Much of the news this year from the auto industry has been dominated by General Motors and its record breaking number of recalls. Hidden away from the spotlight, Tata Motors Limited (ADR) (NYSE:TTM) stock has risen 70% in the past 12 months. The macroeconomic situation facing the company during this period, however, has been difficult to say the least. If Tata improves sales of its nameplates, or if the Indian economy grows as analysts are projecting, Tata Motors could rise even higher.

A plethora of market offerings

Tata Motors is the largest automobile company in India with consolidated revenues of $38.9 billion in the 2013-2014 fiscal year. Tata is the fourth largest manufacturer of buses globally and the fifth largest manufacturer of trucks in the world.

But the company's product offering goes beyond these commercial vehicles -- it is actually better known for its passenger vehicles. In 2009 Tata began producing the Nano, the so-called "People's Car." The vehicle was introduced as the world's cheapest car, but sales have been dismal.

Tata responded by changing the car -- and its perception. The company added a few "luxury" touches to the vehicle, such as a glove box, sound system, and power steering, while also striving to change the tag line for the Nano. Instead of "World's Cheapest Car," the company will now position the vehicle as the "Smart City Car." Sales since this change have been unimpressive, with only 1,000 Nanos sold in May of this year. It is likely that larger changes will be necessary to shake the notoriety of this car.

This year will also see the launching of two new vehicles under the Tata brand, the Bolt and the Zest. These cars will be up-market from the Nano and will be competing with the likes of the Volkswagen Polo and Honda Amaze, respectively.  The company is hoping that these new vehicles will propel sales of Tata brand vehicles.

Tata races ahead in luxury sales

In 2008 Tata purchased Jaguar and Land Rover from Ford Motor Company for $2.3 billion. This acquisition has significantly strengthened and diversified the company's portfolio, and sales of these two brands have accelerated in the past year. Jaguar and Land Rover saw sales in June increase 17.4% over June 2013 sales.

The most important growth story for these two luxury brands was sales in China. Jaguar's June sales in China saw a 68% jump from sales last June, while Land Rover experienced a 58% increase.

This growth in Tata's two luxury brands is crucial for the company; 82% of Tata's total automotive revenue was made up by Jaguar and Land Rover sales last year.

Tata is treading carefully

Despite the weak economic environment, Tata still has an extremely low debt to equity ratio, at 0.77. This is down from 0.85 a year earlier. Toyota Motor Company (NYSE: TM), the world's largest automaker, has a total debt to equity ratio of 1.13, while Ford Motor Company has an extremely high total debt to equity ratio of 4.37.

This conservative use of debt gives Tata the ability to take advantage of opportunities during economic downturns, such as the purchase of Land Rover and Jaguar from Ford in 2008. 

Why the economic slump isn't a major problem

The current economic slump in India is especially impactful on Tata, due to the company's 55.8% share of commercial vehicles market in the country.  According to Tata Motor's Annual Report: "Sustained deceleration in the economic growth, high inflation, higher fuel prices, reduced availability of finance and elevated interest rate regime continued to impact demand for the Indian auto industry in general and commercial vehicle industry in particular."

This economic doldrum shouldn't last for too long, however. India has an extremely young and large population, ideal for the largest car manufacturer in India. The country has the second largest population in the world, and in the next 10 years it's expected that a quarter of the world's working age population will come from India.

In addition, the IMF predicts that GDP per capita in India will rise from $1,500 now, to $2,300 by 2019. This increase in disposable income could bode well for the company. 

Future strength for Tata Motors

Tata Motor's stock price has seen extremely healthy returns in the past year, even as sales in certain areas have dropped. Year-to-date the stock has risen over 30%, bolstered by the acceleration of Jaguar and Land Rover sales in China. Tata's balanced approach to financing should allow the company to be nimble and opportunistic in the future. 

If this is the case in poor economic times, the company could enjoy continued success in the coming quarters as the Indian economy turns around, so long as it is able to deliver with its upcoming vehicle modifications and introductions.

Evan Avery has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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