Jaguar Land Rover may be a late entrant into the country's fiercely competitive luxury automobile market but it has a plan to break the German stranglehold over India. And it is already driving Tata Motors's fortunes
Two years ago, auto enthusiast Mahesh Chauhan decided to buy a vehicle “with personality”. The co-founder of the Mumbai-based ad agency Salt Brand Solutions is an avid driver, having undertaken road trips on challenging and remote tracks in Rajasthan and Ladakh. He was looking for a rugged, four-wheel drive that could withstand rocky terrains. After much thought, he splurged on a Freelander 2, a sports utility vehicle (SUV) from marquee British brand Land Rover.
Along with Jaguar, Land Rover had been acquired by India’s Tata Motors (from Detroit-automaker Ford Motor Company) in a $2.3 billion deal in 2008. A year later, the Tatas brought both luxury brands into the country for the first time.
It was Freelander 2 that gave Jaguar Land Rover (JLR) a toehold into India’s fiercely competitive luxury car market. It was the first vehicle (a few parts for which are imported from JLR’s plant in Halewood, UK) that JLR assembled and rolled out of its factory at Pimpri, Pune district, in May 2011.
Chauhan couldn’t be happier with his choice of car. “It is a cult SUV. It is raw and macho, and can take me anywhere,” he says of his Rs 50 lakh ‘Loire Blue’ Freelander 2. He’s already broken it in with two road trips, one to Kutch in Gujarat and the other to Bangalore in Karnataka. “It has amazing road manners.”
This affirmation is significant for JLR India because, as a late entrant in an already crowded market, the company is making up for lost time. And, since 2009, it has captured nearly 10 percent of the luxury car market. Apart from the Freelander, the Indian arm of the UK-based Jaguar Land Rover Automotive Plc (a Tata Motors subsidiary) assembles the Jaguar XF and XJ from the Pune factory. Industry analysts predict that JLR’s Range Rover Evoque may be the next luxury vehicle to be assembled in India.
In the initial months, JLR imported only six cars—three each from Jaguar and Land Rover. This was a time when India’s luxury car market was, and still is, dominated by the big three German brands: Audi, Mercedes-Benz (from Daimler) and BMW. Reason: All three have at least a five-year headstart in India, either through well-established distribution networks or assembly units.
Notwithstanding that, it was a heady start for JLR. Rohit Suri, who heads operations as vice-president (premier car division) of JLR India, says that customers were lining up to place orders even as the company was setting up its first showroom at Ceejay House in Worli, Mumbai. “This was our first statement to the Indian market,” says Suri. “We were here; that was the message. As our cars were being readied for display, a customer literally threw a handkerchief on one of the Range Rovers, indicating that he wanted to ensure that no one else got the car when the showroom opened.”
By the time the showroom opened, all six imported cars had been booked and sold despite the fact that a luxury car import is accompanied by a hefty tax. (According to analysts, global automakers face import duties from anywhere between 60 and 200 percent depending on the price of the car.)
However, to be taken seriously by its competition and potential consumers, JLR had to assemble its cars locally. And it started doing that in 2011.
With the advantage of starting from a small base, it recorded a 3,100 percent jump in sales in India over a four-year period, from 2009 to 2013: In the first year (from July to December), JLR sold 91 units. In 2013, the company sold 2,913 cars. Market leader Audi, which sold 10,002 cars in the same year, recorded a 500 percent growth between 2009 and 2013, followed by Mercedes (177 percent) and BMW (100 percent). The base effect was in full play for JLR—as was the brand appeal.
Mahantesh Sabarad, deputy head of research at SBICAP Securities, points to a string of factors that ensured JLR’s success in India. “It did not need to create brand awareness; it was already well known,” he says. “The Tata Group was also cost-conscious, and the fully integrated auto manufacturing plant at Pune with its body and paint shops was a huge plus for JLR. It helped the company push the brand in terms of ease of service, post-sales related activities and sourcing of auto parts.”
“Over the last five years, there has been a continuous infusion of funds into JLR, amounting to $12.28 billion,” says Sabarad. (This injection of capital was initially from Tata Motors, followed by debt, and, now, through internal funding. JLR has partly repaid Tata Motors the initial capital, he adds.) By March 2014, JLR was selling more than 100,000 cars in China, now its largest single market. It opened a new factory in China in October 2014, in a joint venture with Chery Automobile. It will be setting up a manufacturing facility in Brazil next year.
(This story appears in the 23 January, 2015 issue of Forbes India. To visit our Archives, click here.)