020, with specific requirements for each manufacturer, based on
the average weight of vehicles. Among its peers, JLR models have the highest carbon
dioxide emission content of 219g/km. Albeit, JLR has applied for derogation from these
norms, an exception available to small volume and niche manufacturers. If JLR is successful,
it would be permitted to reduce emissions by 25% from 2007 levels instead of meeting a
specific carbon dioxide emission targets. While JLR offers two aluminum vehicles, the
Jaguar XJ and Jaguar XK, it plans to deploy its core competence in aluminum construction
across more models in its range. It has set a target for a 25% reduction in carbon dioxide
by 2012. It is implementing life-cycle techniques to evaluate and cut its environmental
footprint through the value chain.
JLR's CO2 emissions are the highest among its peers
Co2 emission (g/km)
JLR, having highest
CO2 emissions among
its peers, has set
target for a 25%
reduction in carbon
dioxide by CY12
219
163
148
142
JLR
Daimler
BMW
VW
28 November 2011
30

Tata Motors
R&D to increase meaningfully, while capitalization to decrease gradually
Based on its five-year investment plan of GBP7.5b, JLR will invest GBP1.5b in FY12,
more than half of which will be spent on R&D (with 80-90% to be capitalized in line with
JLR's accounting policy). The rest is expected to be capex. JLR's R&D capitalization
rate is higher at ~80% against its peers' capitalization rate of 25-35%. The difference in
capitalization ratio is mainly due to a difference in the nature of R&D, as JLR is investing
largely in product development (capitalized and amortized over 3-10 years), whereas its
peers are investing meaningfully in new technologies (which are expensed). Being a late
starter, higher R&D investment is necessary to catch up with its peers by making initial
investments in new products and later in new technologies. Consequently, we expect its
amortization to increase (as its investment in R&D increases) and capitalization to decrease
(as investment in new technologies increase).
Capitalization ratio to decline gradually
R&D expensed (GBPm)
JLR's R&D capitalization rate
is higher at ~80%, as it is
investing largely in product
development (capitalized &
amortized over 3-10 years),
whereas its peers are
investing meaningfully in
new technologies (which
are expensed)
R&D capitalized (GBPm)
Capitalization ratio* (%)
712
720
93.7
90.5
531
411
457
81.6
82.5
80.0
28
FY09
48
FY10
119
FY11
151
FY12E
180
FY13E
* R&D capitalized as a % of total R&D cost
If R&D is expensed in line with peers, JLR's EBITDA margins would decrease
by ~490bp
Given the difference in nature of JLR's R&D activity, it capitalized 80-90% of its R&D
against 25-35% capitalization for its peers. Benchmarking R&D capitalization with its
peers, we adjust our JLR model for 30% capitalization of R&D costs, expensing 70% of
the rest. As a result, JLR's normalized FY12 and FY13 margins decline by 490-440bp to
10.3-11.2%.
Comparison of R&D capitalization of European Luxury vehicle manufacturer
Company
BMW
Mercedes Benz cars
Audi
Capex ex R&D Total R&D cost of which Capitalized Capitalization ratio (%)
EUR2,312m
EUR2,457m
EUR1,516m
EUR2,773m**
EUR3,130m
EUR2,531m
EUR951m
EUR940m
EUR630m
34
30
25
82
JLR*
GBP125m
GBP650m
GBP531m
* Figures represent FY11 data; **excl. ammort of earlier cap R&D
Adjustment for R&D capitalization in line with European peers
Benchmarking R&D
capitalization rate with its
peers at 30%, JLR's
normalized FY12 and FY13
EBITDA margins decline by
490-440bp to 10.3-11.2%
GBPm
Reported EBITDA
Reported EBITDA margin (%)
Total R&D cost
Expensing @ 70% in line with peers
Normalized EBITDA
Normalized EBITDA margin (%)
FY09
-56
-1.1
438
307
-363
-7.3
FY10
397
6.1
505
354
43
0.7
FY11
1621
16.4
650
455
1166
11.8
FY12E
1887
15.2
863
604
1284
10.3
FY13E
2243
15.6
900
630
1613
11.2
28 November 2011
31

Tata Motors
Comparison of EBITDA margin (CY10)
Reported margin for JLR
EBITDA Margin*
16.4%
Comparison of EBIT margin (CY10)
EBIT Margin
15.0%
11.2%
14.4%
11.9%
9.4%
12.4%
8.0%
8.7%
Audi Group
BMW*
Mercedes Benz
cars
JLR**
Audi Group
BMW*
Mercedes Benz
JLR**
** Normalized for capitalized R&D (FY11)
28 November 2011
32

Tata Motors
Improving volumes, market mix coupled with cost
efficiencies to offset cost push
We estimate JLR to post 15.3% volume CAGR over FY11-13; realizations to
grow at 4.5% CAGR led by higher exposure to China - its most profitable
market
EBITDA margins to contract in the short term due to high raw material and
marketing costs but high operating leverage, cost efficiency and better
marketing mix to dilute the medium-term impact.
To generate FCF of GBP364m and GBP582m in FY12 and FY13 respectively,
despite sizable capex plans.
JLR to post 15.3% volume CAGR over FY11-13
We estimate Land Rover volumes to grow by 23.5% to ~235,500 units in FY12, driven by
the launch of Evoque. We estimate Evoque volumes at ~32,400units in FY12. However,
given Jaguar's weakness, we expect Jaguar FY12 volumes to decline by 5% YoY to
~50,300 units. With the base correction due to X-Type behind us, the launch of a refreshed
XJ for China and new MY12 XF, we expect Jaguar volumes to pick up, going forward.
Besides, in line with JLR's guidance of 54% YoY volume growth in China, we factor in
14,000 units of incremental volumes from China in FY12. Consequently, we estimate
JLR's overall FY12 volumes to grow by 17.3% YoY to ~286,000 units.
Volume momentum to continue ahead ('000 units)
Jaguar
Land Rover
26%
16%
17%
13%
JLR volume grow th (% YoY)
Break-up of our JLR FY12 volume estimate (units)
32,415
(4,267 )
191
120
47
FY09
147
235
271
285,769
14,000
243,621
-36%
47
FY10
53
FY11
50
FY12E
53
FY13E
FY11
volumes
China
Evoque
Slow dow n
in dev.
markets
FY12
volumes
Increasing contribution from China to drive realizations
We expect JLR's FY12 realizations to improve by 7% and 2% in FY13, driven by an
improved market mix as it expands its regional coverage in emerging markets, especially
in China, its most profitable market. We expect the impact to be diluted by deterioration in
the product mix due to a shift in mix towards Land Rover, owing to the weakness in
Jaguar volumes and higher volumes of Evoque, which is positioned in the entry level
luxury segment.
28 November 2011
33

Tata Motors
Product mix shifting towards Land Rover
Jaguar
Landrover
Realizations continue to grow
Realizations (GBP)
20%
Grow th (YoY)
72%
72%
76%
14%
78%
81%
7%
2%
28%
28%
24%
FY10
22%
FY11
19%
1HFY12
FY08
FY09
FY09
FY10
FY11
FY12E
FY13E
Retail market mix: Increasing share of China & RoW
USA
10%
9%
5%
34%
UK
Europe (excl Russia)
16%
4%
8%
24%
27%
20%
FY10
China
16%
5%
12%
22%
24%
21%
FY11
Russia
18%
5%
16%
20%
20%
ROW
Trend in revenue mix
UK
18%
21%
5%
13%
43%
US
China
22%
26%
10%
19%
24%
FY09
FY10
Rest of Europe
RoW
23%
21%
17%
20%
19%
FY11
23%
20%
FY09
20%
1HFY12
In FY11, China contributed ~12% to volumes but ~17% to revenues
In short term, EBITDA margins to contract due to RM and marketing cost
In FY12 we estimate reported EBITDA margin to decline by 120bp to 15.2%, led by
deterioration in the product mix with the launch of Evoque, increase in raw material cost,
and higher manufacturing and marketing costs associated with the launch of Evoque.
Further, we believe higher interest and tax expenses will restrict PAT to GBP1010m in
FY12, de-growth of 2.5%.
Trend in EBITDA and EBITDA margin
EBITDA* (GBP m)
11.8
EBITDA margin* (%)
10.3
11.2
Trend in PAT (GBPm)
PAT
Normalized PAT
1,036
733
557
1,010
763
1,213
0.7
23
-214
-402
-7.3
FY09
FY10
FY11
FY12E
FY13E
-695
FY09
FY10
FY11
FY12E
FY13E
* Normalized for R&D capitalization
28 November 2011
34

Tata Motors
However, high operating leverage, cost efficiency, marketing mix will dilute
impact on margins over medium to long term
The management indicated it would try to mitigate cost pressures through internal cost
efficiencies and sourcing from low cost countries. It has already opened purchasing offices
in China and India. With expected 15.3% volume CAGR over FY11-13, JLR will benefit
from increasing operating leverage, which would offset fixed cost inflation. Also, JLR is
increasing its contribution from China (its most profitable market). This along with higher
operating leverage will dilute the impact of cost pressure.
Steps to neutralize cost pressure
JLR plans to undertake the following measures to alleviate cost pressures:
JLR plans to increase sourcing of materials and components from low-cost countries
by 500bp to 32% over the next 3-5 years. JLR has opened purchasing offices in China
and India.
JLR will set up new manufacturing facilities, assembly points and suppliers in select
markets. JLR has set up product development operations in India and sells vehicle
kits to CKD facilities in India, Kenya, Malaysia, Turkey and Pakistan. It is also looking
to set up a manufacturing base in China.
To drive cost efficiency, it is focusing on sharing components across platforms. For
this, it is following a mixed approach of hiring staff in the UK, and moving incremental
levels of design responsibility to be tested on successive programs to India. It is also
implementing measures, such as cuts in manpower costs through increased employee
flexibility between sites and a rationalization of its other fixed costs.
JLR aims to achieve synergies with TTMT in the areas of R&D, supply sourcing,
manufacturing and assembly and other vital operations, including the co-development
of small efficient diesel engines.
Higher operating leverage reflected in stable fixed cost
Increase in sourcing from low cost countries to
support margins
Sourcing from LCCs (as a % of total RM cost)
32%
27%
Fixed cost
33.3
Fixed cost as a % of sales
26.3
20%
21.3
21.2
21.4
FY09
FY10
FY11
FY12E
FY13E
On acquisition
Now
Next 3-5 year target
28 November 2011
35

Tata Motors
Good FCF generation at JLR despite high capex of GBP1.5b
We expect JLR to generate substantial free cash flow (FCF) despite annual capex plans
of GBP1.5b. We estimate cash flow from operations will increase to GBP1.9b in FY12
and to GBP2.1b in FY13, translating into FCF generation of GBP364m and GBP582m
respectively. In a scenario of pressure on volumes due to a deteriorating economic
environment, the management has flexibility to cut capex to GBP700m-800m and still
generate FCF.
Trend in Free cash flow (GBP m)
CFO
Capex
FCF
1,645
1,864
2,082
662
-75.7
-81 -681
-599
-738
867.8
364
582
-777
-1,500
-1,500
FY13E
FY09
FY10
FY11
FY12E
28 November 2011
36

Tata Motors
Domestic business a key contributor with high visibility
Tata Motor's standalone business is still valuable contributor with ~23%
contribution to normalized EBITDA and 46% to fair value estimates.
Domestic business, where CV is the key performer, is witnessing stability and
offers better visibility for the future; increasing contribution of LCVs to CV
volumes dilutes cyclicality
We expect TTMT's PV business to continue to underperform domestic PV
industry and lose market share.
Domestic business still equally valuable, adds ~46% to fair value
Although JLR is the largest contributor to Tata Motor's (TTMT) consolidated performance,
TTMT's standalone business is still valuable, contributing ~23% to normalized EBITDA
and 46% to fair value estimates. The domestic business, in which commercial vehicles
(CV) are the key performer, is stable and offers better visibility for the future. Adjusting
for JLR debt in standalone books, the domestic business contributes ~29% to consolidated
normalized PAT. Furthermore, domestic business enjoys superior valuations due to a
favorable industry structure, less cyclicality and lower capital intensity.
Contribution to normalized EBITDA
Tata Motors Standalone
11%
12%
JLR
Others
7%
Contribution to fair value (INR/share)
Others
INR 23
61%
66%
69%
JLR
INR 104
28%
21%
FY12E
23%
FY13E
Standalone
INR 108
FY11
Commercial vehicles show no sign of a slowdown
The domestic CV business has good volume momentum with ~18% growth in YTDFY12
on top of ~31% growth in FY11 and on a high base in 1HFY11 when volumes grew 45%
(pre-buying before BSIII compliance from October 2010). M&HCV volume growth was
relatively muted at 8% in YTDFY12, impacted by macro-headwinds and issues pertaining
to iron-ore mining. However, LCV volumes are strong at ~27% growth in YTDFY12.
TTMT's CV volumes grew by 18% in YTDFY12 with M&HCV volume growth of 8%
and LCV volume growth of 25%. We estimate volume growth of ~12% in FY12 and
12.7% in FY13 for TTMT's CV volumes, driven by ~15% growth in LCVs in each FY12
and FY13 and ~7% and 10% growth in FY12 and FY13 respectively for M&HCVs.
28 November 2011
37

Tata Motors
Trend in M&HCV volumes of Tata Motors
M&HCV volume growth
was relatively muted at
8% in YTDFY12,
impacted by macro-
headwinds and issues
pertaining to iron-ore
mining
Trend in LCV volumes of Tata Motors
FY12YTD CV volumes grew ~19% despite high base
2HFY11 volume growth
slowdown due to BSIII
implementation
M&HCV: Supply constraints leads to market share loss
65.1%
Market Share
LCV: Market share declined due to competition
Market Share
65.4%
65.3%
64.3%
64.7%
64.1%
63.3%
62.7%
62.0%
62.0%
50.7%
59.8%
63.2%
61.1%
60.1%
49.6%
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
28 November 2011
38

Tata Motors
LCV, TTMT's most profitable business, dilutes cyclicality of CV business
The LCV market has witnessed linear growth over last 9 years with 22.7% CAGR (FY02-
11) and just one year (FY09) of negative growth. While, TTMT's LCV business posted
25.6% CAGR over FY02-11. TTMT is the market leader in the LCV segment with ~60%
overall market share and ~73% market share in its key product Ace (including variants).
Growth in TTMT's LCV business is driven by a hub-and-spoke model and increasing use
in rural areas. It offers stability to TTMT's CV business. Being the most profitable business
for TTMT's domestic business (due to segment leadership and fiscal incentives at the
Pantnagar plant), strong volume growth in the LCV business augurs well for the domestic
business performance. Furthermore, increasing contribution of LCV to CV volumes dilutes
cyclicality of the CV business. LCV contributes ~56% to overall CV volumes while for
TTMT LCV forms ~57% of CV volumes (~60% in YTDFY12).
Industry: Trend in LCV proportion
LCV volumes as a % of total CV
56
38
38
41
41
46
58
56
57
Tata Motors: Trend in LCV proportion
LCV volumes as a % of total CV
57
40
32
42
47
58
60
57
32
TTMT better placed to cope with downturn than in down-cycle of 2008-09
TTMT has learned from its experience in the down-cycle of 2008-09. TTMT has been
following flexibility in its production planning and is adaptive to an evolving market place.
Its inventory is 18-20 days against ~39 days in June 2008. Besides, it has a significantly
higher share of LCVs (~60%) in its CV volumes than it did in FY08 (~49%). We believe
this lends stability to its overall CV business.
Trend in domestic business inventory
Inventory level (in days)
Based on its experience
from the previous down-
cycle in FY09, it is
following flexibility in
production planning and
maintaining leaner
inventory
39
18
Peak level during last crisis
Current level
28 November 2011
39

Tata Motors
However, passenger vehicle business surprises negatively
TTMT's passenger vehicle (PV) business has been throwing up negative surprises with
de-growth in volumes and loss of market share. While the domestic PV industry has been
hit by macro-headwinds, resulting in ~2% volume growth in YTDFY12, TTMT's PV
business has been worst impacted with ~18% volume de-growth. Furthermore, increasing
competitive intensity has also impacted TTMT's PV business performance. Consequently,
TTMT lost ~400bp in market share in the PV segment, to ~12% over the past 3-4 years.
TTMT's PV business has been impacted by a relatively small product portfolio (three
brands, the Nano, Indica and Indigo) and quality perception. Although TTMT has been
taking steps to resurrect its PV business, we believe it will be difficult for it to revive its
PV business in the foreseeable future. Hence, we expect TTMT's PV business to continue
to underperform the domestic PV industry and lose market share. We estimate TTMT's
PV business to remain flat over FY11-13.
Tata Motors: PV volumes and growth (monthly)
PV volumes
25000
20000
15000
10000
5000
0
grow th (% YoY) - RHS
75%
50%
25%
0%
-25%
-50%
15.5%
14.2%
13.8%
14.8%
14.0%
17.7%
17.1%
16.8%
Trend in annual market share in PV
Market Share
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Standalone revenue model (volumes)
FY09
M&HCVs
Growth (%)
Contribution (%)
LCVs
Growth (%)
Contribution (%)
Total Commercial Vehicles
Growth (%)
Contribution (%)
Utility Vehicles
Growth (%)
Contribution (%)
Cars (Ex Nano)
Growth (%)
Contribution (%)
Nano
Growth (%)
Contribution (%)
Total Passenger Vehicles
Growth (%)
Contribution (%)
Revenue (INRm)
Growth (%)
123,007
-31
24.3
168,986
-3
33.4
291,993
98
57.7
39,973
-21
7.9
174,455
-4
34.4
NA
NA
NA
214,428
-8
42.3
255,790
-11
FY10
167,829
36
25.1
233,697
38
35.0
401,720
38
60.1
34,124
-15
5.1
201,364
15
30.1
30,763
NA
4.6
266,251
24
39.9
355,931
39
FY11
214,045
28
25.6
294,986
26
35.3
509,031
27
60.8
43,063
26
5.1
214,058
6
25.6
70,432
129
8.4
327,553
23
39.2
480,405
35
FY12E
229,550
7
26.9
340,215
15
39.9
569,765
12
66.8
46,312
8
5.4
186,163
-13
21.8
51,000
-28
6.0
283,474
-13
33.2
521,611
9
FY13E
252,505
10
26.0
389,443
14
40.1
641,948
13
66.2
48,670
5
5.0
204,779
10
21.1
75,000
47
7.7
328,448
16
33.8
592,620
14
28 November 2011
40

Tata Motors
Trend in Standalone EBITDA and EBITDA margin
EBITDA (INRm)
11.7
9.9
7.9
6.7
8.7
EBITDA margin (%)
Trend in Standalone PAT
PAT (INRm)
207.4
PAT grow th (%)
25.3
-25.0
-69.5
FY09
FY10
FY11
FY12E
FY13E
FY09
FY10
FY11
FY12E
45.1
FY13E
28 November 2011
41

Tata Motors
Valuations remain attractive, maintain Buy with target price
of INR235
A positive outlook for luxury vehicles and JLR's limited presence will drive secular growth.
While JLR is strong in the SUV segment, its weakness in the luxury car segment offers
significant headroom to grow, driven by a refreshed product portfolio and planned launches
over the next 2-3 years. Furthermore, the launch of Evoque in the high volume potential
compact luxury SUV segment will be a key growth driver over the next 2-3 years. We
also foresee strong potential for Jaguar in the entry-level luxury segment, which represents
a market size of over 1.1m units a year. While JLR's EBITDA margins in the short term
are expected to contract due to high RM and marketing costs, the impact in the medium
term is expected to be diluted by higher operating leverage, cost efficiency and a better
market mix (driven by China).
While JLR is the largest contributor to Tata Motor's (TTMT) consolidated performance,
TTMT's standalone business makes a valuable ~23% contribution to normalized EBITDA
and 46% to fair value estimates. Domestic business is witnessing stability and offers
better visibility for the future. Increasing contribution of LCVs to CV volumes (~60%
currently v/s ~49% in FY08) dilutes the cyclicality of the CV business.
The stock price correction for TTMT has been more than its global luxury car markers
(15-35% correction), impacted by financial crisis in developed markets. However, unlike
its peers, JLR is not into the vehicle financing business, which contributes 12-24% of
EBIT to its peers and has a EUR51b-66b book size (which can see some stress). While
JLR is the largest contributor to TTMT's performance, TTMT's cash-cow domestic business
is relatively less vulnerable to global headwinds and expected to be less cyclical than in
previous downturns due to higher LCV contribution.
TTMT's stock corrected ~26% over the past six months and underperformed the Sensex
by 13%. As a result, valuations at 11.5x FY12 and 9x FY13 normalized EPS for ordinary
share, and 6.3x FY12 and 4.9x FY13 normalized EPS for DVR shares is very attractive.
Buy
with target price of INR235 (SOTP) for the ordinary share and INR165 for the
DVR (~30% discount).
Contribution to fair value (INR/share)
TTMT's standalone
business makes a
valuable ~23%
contribution to normalized
EBITDA and 46% to fair
value estimates
Others
INR 23
JLR
INR 104
Standalone
INR 108
28 November 2011
42

Tata Motors
Tata Motors: Sum of the parts
INR B
EBITDA
Tata Motors - Standalone
JLR
HV Axles
HV Transmission
Tata Technologies
Tata Daewoo
SOTP Value
Tata Motors - Standalone
JLR (Adj for R&D capitalization)
HV Axles
HV Transmission
Tata Technologies
Tata Daewoo
Total EV
Less: Net Debt (Ex FCCB & TMFL)
Add: Other Investments
Tata Motors Finance
Other Associates/JVs
Tata Sons
Total Equity Value
Fair Value (INR/Sh) - Ord Sh
Upside (%)
Fair Value (INR/Sh) - DVR
Upside (%)
Valuation Parameter
Multiple (x)
FY12E
41,416
93,987
1,958
1,820
2,103
1,972
EV/EBITDA
EV/EBITDA
EV/EBITDA
EV/EBITDA
EV/EBITDA
EV/EBITDA
7
3
4
4
4
4
290
282
8
7
8
8
603
71
P/BV
Carrying Cost
50% discount to mkt value
Fully Diluted
@ 30% discount
1
18
8
28
585
176
2.6
123
15.2
FY13E
51,291
115,326
2,240
2,081
2,454
2,839
359
346
9
8
10
11
743
22
17
9
28
775
235
37
165
53.8
Adj for R&D capitalization
FY13 Fair value sensitivity analysis to JLR's
volumes & margins
260
16.2
15.7
15.2
14.7
14.2
178
173
167
162
157
JLR Volumes
280
300
208
203
197
192
186
245
239
235
227
221
315
270
264
257
251
245
330
301
294
287
281
274
FY13 norm. EPS sensitivity analysis to JLR's
volumes & margins
260
16.2
15.7
15.2
14.7
14.2
11.5
10.4
6.8
5.6
4.5
JLR Volumes
280
300
17.5
16.3
12.5
11.2
10.0
24.7
23.3
19.2
17.9
16.6
315
29.6
28.2
23.9
22.5
21.1
330
35.7
34.2
29.6
28.1
26.7
FY13 Fair value sensitivity analysis to JLR's
& standalone CV volumes
260
5.0
10.0
12.7
15.0
20.0
151
162
168
172
183
JLR Volumes
280
300
181
192
198
202
213
216
227
235
238
249
315
241
252
258
262
273
330
271
282
287
292
303
FY13 norm. EPS sensitivity analysis to JLR's
& standalone CV volumes
260
5.0
10.0
12.7
15.0
20.0
5.2
6.2
6.8
7.2
8.2
JLR Volumes
280
300
10.9
11.9
12.5
12.9
13.9
17.7
18.6
19.2
19.6
20.6
315
22.3
23.3
23.9
24.3
25.3
330
28.0
29.0
29.6
30.0
31.0
28 November 2011
43

Tata Motors
Consolidated financials - Key financial parameters
Trend in adjusted & normalized PAT (INRb)
Adjusted PAT
Normailzed PAT
105
50
64
Trend in consolidated adjusted & normalized EPS (INR)
91
58
15
91
-21
-71
FY09
-14
FY10
FY11
FY12E
FY13E
EBITDA contribution by business
Trend in Free cash flow (INRb)
Trend in RoE & RoCE (%)
28 November 2011
44

Tata Motors
Annexure
BMW - volume break-up by model
CY09
BMW 1 Series
BMW 3 Series
BMW 5 Series
BMW 6 Series
BMW 7 Series
BMW Z4
Cars
BMW X1
BMW X3
BMW X5
BMW X6
SUVs
Total
216,944
397,103
175,983
8,648
52,680
22,761
874,119
8,499
55,634
88,851
41,667
194,651
1,068,770
CY10
196,004
399,009
238,454
5,848
65,814
24,575
929,704
99,990
46,004
102,178
46,404
294,576
1,224,280
%YoY
-100
0
35
-32
25
8
6
1076
-17
15
11
51
15
9M CY10
151,681
295,608
155,648
5,149
47,349
20,637
676,072
72,294
35,252
74,655
34,464
216,665
892,737
9M CY11
129,041
288,077
250,566
5,314
48,842
15,627
737,467
94,294
83,754
75,055
31,357
284,460
1,021,927
%YoY
-15
-3
61
3
3
-24
9
30
138
1
-9
31
14
Audi - volume break-up by model
CY09
Audi A1
Audi A3
Audi TT
Audi A4
Audi A5
Audi A6
Audi A7
Audi A8
Audi R8
Cars
Audi Q3
Audi Q5
Audi Q7
SUVs
Total volumes
NA
208,817
26,979
298,119
70,743
194,620
NA
11,703
3,074
814,055
NA
99,812
35,606
135,418
949,473
CY10
27,898
204,325
24,908
302,060
114,533
204,309
3,795
17,039
3,166
902,033
NA
147,088
43,251
190,339
1,092,372
%YoY
NA
-2
-8
1
62
5
NA
46
3
11
NA
47
21
41
15
9M CY10
7,411
160,903
19,350
235,612
90,734
159,639
668
11,987
2,408
688,712
NA
109,189
31,380
140,569
829,281
9M CY11
88,784
141,644
22,158
245,073
87,144
164,148
23,490
25,771
2,608
800,820
NA
131,335
40,236
171,571
972,391
%YoY
NA
-12
15
4
-4
3
NA
115
8
16
NA
20
28
22
17
Mercedes Benz - Volume break-up by model
CY09
E-Class
S-Class
C-Class
A&B Class
Cars
SUV (M-, R-, GL-,
GLK- and G-Class)
Total
212,100
57,100
322,800
215,500
807,500
CY10
330,800
80,400
341,900
222,400
975,500
202,800
1,178,300
% YoY
56
41
6
3
21
NA
46
1HCY10
252,350
59,380
246,870
162,700
721,300
140,640
861,940
1H CY11
246,740
60,100
292,000
149,280
748,120
181,000
929,120
% YoY
-2
1
18
-8
4
29
8
807,500
28 November 2011
45

Tata Motors
JLR - Financials
Income Statement
Y/E March
Total Income
Change (%)
Expenditure
EBITDA
% of Net Sales
Normalized EBITDA
% of Net Sales
Depreciation
EBIT
Product development Exp.
Interest
Other Income
EO Exp/(Inc)
PBT
Tax
Reported PAT
Net Profit
Normalized PAT *
5,033
-56
-1.1
-363
-7.3%
209
-265
28
69
0
14
-375
27
-402
-402
-695
FY09
4,977
FY10
6,555
31.7
6,158
397
6.1
43
0.7%
316
80
48
50
0
-68
51
28
23
23
-214
FY11
9,907
51.1
8,286
1,621
16.4
1,166
11.8%
396
1,225
119
23
0
-33
1,115
79
1,036
1,036
733
2012E
12,435
25.5
10,547
1,887
15.2
1,284
10.3%
432
1,456
151
117
0
0
1,188
178.2
1,010
1,010
557
(GBP Million)
2013E
14,362
15.5
12,119
2,243
15.6
1,613
11.2%
567
1,676
180
69
0
0
1,427
214.0
1,213
1,213
763
E: MOSL Estimates; * Normalized for capitalized R&D expenses
Balance Sheet
FY09
Share Capital
Reserves
Net Worth
Loans
Deferred Tax
Capital Employed
Gross Fixed Assets
Net Fixed Assets
Capital WIP
Goodwill
Investments
Curr.Assets
Inventory
Sundry Debtors
Cash & Bank Balances
Others
Current Liab. & Prov.
Sundry Creditors
Provisions
Net Current Assets
Misc. Expenditures
Appl. of Funds
E: MOSL Estimates
924
-1,004
-80
1,953
-16
1,858
5,347
1,764
373
376
0
1,753
917
461
128
247
2,452
1,690
763
-700
44
1,858
FY10
2,320
-941
1,379
1,283
-27
2,635
5,833
2,057
497
376
0
2,709
995
667
680
368
2,988
2,349
639
-278
-17
2,635
FY11
1,658
23
1,680
1,261
-55
2,887
6,104
2,000
1,030
376
105
3,110
1,152
562
923
473
3,735
2,910
825
-625
0
2,887
2012E
1,658
1,033
2,690
1,261
-55
3,897
8,287
3,751
100
376
105
4,041
1,446
705
1,297
594
4,477
3,652
825
-436
0
3,897
(GBP Million)
2013E
1,658
2,245
3,903
1,158
-55
5,006
9,494
4,392
100
376
105
5,077
1,670
814
1,907
686
5,044
4,218
825
33
0
5,006
28 November 2011
46

Tata Motors
Tata Motors - Financials and valuation (Consolidated)
Income Statement
Y/E March
Total Income
Change (%)
Expenditure
EBITDA
% of Net Sales
Depreciation
EBIT
Product development Exp.
Interest
Other Income
EO Exp/(Inc)
Forex Gain/ (Loss)
PBT
Tax
Effective Rate (%)
Reported PAT
Minority Interest
Share of profit of associate
Net Profit
Adj. PAT
Change (%)
2009
708,810
98.8
686,845
21,965
3.1
25,068
-3,103
3,478
19,309
7,990
0
3,393
-21,293
3,358
-15.8
-24,650
114.8
-517.3
-25,053
-21,125
-202.9
2010
925,193
30.5
839,051
86,142
9.3
38,871
47,270
4,982
22,397
416
-14,075
-845
35,226
10,058
28.6
25,169
-303.3
845.0
25,711
15,051
-171.2
2011
1,231,333
33.1
1,053,533
177,800
14.4
46,555
131,245
9,625
20,454
896
0
-2,310
104,372
12,164
11.7
92,208
-485.2
1,013.5
92,736
90,695
502.6
2012E
1,495,131
21.4
1,298,027
197,103
13.2
52,482
144,621
12,977
24,661
2,421
4,960
0
104,445
17,947
17.2
86,498
-527.6
796.0
86,767
90,874
0.2
(INR Million)
2013E
1,690,412
13.1
1,466,722
223,690
13.2
63,425
160,265
15,045
20,777
2,412
0
0
126,855
22,907
18.1
103,948
-626.2
1,200.5
104,523
104,523
15.0
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Minority Interest
Deferred Tax
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Goodwill
Investments
Fx item translation
Curr.Assets
Inventory
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Other Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2009
5,141
54,266
59,406
349,739
4,030
6,802
419,977
584,694
332,691
252,003
105,330
37,187
12,574
6,365
326,860
109,506
47,949
41,213
128,166
26
321,202
185,190
54,611
81,400
5,658
419,977
2010
5,706
76,359
82,065
351,924
2,135
11,536
447,660
648,518
344,135
304,383
80,680
34,229
22,191
-1,912
425,296
113,120
71,912
87,433
152,807
24
417,208
221,875
118,898
76,435
8,088
447,660
2011
6,377
185,338
191,715
327,914
2,466
14,638
536,733
714,629
396,987
317,643
117,289
35,848
25,443
0
510,349
140,705
68,774
109,479
191,372
19
469,838
266,848
104,299
98,692
40,511
536,733
2012E
6,420
257,081
263,502
323,606
2,994
14,638
604,739
891,918
449,469
442,449
50,000
35,848
26,239
0
623,678
174,091
90,117
126,078
233,372
20
573,475
327,700
122,887
122,887
50,203
604,739
(INR Million)
2013E
6,632
344,146
350,778
307,367
3,620
14,638
676,403
1,001,918
512,894
489,024
30,000
35,848
27,439
0
742,469
196,829
101,888
168,360
275,372
20
648,377
370,501
138,938
138,938
94,091
676,403
28 November 2011
47

Tata Motors
Tata Motors - Financials and valuation (Consolidated)
Ratios
Y/E March
Basic (INR)
EPS
EPS Fully Diluted
Normalized EPS ^
Cash EPS
Book Value (Rs/Share)
DPS
Payout (Incl. Div. Tax) %
Valuation (x)
Consolidated P/E
Cash P/E
EV/EBITDA
EV/Sales
Price to Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2009
-8.2
-6.4
-21.3
1.5
23.1
1.2
-16.4
2010
5.3
4.5
-4.3
18.9
28.8
1.2
65.9
2011
28.4
27.3
17.4
43.0
60.1
4.0
16.2
2012E
28.3
27.3
14.9
44.7
82.1
4.0
16.5
2013E
31.5
31.5
19.2
50.7
105.8
4.5
16.7
6.3
4.0
1.7
0.2
2.9
2.3
6.3
3.8
1.4
0.2
2.1
2.3
5.5
3.4
1.0
0.1
1.6
2.6
-35.6
1.2
18.3
10.7
47.3
24.6
34.5
24.3
29.8
24.1
25
56
95
1.7
28
45
88
2.1
20
42
79
2.3
22
43
80
2.5
22
43
80
2.5
5.9
4.3
1.7
1.2
0.9
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Interest/Div. Received
Depreciation & Amort.
Direct Taxes Paid
(Inc)/Dec in Wkg. Capital
Other Items
CF from Op Activity
Extra-ordinary Items
CF after EO Items
(Inc)/Dec in FA+CWIP
(Pur)/Sale of Invest.
CF from Inv Activity
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2009
-3,103
18,517
25,023
5,986
13,450
-65,470
-5,597
13,095
7,498
-98,959
-89,206
-188,164
41,097
167,996
-23,867
-7,595
177,631
-3,035
38,332
41,213
2010
47,270
23,055
38,826
-12,292
26,009
-28,408
94,460
-4,489
89,971
-84,532
9,202
-75,331
15,167
45,300
-28,553
-3,496
28,417
43,058
41,213
87,433
2011
131,245
19,781
46,510
-13,912
-40,484
-28,651
114,489
-2,087
112,402
-81,128
10,471
-70,657
31,561
-10,688
-24,691
-10,195
-14,013
27,732
87,433
115,165
2012E
144,621
2,421
52,482
-17,947
6,906
-12,181
176,303
-4,960
171,343
-110,000
-796
-110,796
43
-4,308
-24,661
-15,023
-43,949
16,599
109,479
126,078
(INR Million)
2013E
160,265
2,412
63,425
-22,907
-1,606
-13,845
187,745
0
187,745
-90,000
-1,200
-91,200
211
-16,239
-20,777
-17,458
-54,262
42,282
126,078
168,360
28 November 2011
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