Tata Motors Ltd. (NYSE: TTM) - King of the Road
by Investment U Research Team
Monday, December 7, 2009
We all know that most car manufacturers worldwide have suffered dearly. But while others continue to struggle, one company is emerging from the global recession by catering to one of the fastest growing democracies in the world.
It's all taking place in India at Tata Motors Ltd. (NYSE: TTM).
Take a look at the company's share price since March and you can see that the market is very impressed with the company's ability to recover from a crippling recession in the auto manufacturing sector. From a low of $3.05 on March 2, 2009, it surged back to a 52-week high of $16.01 on December 1 amid strong retail sales and its green initiatives.
But Tata has a lot more left in the tank, as its primary market races further ahead. And its share price can only reap the benefits...
India's Massive Transportation Boom
Consider this statistic: The United States currently has 765 vehicles for every 1,000 people, while India only has 12 for every 1,000.
But expect it to start bridging that gap... quickly.
According to Goldman Sachs' updated BRIC (Brazil, Russia, India, China) report, India should have the most number of cars in the world by 2050 - a total of 611 million.
In the shorter-term, India should have one-third the amount of cars that China has before 2025. And given another 25 years, analysts believe it will top its Asian neighbor, with 382 cars for every 1,000 people versus China's 363.
With those kinds of figures, it means that India will purchase one out of every six cars sold on the global market - an impressive feat to say the least.
It makes sense, though, considering how the country sped out of the global recession, thanks to heightened retail demand from its growing middle class
And Tata Motors has clearly reaped the benefits of that growth...
Seeing Green and Going Green
In November 2008, Tata sold 32,696 vehicles. This November, that number soared by 65% to 54,108, in part due to inventive models like the Nano, the world's cheapest car at about $2,500.
Analysts caution that maintaining that kind of momentum depends on a sustained national recovery. But as long as that happens, Tata Motors should experience strong sales growth as the domestic transportation infrastructure develops.
The company is also forging ahead with its green initiatives. For example, it's using the latest technology to construct a new hybrid bus that runs on diesel at high speeds, but becomes battery-operated within the confines of a city.
That important, given that global carbon emissions rose 2% last year, due in large part to increased activity from developing nations like China and India. And while the latter hasn't enforced any standards concerning that issue, Tata Motors has.
While the upcoming bus model currently costs twice as much as a conventional bus, due to the cost of importing special motors, if Western leaders have their way on global CO2 regulations, that hybrid bus could become the next big thing.
However, even if that doesn't happen, Tata is still managing to do a good job balancing its forward thinking and out-of-the-box concepts with India's fast-paced development.
As demand for cars increases in India, Tata's share price should grow. So get in now while it's still at a devalued level.