What happened
Shares of Tata Motors Limited (TTM), a global automotive company known also for its Jaguar and Land Rover brands, jumped over 12% higher early Tuesday morning on news of a program in India designed to boost car sales.
So what
Investors might remember the "cash for clunkers" program with similar intentions to drive vehicle sales in the U.S. market, and India's own program details are set to go public within a couple of weeks. Broadly speaking, the program is intended to spur 10 billion rupees, or about $1.4 billion, in new investment and also create as many as 50,000 jobs. The vehicle scrapping program will likely involve private vehicles 20 years or older and commercial vehicles 15 years or older, and it should certainly foster sales of newer and more environmentally friendly vehicles. Despite Tata Motors dealing with pandemic-related disruptions, the company recently posted a solid third quarter, has seen its stock price surge nearly 150% over the past three months, and would certainly stand to benefit from a program that should boost sales in India.
Jaguar Land Rover at the 2019 Los Angeles Auto Show. Image source: Jaguar Land Rover.
Now what
There's an additional angle for investors to consider alongside the news of India's scrap program. Consider that while the program is designed to boost sales, it's also designed to encourage sales of more environmentally friendly vehicles. That's important to Tata Motors, as rumors swirled recently that Tesla (TSLA -1.06%) plans to enter the Indian market this year and has been searching for an Indian manufacturing partner; Tata Motors would be a strong candidate. Investors should take these rumors with a grain of salt, especially in the rapidly changing automotive industry, but with Tata taking momentum into its last fiscal quarter of the year, the "cash for clunkers" program potentially boosting sales, and a potential deal with Tesla at a time when the country is aiming to sell more environmentally friendly vehicles, it's easy to see why Tata Motors' stock has been on the rise, including with today's pop.
