Environmental performance: Jaguar Land Rover's strategy is to invest in products and technologies that position their products ahead of expected stricter environmental regulations and ensure that benefits from a shift in consumer awareness of the environmental impact of the vehicles driven by customers. The Company also believe that Jaguar Land Rover is a leader in automotive green technology in the United Kingdom. Jaguar Land Rover's environmental vehicle strategy focuses on new propulsion technology, weight reduction and reduction of parasitic losses through the driveline. Jaguar Land Rover have developed diesel hybrid versions of the Range Rover and Range Rover Sport, without compromising these vehicles' off road capability or load space.
Jaguar Land Rover is a global leader in the use of aluminium and other lightweight materials to reduce vehicle weight and improve fuel and CO2 efficiency, and Jaguar Land Rover believes that it is ahead of many of its competitors in the implementation of aluminium construction. For example, the Jaguar XE is the only vehicle in its class to use an aluminium intensive monocoque. Jaguar Land Rover plans to continue to build on this expertise and extend the application of aluminium construction as it develops a range of new products. The aluminium body architecture introduced on the Jaguar XE is also used in the new lightweight Jaguar XF and the new Jaguar F PACE.
Recognizing the need to use resources responsibly, produce less waste and reduce Jaguar Land Rover's carbon footprint, Jaguar Land Rover is also taking measures to reduce emissions, waste and the use of natural resources in all of their operations.
Jaguar Land Rover is also developing more efficient powertrains and other technologies. This includes smaller and more efficient 2.0 litre petrol engines, stop start and hybrid engines. Jaguar Land Rover already produce smaller and more efficient diesel engines such as the 2.0 litre diesel engine used in its new Jaguar XE, XF, Discovery Sport, Evoque and F-PACE. The Range Rover and Range Rover Sport Diesel Hybrid, powered by downsized and more efficient engines and alternative powertrains have both contributed to the improvement of their carbon footprint.
Jaguar Land Rover's current product line up is the most efficient it has ever been and the launch of new models has further improved the environmental performance of its vehicles. The aluminium intensive Jaguar XE is the most fuel efficient Jaguar and the first Jaguar Land Rover vehicle to receive a UK VED Band A rating resulting in a £0/annum tax rate and the new aluminium intensive XF delivers improved fuel consumption and CO2 emission performance. The all aluminium Jaguar XJ 3.0 litre V6 twin turbo diesel and the 2.0 litre turbocharged petrol engine options in the Range Rover Evoque, the Land Rover Discovery and the Jaguar XE, XF and XJ also offer improved fuel efficiency.
The most efficient version of the latest Range Rover Evoque emits less CO2 than the prior model due to the introduction of the new 2.0 litre "in house" diesel engine. The Discovery Sport has been developed to be the most versatile and capable Land Rover in its category with a range of four cylinder turbocharged petrol and diesel engines (including Jaguar Land Rover's in house 2.0 litre diesel engine). The 3.0 litre TDV6 Range Rover offers similar performance to the previous 4.4 litre TDV8 Range Rover while fuel consumption and CO2 emissions have been reduced. Jaguar Land Rover's first hybrid electric vehicles in the Range Rover and Range Rover Sport 3.0 litre SDV6 Hybrid also offer significantly improved CO2 emission performance.
Mitigating cyclicality: The automobile industry is impacted by cyclicality. To mitigate the impact of cyclicality, the Company plans to continually strengthen its operations by gaining market share across different vehicle categories and offering a wide range of products in diverse geographies. For example, the Company is focusing on shifting its offerings in the defense sector from pure logistical solutions to tactical and combat solutions, which the Company believes will be less affected by cyclicality. The Company also plans to continue to strengthen its business operations other than vehicle sales, such as financing of its vehicles, spare part sales, service and maintenance contracts, sales of aggregates for non-vehicle businesses, reconditioning of aggregates and sales of castings, production aids, tooling's and fixtures, to reduce this cyclical impact of the automotive industry on the Company's financial performance.
Expanding the Company international business: The Company's international expansion strategy involves entering new markets where it has an opportunity to grow and introducing new products to existing markets in order to grow its presence in such markets. The Company's international business strategy has already resulted in the growth of its international operations in select markets and chosen segments over the last five years. In recent years, the Company has grown its commercial vehicle market share across various African markets such as Kenya, Nigeria, Tanzania, Congo and Senegal, introduced certain products in Australia, and is focused on increasing the presence in key markets in Southeast Asia and Latin America. The Company is also actively considering expanding its global manufacturing footprint in key international markets to take advantage of import duty differentials and local sourcing.
The Company has also expanded its range through acquisitions and joint ventures. The Company now offers products in the premium performance car and premium all-terrain vehicle categories with globally-recognised brands through Jaguar Land Rover and has diversified its business across markets and product categories. The production of the Range Rover Evoque commenced at the joint venture with Chery Automobile Company Ltd, or the China Joint Venture in October 2014 and the Range Rover Evoque went on retail sale in China in February 2015. Production of the Discovery Sport was also added as the second vehicle to be manufactured at the China Joint Venture in Fiscal 2016, which went on retail sale in November 2015. In addition, Jaguar Land Rover recently announced that the Jaguar XF L (a long wheelbase version of the Jaguar XF saloon) would be the third vehicle to be produced at the China Joint Venture from the later half of 2016. The Company aims to continue to build upon the internationally recognized brands of Jaguar Land Rover. TDCV continues to be the largest exporter of heavy commercial vehicles from South Korea. The Company has established a joint venture along with Thonburi in Thailand to manufacture pickup trucks and any other product lines that would be suitable for the market going forward. Tata Motors (SA) (Proprietary) Ltd., which caters to the domestic South African market, has produced and sold over 750 chassis as at the end of Fiscal 2016.
Jaguar Land Rover also has ambitious plans to continue to develop the product range, for example the new Jaguar F-PACE performance crossover, which went on sale in April 2016, will be a new product offerings for the Jaguar portfolio. Similarly, Jaguar Land Rover continues to expand its Land Rover product off erings with the announcement of the Range Rover Evoque convertible, which also went on retail sale in June 2016.
Jaguar Land Rover intends to expand its global footprint by increasing its global dealer network as well as expanding its manufacturing base in the UK and internationally, for example including the new manufacturing facility in Brazil due to commence operations in Fiscal 2017, and at a brand new manufacturing plant in Slovakia, due to commence production at the end of 2018.
Reducing operating costs: The Company's ability to leverage its technological capabilities and the manufacturing facilities among its commercial vehicle and passenger vehicle businesses enables it to reduce costs. As an example, the diesel engine used in the Indica platform was modified for use in the Ace platform, which helped to reduce development costs. Similarly, platform sharing for the manufacture of pickup trucks and utility vehicles enables the Company to reduce capital investment that would otherwise be required, while allowing it to improve the utilisation levels at its manufacturing facilities. Where appropriate, the Company intend to apply its existing low-cost engineering and sourcing capability to vehicles manufactured under the Jaguar and Land Rover brands.
The Company's supplier relationships also contribute to cost-reductions. For example, the Company believes that the supplier rationalisation programme that it is undertaking will provide economies of scale to its vendors, which would benefit the Company's cost programmes. The Company is also undertaking various internal and external benchmarking exercises that would enable it to improve the cost effectiveness of its components, systems and sub-systems.
The Company has intensified efforts to review and realign its cost structure through a number of measures, such as reduction of manpower costs and rationalisation of other fixed costs. The Jaguar Land Rover business continues to focus on cost-management initiatives, such as streamlining its purchasing processes and building on its strong relationships with suppliers while increasing employee deployment and flexibility. In addition, Jaguar Land Rover continues to increase its use of its new modular aluminium architecture across vehicles platforms, which it expects, will result in the use of common technology more widely, across product lines and a reduction in engineering complexity.
Enhancing capabilities through the adoption of superior processes: Tata Sons and the entities promoted by Tata Sons, including the Company, aim at improving quality of life through leadership in various sectors of national economic significance. In pursuit of this goal, Tata Sons and the Tata Sons promoted entities have institutionalised an approach, called the Tata Business Excellence Model, which has been formulated along the lines of the Malcolm Baldridge National Quality Award, to enable the Company to improve performance and attain higher levels of efficiency in its businesses and in discharging the Company's social responsibility. The model aims to nurture core values and concepts embodied in various focus areas such as leadership, strategic planning, customers, markets and human resources, and to translate them to operational performance. The Company's adoption and implementation of this model seeks to ensure that its business is conducted through superior processes compared to its competitors.
The Company has deployed a balance score card system for measurement-based management and feedback. The Company has also deployed a product introduction process for systematic product development and a product lifecycle management system for effective product data management across its organisation. The Company has adopted various processes to enhance the skills and competencies of its employees. The Company has also enhanced its performance management system with appropriate mechanisms to recognise talent and sustain its leadership base. The Company believes these measures will enhance its way of doing business, given the dynamic and demanding global business environment.
Expanding customer financing activities: With financing a critical factor in vehicle purchases and the rising aspirations of consumers in India, the Company intends to expand its vehicle financing activities to enhance vehicle sales. In addition to improving its competitiveness in customer attraction and retention, the Company believes that expansion of its financing business would also contribute towards moderating the impact on its financial results from the cyclical nature of vehicle sales. To spur growth in the small commercial vehicles category, the Company has teamed up with various public sector and cooperative banks and Grameen banks to introduce new finance schemes. TMFL has increased its reach by opening a number of limited services branches in Tier 2 and 3 towns. This has reduced turnaround times and improved customer satisfaction. TMFL's Channel Finance initiative and fee-based insurance support business has also helped improve profitability.
Continuing to invest in technology and technical skills: The Company believes it is one of the most technologically advanced indigenous vehicle manufacturers in India. Over the years, the Company has enhanced its technological strengths through extensive in-house research and development activities. Further, the Company's research and development facilities at its subsidiaries, such as TMETC, TDCV, TTL, and Trilix, together with the two advanced engineering and design centres of Jaguar Land Rover, have increased its capabilities in product design and engineering. The Jaguar Land Rover business is committed to continue to invest in new technologies to develop products that meet the opportunities of the premium market, including developing sustainable technologies to improve fuel economy and reduce CO2 emissions. The Company considers technological leadership to be a significant factor in its continued success, and therefore, intends to continue to devote significant resources to upgrade its technological base.
Maintaining financial strength: The Company's cash flow from operating activities in Fiscal 2016 and 2015 was Rs. 39,166.71 crores and Rs. 35,531.26 crores, respectively. The Company has established processes for project evaluation and capital investment decisions with the objective of enhancing its long-term profitability.
Automotive Operations
Automotive operations is the Company's most significant segment, accounting for 99.5% of its total revenues in Fiscal 2016 and 2015. Revenue from automotive operations before inter-segment eliminations increased by 4.7% to Rs. 274,138.50 crores in Fiscal 2016 as compared to Rs. 261,839.73 crores in Fiscal 2015.
The Company's automotive operations include:
- activities relating to the development, design, manufacture, assembly and sale of vehicles as well as related spare parts and accessories;
- distribution and service of vehicles; and
- financing of the Company's vehicles in certain markets.
The Company's consolidated total sales (including international business sales and Jaguar Land Rover sales, including China Joint Venture) for Fiscals 2016 and 2015 are set forth in the table below:
The automotive operations segment is further divided into (i) Tata and other brand vehicles (including vehicle financing) and (ii) Jaguar Land Rover.
Tata and other brand vehicles (including vehicle financing)
India is the primary market for Tata and other brand vehicles (including vehicle financing). During Fiscal 2016, there was a robust and steady pace of economic growth in the geographic markets in which the Tata and other brand vehicles segment has operations.
The Indian economy experienced a GDP growth of 7.6% in Fiscal 2016, compared to 7.2% in Fiscal 2015 (based on data from the Ministry of Statistics and Program Implementation). The Indian automobile industry experienced an increase of 8.0% in Fiscal 2016, as compared to a 2.4% in Fiscal 2015. Falling crude oil prices, lower inflation, resumption of manufacturing and mining activities, and lower interest rates appear to be helping the Indian auto industry. However, competitive pressures continued across all major products in the Tata and other brand vehicles segment leading to a marginal decrease in vehicle sales volumes.
The following table sets forth the Company consolidated total sales of Tata and other brand vehicles:
The Company's overall sales of Tata and other brand vehicles decreased by 0.8% to 520,511 units in Fiscal 2016 from 524,522 units in Fiscal 2015, however, the revenue (before inter-segment elimination) increased by 12.8% to Rs. 49,742.80 crores during Fiscal 2016, compared to Rs. 44,118.13 crores in Fiscal 2015, due to a better product mix, primarily due to relatively more sales of M&HCVs as a proportion of overall sales in Fiscal 2016 compared to Fiscal 2015.