BDA-老虎基金塔塔汽车中国业务发展研究EN-2014 12 22

StudyonTataMotors’BusinessinChina(NYSE:TTM)22December2014ForTigerGlobal’sinternaluseonly©2014BDA2TableofContentsExecutiveSummaryChinaIstheLargestMarketforTTM’sPVsLuxury-CarSectorHasRoomtoGrowintheNearFutureGrowthinSalesofImportedJLRsHasSlowedRecentlyEstablishedCheryJLRMayPerformWellDealers’FallingProfitabilityMaySqueezeJLR’sMarginFocus-GroupandSurveyFindingsAppendixExecutiveSummary(1/3)BDAdoesnotsenseaninflectionpointcomingforTTMifconsideringonlyJLR’sbusinessinChina.The2008–2013CAGRonpremiumpassengervehicles(PVs)was36%,muchhigherthanthe14%recordedin2003–2008;in2014,thepremiumPVmarket’sYTDgrowthstandsat22%YoY,muchlowerthanpreviousnumbersbutstillhigherthantheoverallPVaverageofjust12%.Intermsofannualsalesvolume,themarketshareofSUVsinChinahasbeenincreasinginrecentyearsbutstillfallsshortofthatseenintheUS,whichindicatesthatthereisstillpotentialforcontinuedgrowth.JLRexperiencedmorethansixyearsofhigh-speedgrowthbutisnowfacingaslowdownstemmingmainlyfromdeterioratingeconomicconditionsinChinaandfiercecompetitionintheSUVmarket.However,thelocallymadeNewEvoqueistobelaunchednextFebruaryatamuchlowerpriceandmaybringthegroupsubstantialprofit.JLRhasachievedaPOSCAGRof48%andSSSCAGRof26%overthepastthreeyears,anditsinventoryratiofloatsaround1.5–2whiledealers’retailmarginremainsjustabove0%;asaresult,dealerswillbereluctanttoopennew4SstoresandmayevenaskJLRformorerebates,squeezingitsmargin.3ExecutiveSummary(2/3)However,2015isatimeofgreatconcernforJLRinChina,consideringthatitislaunchingitsfirstlocallyproducedmodel,facingdifficultiesinPOSexpansion,anduncertaintyregardinghowtobuildupJaguar’sbrandimage.BDAwilltrackthefollowingindicatorstojudgewhetheraninflectionpointiscoming.4GDPgrowthCategoryIndicatorsMacroeconomicconditionsPolicyTypeQuantitative;LaggingQualitative;Forward-lookingImpor-tanceInfluenceonTTMDec.2014Feb.2015Mar.–May2015Jun.–Dec.2015CompetitivelandscapePeers’salesvolumesQuantitative;LaggingImportedvehiclesHistorical/futuresalesvolumesQuantitative;Laggingandforward-lookingLocallymadevehiclesEstimatedsalesvolumeQuantitative;Forward-lookingQualityQuantitative;Forward-lookingReputationQualitative;Forward-lookingPricingQuantitative;Forward-lookingMethodSecondaryresearchExpertinterviewsSecondaryresearchSecondaryresearchExpertinterviewsSurveysandexpertinterviewsSurveysandexpertinterviewsSecondaryresearchandsurveysNewvehiclestobelaunchedQualitative;Forward-lookingExpertinterviewsRound1:BDAwillattempttofindoutaboutthemarket’sattitudetowardsthenewproductsandtolearndealers’salestargets.Timing: February2015Event: InitiallaunchofNewEvoqueProject: ThreeweeksRound2:IndustryexpertsthatBDAinterviewedunanimouslyagreethatthefirstthreemonthsofanewproduct’sperformancecanpredictitsfuturetrendsquiteprecisely,soBDAplanstoconductsomelight-touchtracking.Timing: March–May2015Event: MarketfeedbackonNewEvoqueProject: Lighttouch,oneortwoweeksPositiveNeutralNegativeExecutiveSummary(3/3)Inaddition,itisworthnotingthat,evenifJLR’sbusinessinChinaperformswellinthefuture,TTM’sstockpricecouldstilldropifTheIndianbranch’sbusinesskeepsdeteriorating,JLR’sbusinessesoutsideofIndiaandChinadopoorly,FluctuationsinexchangeratesandincreasinglaborcostssqueezeTTM’smargin,orTheestablishmentofmoreoverseasJVsleadsJLRtorecordnegativefreecashflows.5CategoryIndicatorsTypeImpor-tanceInfluenceonTTMDec.2014Feb.2015Mar.–May2015Jun.–Dec.

2015MethodChannelmanagementPOSGQuantitative;Forward-lookingSSSGQuantitative;Forward-lookingInventoryratiosQuantitative;Forward-lookingDiscountsandrebatesQuantitative;Forward-lookingSecondaryresearchanddealerinterviewsDealerinterviewsDealerinterviewsDealerinterviewsMarginsQuantitative;Forward-lookingDealerinterviewsRound3:BDAwillcontinuouslymonitorthenewproducts’performanceandkeepaneyeontheprogressofPOSexpansions.Timing: June2015onwardEvent: POSexpansionsProject: QuarterlyPositiveNeutralNegative6TableofContentsExecutiveSummaryChinaIstheLargestMarketforTTM’sPVsLuxury-CarSectorHasRoomtoGrowintheNearFutureGrowthinSalesofImportedJLRsHasSlowedRecentlyEstablishedCheryJLRMayPerformWellDealers’FallingProfitabilityMaySqueezeJLR’sMarginFocus-GroupandSurveyFindingsAppendixTataMotorsLimited(TTM)isanIndia-basedmanufacturerofautomotivevehiclesthatownsfamousbrandsJaguarLandRover(JLR)andHispanoYearestablished: 1945Headquarters: MumbaiYearlisted: 2004,ontheNewYorkStockExchangeTicker: TTMMarketcap: USD23.3BNasof18December2014Business:

Designs,manufactures,andsellsheavy commercial,mediumcommercial,and smallcommercialvehiclesincludingtrucks, tankers,vans,buses,ambulances,and minibuses;alsomanufacturessmallcars andSUVs

7TTM’sOwnershipStructureBasicInformationSource:Companyinformation,BDAanalysisTTM’sSharePrice(2004–2014)Unit:USDBoughtJLRin20083642.6Others2.61%Mutualfunds2.15%Individualshareholders7.4%Insurancecompanies11.19%Foreigninstitutionalinvestors33.13%Corporations43.52%43.60%Promoterandpromoter’sgroup47.15%Institutions9.25%Non-institutionsThegroupstartedmanufacturingcommercialvehiclesin1954andenjoyedgreatgrowthafterthe1990s;itsrevenueincreaseddramaticallyfollowingitsmergerwithJLR8Source:Companyinformation,equityresearch,BDAanalysisYearEventBDA’scommentsMilestonesinTTM’sHistory(1945–2014)1945196620042006200820112013TataEngineeringandLocomotiveCompany(nowTTM)wasestablished.Thecompany’sEngineeringResearchCentrewassetupatPunetoprovideimpetusforR&Donautomobiles.TTM’sstockwaslistedontheNewYorkStockExchange.TTMacquiredSouthKorea’sDaewooCommercialVehicleCompanyLimited(DWCV).TTMandBrazil’sMarcopoloannouncedaJVtomanufacturefullybuiltbusesandcoachesforIndiaandothermarkets.TTMacquiredJLRfromFordMotorCompany.TTMsetupanassemblyplantinSouthAfrica.TheplantwasaJVwithTataAfricaHoldings(SA)PtyLimited.TTM’sJamshedpurplantrolledoutitstwo-millionthtruck.Thecompanymanufacturedlocomotiveandengineeringproducts.Thisenabledthecompanytodeveloppioneeringtechnologiesandproducts.DWCV’sshareoftheKoreanheavy-truckmarketwasover25%.TTMformeda51:49JVwithMarcopolo,agloballeaderinbuildingbusandcoachbodies.TTMpaidatotalofapproximatelyUSD2.3BNincashforJLR.FordhadacquiredJaguarforUSD2.38BNin1989.FordboughtLandRoverfromBMWforUSD2.9BN.Theplantcanassemblesemi-knocked-down(SKD)kitsandlight,medium,andheavycommercialvehiclesrangingfrom4to50tons.Withitsworld-classequipmentandassemblylines,thisplantcanproduceatruckeveryfiveminutes.AfteritsacquisitionofJLR,TTM

achievedsteadygrowth;however,thiscamemainlyfromthenewsubsidiary,whileTTM’sbranchesinIndiaandelsewhereexperiencedalmostnogrowth9TTM’sOverall1Revenue,FY22011–2014Unit:USDMNFY2014FY2013FY2012FY2011+13%Source:Companyinformation,BDAinterviewsandanalysisJLR’sRevenue,FY2011–2014IndianBranch’sRevenue,FY2011–2014FY2014FY2013FY2012FY2011+26%FY2014FY2013FY2012FY2011-11%Notes:TTM’soverallrevenuecamefromJLR,itsIndianbranch,anditsotherinternationalbranches,whicharerathertiny.TTM’sfiscalyearendson31MarchUnit:USDMNUnit:USDMNIngeneral,JLRenjoyedquickrevenuegrowthinFY2011–2014;inparticular,ChinacontributedanincreasinglylargeportionofrevenuewithaCAGRof60%,thoughallothermarketsalsowitnessedconsiderablegrowth10Source:Companyinformation,BDAinterviewsandanalysisJLR’sRevenuebyGeographicalSource,FY2011–2014Unit:USDMN1AllothermarketsEurope(excludingRussia)USUK

China

FY201430,81615%14%14%34%FY201324,94517%33%FY201221,57015%17%29%FY201115,35820%19%17%FY2011–2014CAGR22%14%11%17%61%26%OverallNote:JLR’sannualreportismeasuredinGBPinsteadofINR,andBDAtransfersthemintoUSDJLRalmostdoubleditsoverallretailvolumesinFY2011–2014;ChinaplayedanincreasinglyimportantroleinJLR’sglobalexpansionwithaCAGRofover50%11Source:Companyinformation,BDAinterviewsandanalysisJLR’sSalesVolumebyGeographicalSource,FY2011–2014Unit:VehiclesAllothermarketsEurope(excludingRussia)17%19%21%FY2012305,85919%20%17%FY2011240,90521%24%12%USUK

China

FY2014434,31117%18%24%FY2013374,62724%16%15%10%53%22%OverallFY2011–2014CAGRLandRover’soverallsalesvolumesexpandedataCAGRof25%overFY2009–20141;theRangeRoverEvoquegeneratedaCAGRof134%afterbeinglaunchedinFY2012andnowaccountsforthelargestpartofJLR’soverallvolume12Source:Companyinformation,BDAinterviewsandanalysisLandRover’sSalesVolumebyModel,FY2009–2014Unit:Vehicles-1%15%23%7%17%54%22%316,04336%18%17%10%14%5%FY2012251,63221%22%13%19%12%18%8%FY2011189,08725%30%13%21%10%FY2010157,17725%31%13%20%12%FY2009128,544Freelander31%13%18%14%RangeRoverDiscoveryDefenderFY2014353,78924%35%19%16%13%5%FY2013RangeRoverEvoqueRangeRoverSportNote:ItreferstoTTM’sfiscalyear,whichendson31March.FY2009–2014CAGROverallJaguar’ssales-volumegrowthwasstagnantbeforeFY2014,whenitachieveda37%surge,thankstoitsstrongperformanceinChina13Source:Companyinformation,BDAinterviewsandanalysisXFXJF-TYPEXK+37%80,52225%11%4%FY2014FY201358,62666%27%0%7%FY201254,22762%29%9%FY201160%51,81863%26%10%FY201051,02066%5%17%12%FY200948,87856%10%24%10%10%-8%-6%34%12%Jaguar’sSalesVolumebyModel,FY2009–2014Unit:VehiclesJaguarChinareported73%YoYgrowthinFY2014.FY2009–2014CAGROverallTTM’sgrossandoperatingmarginshavebeentrendingupwardsduringthepastfewyears,whileJLR’sincreasedmorerapidlythanTTM’sasawhole14Source:Companyinformation,BDAinterviewsandanalysisTTM’sandJLR’sGrossandOperatingMargins,FY2010–2014OPM-TTMGM-TTMOPM-JLRGM-JLRFY2014FY2013FY2012FY20119%FY20101%BDA’sCommentsTheincreaseinprofitmarginscamemainlyfromthreesources.Richerproductmix:

JaguarlauncheditsF-TYPEsportscar,whileLandRoverwasdoingtrialsoftheEvoque.Decreaseofexpenses:

Purchasesofproductsforsalehavebeenreduced.Geographicexpansion:

Chinahaswitnessedfastergrowthoverthepasttwoyearsthananyotherplace;also,JLRisplanningtobuildanewfactoryinBrazil.Unit:%15TableofContentsExecutiveSummaryChinaIstheLargestMarketforTTM’sPVsLuxury-CarSectorHasRoomtoGrowintheNearFutureGrowthinSalesofImportedJLRsHasSlowedRecentlyEstablishedCheryJLRMayPerformWellDealers’FallingProfitabilityMaySqueezeJLR’sMarginFocus-GroupandSurveyFindingsAppendixChina’snumberofvehiclesper1,000peopleisonly12%oftheUS’sand16%ofJapan’s,whichindicateshugepotentialinChina’sPVmarket16Source:WorldBank,BDAanalysis850800750700650600500JapanUSChina58878650,00048,00046,00044,00042,00040,00038,00036,0006,0004,0002,000054,00052,000JapanUSChina38,49253,143GDPperCapitaofUS,Japan,andChina,2004–2013Unit:CurrentUSDVehiclesper1,000PeopleintheUS,Japan,andChina,2004–2013ThegrowthrateofChina’sPVsalesvolumedeclinedsignificantlyin2010–2013andhasbeenonlymoderatethusfarin201417Source:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysisChina’sPVSalesVolume,2003–November2014Unit:MNvehicles+12%+13%3.120042.420032.1+41%+7%+27%YTDNov.2014YTDNov.2013201316.3201213.6201112.2201011.320098.420085.720075.320064.22005ItisclearfromthebreakdownofChina’sPVsalesvolumethatordinaryPVspricedlowerthanUSD41,000accountforthemajoritywhilethecontributionofpremiumPVshasbeenrisingquicklyfromaround3%in2009to5%lastyear18Source:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysisPVSalesVolumebyType,2003–20132003–2013CAGR24%22%Overall23%200320042005OrdinaryPVsPremiumPVs15%4%5%5%MPVs5%200620072008200920102011201220133%5%4%3%3%3%4%8%3%4%7%3%5%4%4%5%4%Note:PremiumPVsincludesedansandSUVspricedhigherthanUSD41,000.32%ThesalesvolumeofpremiumPVsroseata2008–2013CAGRof36%,muchhigherthanthe14%seenin2003–2008anddrivenmainlybystrongerpurchasingpowerandconsumerstradingup19Premium-PVSalesVolume,2003–November2014Unit:MNvehicles+22%+36%+14%YTDNov.2014990.0YTDNov.2013808.42013885.82012137.32005102.22004103.42003100.1688.82011585.32010434.12009280.82008192.92007167.02006StrongerpurchasingpowerThegeneralpublic’s

disposableincomehasincreasedcontinuously,whichhasgraduallymadepremiumPVsmoreaffordableforthem.FollowingChina’sRMB4TNstimuluspackagein2008,therehasbeensignificantgrowthinthenumberofhigh-net-worth

individuals,premiumPVs’targetbuyers.Ithasbecomeincreasinglycommonforthegovernment(includingthemilitary)tobuypremiumcars,whichisasideeffectofincreasingcorruption.TradingupCarownerstendtoupgradetopremiumPVswhenreplacingcarstheyboughtin2000–2008,whichisalsosupportedbyhigherincomelevels.MainDriversofPremium-PVSalesafter2008“Manypeopleboughttheirfirstcarsin2005–2007,mostlyordinaryPVs…Nowitiscommonformiddle-classpeopletobuypremiumPVsastheirsecondcars…Thisisdrivenbyincomegrowth.“-IndustryexpertSource:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysisHowever,YTDgrowthinthevolumeofpremium-PVsalescurrentlystandsat22%YoY,significantlylowerthanthe2008–2013CAGR,duemainlytothesluggisheconomyandanticorruptionandantimonopolyraids20Source:Companyinformation,BDAinterviewsandanalysisSluggisheconomyFactorsAnticorruptionAntimonopolySlowingGDPgrowthhasexertedadirectimpactondemandforpremiumPVsduetoWeakerpurchasingpowerofbusinessmenwhosuffereddecliningprofitsorlossesandofwhite-collarworkerswhogotsmallerbonuses,Aswellasalongerdecision-makingprocessaspotentialbuyersbecomemoreconservativeandputasidemorecashforfuturemarketchanges.BDAanalysisAnticorruptionpolicieshavehadbothdirectandindirectnegativeimpactsonpremium-PVsales.Thedirectimpactislimited:Fewerpurchasesbythegovernmentandmilitaryaswellasbycivilservants,whohavebecomemorecautious.Theindirectimpactisstronger:Businessmenthatrelyongovernmentconnectionsnowgetfewerdealsandlessincome,whichhurtstheirpurchasingpower;also,civilservantsarelesslikelytoacceptgiftsofpremiumPVs.Antimonopolyraidshavemainlycausedmorepotentialcustomerstostayonthesidelines,expectingpremium-PVpricestofallinthecomingyear.Experts’commentsScore“Themainreasonistheeconomy…Smallandmediumenterprisessuffereddecliningrevenueandprofitwhilefacingpressurefrombankloans…Theysimplychoosetoreservemorecashincaseofemergency…Salespeoplefinditmoredifficulttopersuadecustomerstocompletedeals."-Industryexpert“Theimpactofanticorruptioncampaignsislimitedastheyonlydecreaseconsumptionbythegovernmentandcivilservants…However,potentialcustomerswhodobusinesswiththegovernmentarealsoinfluencedandcuttheircarbudgets.”-Industryexpert“Theantimonopolymovementhashadnodirectimpactonoursales,butitfuelspotentialcustomers’wait-and-seeattitude."-IndustryexpertMostimportant"Civilservantsarenowmorecautious.Forinstance,theymaychoosetodriveaVolkswagenCCratherthanaBMWorMercedes-Benzinordertoavoidunwarrantedaccusations."-IndustryexpertLeastimportantSUVs’sharehasbeenrisingsince2003,expandingfrom2%to22%inNovember2014,whilesedans’sharehasfallenfrom94%in2003to68%currently21Source:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysisPVSalesVolumebyType,2003–November2014YTDNov.2014SUVsMPVsSedans22%YTDNov.201318%201318%201215%201113%201012%20093%8%20084%8%20077%20065%20056%20044%20034%2%2003–2013CAGR52%20%Overall23%32%MorespaceMostChinesefamiliesownonlyonecarduetothecountry’shigherpricesandlowerincomelevelsrelativetodevelopedcountries’.SUVshavemorespace,arefitforbothindividualcommutingandfamilyuse,andaremultifunctional.GreaterconvenienceSUVsprovideawiderfieldofviewthankstotheirlargersizeandhigherchassis.Theyaresuitableforavarietyofroadconditions,whichisespeciallyvaluableinChina.ExtrapersonalityInChina,SUVsareregardedasbeingfashionableandanexpressionoftheirowners’personality,thankstosuccessfulbranding.SUVshavebeenenjoyingincreasingpopularityinChina.Intermsofannualsalesvolume,SUVs’marketshareinChinahasbeenincreasinginrecentyears,butithasstillnotreachedlevelsseenintheUS,whichsuggestspotentialforfurtherexpansion22Source:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysis7%19802%6%198519752%201036%200936%200814%199020001995200523%34%200633%32%2004200730%33%78%22%2014YTDOthersSUVsUSChinaComparisonofSUVs’MarketSharesinChinaandtheUS1Notes:1.PVsectorintheU.S.includespick-upsIntheSUVsubsector,modelspricedlowerthanUSD41,000dominate;however,theshareofhigher-pricedmodelshasbeenrisingsince2008,drivenmainlybyupper-classSUVs(USD41,000-65,000)23Source:ChinaAssociationofAutomobileManufacturers,BDAresearchandanalysisSUVSalesVolumebyPrice,2007–20139%PremiumUpperBasic20%74%14%80%Low2%Luxury31%20112007201220132008200963%26%61%26%10%62%10%26%62%64%25%20102007–2013CAGR13%32%80%58%37%≤USD33,000ASPUSD33,000-41,000USD41,000-65,000USD65,000-98,000>USD98,00024TableofContentsExecutiveSummaryChinaIstheLargestMarketforTTM’sPVsLuxury-CarSectorHasRoomtoGrowintheNearFutureGrowthinSalesofImportedJLRsHasSlowedLongHistory,GoodReputation,andNewProductsContributedtoLR’sBoomoverthePastSeveralYearsRecentlyEstablishedCheryJLRMayPerformWellDealers’FallingProfitabilityMaySqueezeJLR’sMarginFocus-GroupandSurveyFindingsAppendixJLR’sSalesVolumeinChina,FY2009–2016FUnit:VehiclesJLRexperiencedmorethansixyearsofhigh-speedgrowthbutisnowfacingaslowdown,mainlybecauseofdeterioratingeconomicconditionsinChinaandfiercecompetitionintheSUVmarket;however,theNewEvoquecouldbeitsnextdriver25Source:Companyinformation,BDAinterviewsandanalysis+28%+48%+80%+70%+93%LandRoverJaguarFY2016F144,262106,860FY2014103,07783,18626,0092,884FY201017,00414,9622,042FY20138,8217,536+34%+35%+32%77,075FY2015E67,579FY201252,03244,622FY201128,893FY2009Phase1(FY2009–2014):High-speedgrowthJLRenteredtheChinesemarketearly,withalonghistoryofproducingSUVs.LandRover’sSUVsenjoyedagoodreputationandfacedfewcompetitorsatfirst.JLRlaunchedthemid-pricedFreelanderandEvoque,whichattractedmorecustomers.Thegroupkeptopening4Sstoresduringthisperiod.Phase2(startinginFY2015):Stablegrowthorboost?Macroeconomicconditionshavebeendeterioratingsince2014.MorecompetitorstappedintotheSUVmarketandintensifiedthecompetition,whileJLRlacksanentry-levelluxurySUV.MarketleadersABB(Audi,BMWandM-Benz)begantoproducesomeoftheirvehicleslocally,whichmadepricesmuchlowerandcapacitylarger.JLR’sbrandpremiumisfadingaway.Dealersofallbrandsaresufferingfrompoorprofitability,whichmaycurbJLR’sprogressinopeningmore4Sstores.However,thelocallymadeEvoque,tobelaunchedin2015,maybenefitJLR.High-speedgrowthStablegrowthOrboost?TheNewEvoquemaybecomethenextgrowthdriver.Agenda26KeySuccessFactorsandJLR’sHistoricalScoresLongHistoryandGoodReputationSupportedJLR’sRapidGrowthLaunchofMid-PricedSUVWasAnotherDriverInChina’sPVmarket,JLRispositionedasaluxurybrandwithmajorproductspricedatUSD65,000-130,00027PositionofPVsinChinaLuxury1SuperluxuryMidandlowend>160Vehicleprice

Unit:USD‘00013065MainproductsFerrari458,LamborghiniAventadorPorscheCayenneLandRover:RangeRover2,Discovery,EvoqueJaguar:XJ,XF,F-TYPEAudi:A8,A6,Q7,Q5BMW:7Series,5Series,X6,X5Mercedes-Benz:GLA,E-Class,S-Class,CLS-ClassVolvoXC60,CadillacSRXInfinitiQX50,LexusGXJeepWrangler,VolkswagenTiguanChevroletTrax,Hyundaiix25DongfengPeugeot3008,GreatWallM4Source:Companyinformation,BDAinterviewsandanalysisNotes:Amongluxurybrands,thepricerangesoverlapwitheachother.TheRangeRovercostsaboutUSD245,000,whichissimilartosuper-luxurybrands’prices.DeterminationoftargetcustomersFullrangeofPVtypesAttractiveexteriorandinteriorGooddrivingexperienceforownersLuxuryPVsareconsumergoods,forwhichproductandchannelmanagementareimportant,yettheyarealsoluxurygoods,sobrandawarenessandimagematters;afaultinanyKSFcouldburyabrandMinimalneedforrepairs28Source:BDAinterviewsandanalysisProduct1BrandChannelmanagement3KeySuccessFactors(KSFs)forOEMsKSFDetailsBDA’scommentsImpor-tanceThisisveryimportant

butthereisnodisparityamongmaturefirms.QualityPerfor-manceDesignVarietyPricingThereisnoobviousdifferenceinthemechanicalproperties

ofvehiclesinthesamepricerange.Everybrandhasitsownstyle,whichattractsdifferentcustomersanddependsontheOEM’sR&Dcapabilities.Thishelpsacompanyavoidrisksrelatedtomakingasingleproductandraisesbrandawarenessbyreachingmorebuyers.Wisemarketpositioningandpricinghelpstogenerategreatersalesvolumes.OutreachtopotentialcustomersAwarenessThisisaffectedbyanOEM’shistory,timeofentryintoChina,varietyofPVtypes,marketingstrategy,andPOScount.Signalsregardingowner’spersonality/identityImagePotentialcustomers,especiallyluxury-carbuyers,putemphasisoncertainvehicles’brandimages.Rebates,promotions,ARdaysCertainpoliciescangiveincentivesfordealerstopromoteanOEM’sproducts.PoliciesNumberof4SstoresandlocationsacrosscitytiersCoverageMorechannelscancreatemoresourcesofincome.Mostimportant/GreatdisparityLeastimportant/NodisparityDispar-ityBasisofcustomers’choiceAllfactors,suchaspointoforiginandquality,canaffectanOEM’sreputation.Reputation2LandRoverhasafulllineofhigh-profileSUVswithalonghistoryandgoodreputationinChina,whichdroveitsrapidsalesgrowthinthepast29Source:BDAinterviewsandanalysisProduct1BrandChannelmanagement3HistoricalPerformanceofJLR’sandPeers’SUVsinTermsofKSFsKSFDetailsJLRQualityPerfor-manceDesignVarietyPricingAwarenessImagePoliciesCoverageBestWorstBMWReputation2AudiM-BenzVolvoInfinitiCadillacLexusAgenda30KeySuccessFactorsandJLR’sHistoricalScoresLongHistoryandGoodReputationSupportedJLR’sRapidGrowthLaunchofMid-PricedSUVWasAnotherDriverJLRstoodfortheBritishmonarchybutwasacquiredbyFordandBMWafterthedeclineoftheUK’scarindustry;JaguarandLandRoverweremergedbyFordandboughtbyTTMin200831Source:Equityresearch,BDAanalysisYearEventBDA’scommentsMilestonesinJLR’sHistory,1922–20141922193519481978197019891994200020082011SwallowSidecarCompanywasfounded.TheSSJaguarwasreleased.TheJaguarbrandwasfirstusedforaspecificvehiclemadebytheRoverCompany.Jaguarbecameastand-alonecompany.ThefirstRangeRoverwaslaunched.FordacquiredJaguarforUSD2.38BN.BMWacquiredtheRoverGroupforGBP800MN(USD1,270MN)in1994,separatedLandRover,andsoldittoFordforUSD2.9BNin2000.TTMboughtJLRfromFordforUSD2.3BN.TheEvoquewaslaunchedinChina.Thecompanybeganbymakingmotorcyclesidecars,thenmovedontoproducepremiumsedansandsportscars.TheRoverCompanywasacquiredbyLeylandMotorCorporation,whichlaterevolvedintotheRoverGroup.GivenitslonghistoryofproducingSUVs,JLRbuiltupitsbrandprestige,whichstillstimulatesitssalesincurrenttimes.Ford'sbidofUSD13.32/sharewasnearlytwicewhatJaguar'smarketvaluewasbeforeFordannounceditsintenttotakecontrolofthecompanyinmid-September.In2002,JaguarCarsandLandRoverwerefirstunitedasasingleentitybyFord.TTMhasboostedJLR’ssalesdramaticallyinrecentyears.ThesuccessinChinahasincreasedJLR’srevenueandTTM’sshareprice.TheEvoqueisthebest-sellingmodelinChina.AsJLRhasthefirst-moveradvantageintheSUVmarket,itenjoysastrongreputation;peerslaunchedtheirSUVsin2006–2009,whenthemarketbegantoexpand32Source:Companyinformation,BDAinterviewsandanalysisTimeLineofMainLuxuryBrands’SUVLaunchesinChina1970FirstRangeRoverFirstG,whichcateredtothearmyonly20042005200720112014RangeRoverDiscoveryRangeRoverSportFreelanderEvoqueDiscoverySportSRXXC60QX50QX60QX70QX80NXGLKLXGLML1976EscaladeXC601989FirstDiscovery1990sDealersinChinabegantoimportLRs2006200820132012200920102003EntryintoChinesemarketX6Q5Q7Q3FirstX5RXKeymilestonesX3

X5JLR’sSalesVolumeinChina,FY2009–2014Unit:VehiclesAsaresult,JLRhadsixyearsofrapidgrowthstartingin2008(aroundFY2009),duringwhichtimeitestablishedmoreandmore4Sstores33Source:Companyinform