LONDON/MUMBAI -- Jaguar, the 76-year-old British luxury-car brand owned by Tata Motors Ltd., aims to challenge BMW AG with a hybrid supercar and an entry-level sedan to compete with the 3 series.
The new models are part of Tata's plans to invest 1.5 billion pounds ($2.5 billion) annually in product development at Jaguar and sister brand Land Rover over the next five years, as its cheap cut-rate Nano model faces falling sales.
The spending will include 40 new vehicles or upgrades, including the Range Rover Evoque SUV.
Tata is turning to the British luxury brands, which it purchased in 2008 from Ford Motor Co., for growth and to drive international ambitions. While Land Rover is targeting record sales on the compact Evoque, Jaguar aims to reverse declining demand by rounding out its product offering.
"The company now revolves around the JLR unit and not the other way around," said Ashvin Chotai, the managing director for Intelligence Automotive Asia. "The next challenge for both the brands is to keep the product pipeline going and exploring new product segments."
Nano sales plunge
Sales of the Nano, the world's cheapest car, plunged 48 percent over the past two months, with demand burdened by higher borrowing costs for buyers in India, its dominant market.
The Jaguar Land Rover unit, in contrast, generated 57 percent of Tata Motors' revenue for the year ended March 31, up from 53 percent a year earlier. The division's pretax profit surged 20-fold to 1.12 billion pounds for the fiscal year.
The company is now valued at 542 billion rupees ($12.2 billion).
The Jaguar Land Rover division "contributes definitely more than half the profit so it is clearly very significant for the performance of the group," CEO Carl-Peter Forster, a former BMW and General Motors Co. executive, said last week.
The flow of technology between the British luxury brands and Tata Motors "shouldn't be just one way," said Forster, who was hired in February 2010 to realize the automaker's international ambitions. "The task is also to make sure that Tata adds to the value of Jaguar Land Rover."
While Land Rover is benefiting from robust demand for upscale SUVs, Jaguar is slumping on a thin lineup and a tarnished image after decades of mediocre cars. The brand lost its way after co-founder William Lyons retired in 1972 by refreshing rather than redeveloping models, Ian Callum, the brand's design director, said in a July 27 interview.
Back to beauty
The carmaker, whose 1961 E type was described as the "the most beautiful car ever built" by Ferrari founder Enzo Ferrari, finally overhauled the XJ in 2009, after making only modest changes in the four decades since its introduction in 1968.
"It would be fair to say that the company floundered in the past for a bit too long," Callum said. "When Jaguar was a fully successful car in the late fifties and sixties, it produced very modern cars and very relevant cars to the period, and our job is getting back to that point."
To reestablish a reputation as an innovator, Jaguar is developing a production version of the C-X75 hybrid supercar concept. The model, which starts at 700,000 pounds (805,000 euros) and begins production in 2013, can accelerate to 62 miles (100 kilometers) per hour in less than 3 seconds and drive more than 50 kilometers (31 miles) on electric power. BMW's i8 hybrid supercar, also due in 2013, can travel up to 35 kilometers without using the combustion engine.
"Tata knows that if it wants to compete, it cannot flick a switch," said Jonathan Poskitt, an analyst at J.D. Power & Associates in Oxford, England. "It requires getting the right sort of product and that takes time."
Jaguar's sales fell 27 percent to 11,343 cars for the quarter ended June 30, as the sparse lineup and limited presence in China cut it out of the demand that's driving record sales for BMW, Volkswagen AG's Audi and Daimler AG's Mercedes-Benz.
Unlike Jaguar, all three companies have factories in China, the world's biggest auto market. Jaguar and Land Rover came together after Ford sold the two companies to Tata Motors for $2.3 billion.
The U.S. automaker acquired Jaguar in 1990 and bought Land Rover from BMW a decade later, as the German company unwound the unsuccessful acquisition of Rover.
Land Rover is driving growth for the unit. Deliveries for the quarter through June rose 22 percent to 50,747 SUVs even before the Evoque goes on sale in September. The marque's smallest and cheapest model at 28,750 pounds has more than 20,000 orders and new buyers will have to wait "well into next year" to get one, said John Edwards, the brand's director.
The Jaguar C-X75, which will be limited to 250 vehicles, could help the introduction of a sedan priced below the $52,500 XF, which is critical to boosting volumes.
The brand's line-up currently consists of the XF and XJ sedans and the XK sports car. A new entry-level sedan would give Jaguar a rival to the BMW 3 series, Audi A4 and Mercedes-Benz C class, the best-selling models from the top-three luxury brands.
"The importance of this segment in absolute economic terms is without question," Adrian Hallmark, Jaguar's brand director, said in an interview. "We'd be foolish not to go there."