JLR ACQUISITION: WRONG MOVE

The TATA MOTORS decision to acquire JLR, two global brands, is proving to be costly going by the results declared by the company in the last two quarters. The dynamics of the luxury car market has changed with the advent of hybrid - electric cars, with sustained technology. The growing demand for oil, in spite of, recession through out the world, is likely to push the price beyond $ 100/barrel. This acts as a deterrent in the already subdued segment. Look at the financials of its competitor –Maruthi, the country’s largest car maker. It is churning out better than expected results quarter after quarter. It relays on numbers. Its mid sized car and lower end model contribute substantially both to the top and bottom line. It makes sense to increase the numbers in the fully depreciated plant, which will have direct bearing the profitability of the company. The newly acquired brands -JLR are neither going to contribute to the numbers nor to the bottom line.