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Once upon a time, investors might have balked at the idea of investing in an Indian automotive company. Tata Motors' (NYSE: TTM ) recent success has silenced many naysayers, but its new annual report has some shareholders wondering where Tata is headed in the next few years. Let's see whether this Indian growth stock is screeching to a halt or gearing up for global greatness.
One of the first and most important statistics to take a peek at is the number of vehicles sold. Tata Motors sold 1.3 million vehicles in fiscal 2012 thanks to its diverse lineup of automotive options. It's mostly known for manufacturing the Tata Nano, the world's cheapest car, but this $2,800 go-kart accounted for less than a tenth of vehicles sold in fiscal 2012.
In 2008, Tata pounced on the Jaguar Land Rover company, buying this floundering luxury division from Ford (NYSE: F ) for a paltry $2.3 billion. Tata has also sped up its light truck division by acquiring several Asian truck companies and partnering with Cummins (NYSE: CMI ) to guarantee state-of-the-art diesel engine offerings.
Let's take a look at how Tata's expansion has helped it roll vehicles off its lot in the past few years:
Sources: Data from 20-F and author's calculations.
In the past year, Tata has sold more of each vehicle type than ever before. Its utility fleet grew 30% thanks in large part to the new Sumo Gold SUV, while passenger vehicles bumped up 10% to 352,981.
Jaguar Land Rover continues to dig its claws into lucrative emerging markets like China and Russia, with sales up 30% in the past year.
Fast and furious money-making
Tata has done a great job growing revenue lately, posting more than 30% sales growth over each of the past three years. Net income also provides evidence that Tata's sustainable growth is far from over, as Tata managed to grow its profit 45% in fiscal 2012 versus the year before.
Source: Data from 20-F and author's calculations.
As its sales have jumped, Tata has used scale advantages to decrease its relative cost of goods sold, from 70% of revenue in 2008 to 67% in 2012. At the same time, it has kept other operating expenses in line and continues to reduce its debt-to-equity ratio.
Even as its sales growth has slowed in the past year, Tata's margins continue to separate it from its competition. Here's how it stacks up against a few other automakers in the last fiscal year:
|Toyota (NYSE: TM )||11.8%||1.9%|
|General Motors (NYSE: GM )||13.0%||5.0%|
Tata takes the cake on all fronts, with a gross margin almost two times as large as its closest competitors. These gaps are no fluke: Tata manufactures and sells its vehicles across the world, seeking out comparative advantages and new markets where others don't. Its global acquisitions protect it from macroeconomic shocks like currency fluctuations, provide it with diverse intellectual capital, and allow it promote vehicles sales in 129 countries across six continents.
Say hello to Tata
A diamond in the rough, Tata Motors is not your typical auto company. It's made excellent acquisitions to diversify across the industry and globe, and its numbers continue to prove that it's got what it takes to compete with car company giants.
Tata's global profiteering hasn't gone without notice, and Ford's CEO, Alan Mulally, is making moves to get in on the action. Ford is set to produce over 1 million vehicles in China by 2015, and will be ramping up efforts in India and Russia in the coming years. Motley Fool analyst Brendan Byrnes has prepared a special report outlining the key opportunities and risks for Ford, both at home and abroad. It comes with a full year of free updates and is available for a limited time only, so grab yours today.