Tata will double annual investments in Jaguar Land Rover

MUMBAI (Reuters) -- Tata Motors will double investments in its Jaguar Land Rover brands to 1.5 billion pounds ($2.4 billion) a year, even as the Indian automaker warned that it will be a challenge to sustain high margins at its key profit generator.

With soaring revenues and expanding margins, Jaguar Land Rover (JLR) has driven the company's growth in recent quarters, as strong demand in emerging countries for the famous British brands offset sluggish performance in Tata's home market.

"Over the past 5 to 6 years, JLR has spent around 700 to 800 million pounds annually on capital expenditure and product development. Going forward, we will double that," C.R. Ramakrishnan, Tata's chief financial officer, said on today.

"JLR spending will be in the order of 1.5 billion pounds each year," Ramakrishnan told reporters, adding that the increase would apply in the current fiscal year ending in March.

JLR contributed 95 percent of the company's profit in the quarter to end-December, with a profit margin of 20 percent, three times the profitability seen at Tata's domestic business.

Sustaining such high margins in coming quarters would be "a challenge," for JLR, Ramakrishnan added, as sales growth likely moderates.

Sales of the new compact Evoque SUV accounted for much of JLR's revenue growth in the fiscal third quarter, alongside surging demand in emerging markets such as Russia and China.

Tata bought JLR from Ford Motor Co for $2.3 billion in 2008.

China partner

Tata has selected a joint venture partner for manufacturing JLR cars in China and is awaiting approval from government regulators in the world's fastest-growing auto market, Ramakrishnan said.

An announcement on the company's China joint venture will be made "very soon," he added, without giving details.

In February, Bloomberg quoted sources as saying that Chery Automobile is Tata's China partner.

Fiat JV to stay

Tata's joint venture with Fiat SpA, through which the Italian automaker uses Tata's distribution network in India, is not producing the expected financial results or sales, Ramakrishnan said.

Fiat and Tata have held meetings to discuss new measures to improve the Italian automaker's sales in the country, Ramakrishnan said, adding that there are no plans to end the tie-up.

Bloomberg contributed to this report.