After the long buildup of expectations and the attendant euphoria, this deal hasn't quite zoomed off the blocks. Investors and analysts remain, at best, lukewarm to Tata Motors' acquisition of two renowned automobile brands—Jaguar and Land Rover (JLR)—with the share price of India's largest auto company slipping 8 per cent since the deal was announced on March 26. There are a brimful of concerns—falling sales of luxury cars, just how Tata Motors will generate returns from the $2.3 billion that it has put on the table, and the absence of an articulated strategy. But Tata Motors is quietly confident that it has a winner on its hands, albeit over the long term. Who's right?
In tune with recessionary trends, sales in the world's biggest luxury car markets—the US and Europe—have been flagging. While Jaguar took a 33 per cent hit in US sales in 2007, Land Rover's numbers dropped by 13 per cent. The numbers are similar for Europe. Says Piyush Parag, automobile analyst with Religare Securities: "Globally, luxury cars have been seeing a slump for 7-8 months. Most cars are fully financed and financiers aren't coming up with new schemes, so this market is sliding rapidly."