Like many other automakers, rising input costs have impacted Tata Motors' standalone profitability in the fourth quarter.
EBITDA margins during the January – March 2011 period have dropped to 8.7 per cent from about 10 per cent in Q3. However, higher margins from JLR (which forms bulk of the consolidated revenues) have perhaps helped consolidated margins improve from 11.7 per cent to 13.5 per cent sequentially.
Though spiralling commodity prices have been dampening the standalone margins, superior margins at JLR have boosted the company's consolidated performance throughout this year.
Higher margin at JLR is a function of the segment it caters to. Its focus on high-content, high-technology cars reduces its raw materials to sales proportion in comparison to Indian manufacturers. Besides the margins are also a function of a number of ongoing cost reduction efforts at JLR such as variety reduction in materials, standardisation of parts across models and platforms, sourcing from low cost destinations (at about 20 per cent currently) and reduced variable marketing expenses.
Moreover, Land Rover/ Range Rover vehicles, where the company enjoys greater pricing power, constitute over 70 per cent of the volume mix. In terms of markets, too, the share of revenues from China, where profitability is the highest, has continued to expand.
Going forward, the launch of the Evoque and the MY12 (model year 12) coupled with strong demand from emerging markets such as Brazil, Russia and China are expected to keep the volume growth at JLR ticking.