A Good Long Term Bet: Tata Motors Limited (TTM), Ford Motor Company (F), Toyota Motor Corporation (TM)

All is not well with Tata Motors Limited (NYSE:TTM). The company posted a decline of 29.50 percent in its total vehicle sales in January 2013, while its cumulative sales (including exports) witnessed a 5 percent decline from April 2012 to January 2013. If such news was not enough for investors, the automaker also said that its EBITDA will be around that of the last two quarters and that its capital expenditures will contain “greater percentage of its revenue,” thereby resulting in a negative cash flow for the fiscal third quarter ended Dec 31.  This has definitely slashed the hopes of many, which become evident when ADRs dropped 9.9% to $26.99 during that time.

The situation is definitely not the same as that of other players in the market. Toyota Motor Corporation (NYSE:TM) regained it No. 1 position from General Motors Company in sales by selling 9.75 million vehicles globally in 2012. It also reported a 22.2% rise in EPS in the third quarter of fiscal 2013 ended Dec. 31, 2012.  Ford Motor Company (NYSE:F) reported a 17.6% rise in EPS to 40 cents in the third quarter of the year, from 34 cents a year ago.

The question comes down to if Tata Motors is still a good pick?

With the revival of two money-losing British Luxury brands, Jaguar and Land Rover, after their acquisition in March 2008 from Ford, Tata Motors has dispelled the fears of many who believed that this Indian automaker would tarnish the brand name. Despite all doubt, Tata not only successfully completed the acquisition when the world’s economy was crippled with recession, but over the past three years its American depositary shares also gave a return of 26%, compared with 14% for the S&P 500.The company made an investment of $3.2 billion in the Jaguar Land Rover division. The profits quintupled to $2.8 billion from 2012 to 2012, and it alone generates more than three-quarters of Tata’s EBITDA. Furthermore, it is likely to bring in sales of $39.8 billion, which is two-thirds of the total expected amount for fiscal 2013.

Tata Motors has affirmed plans to introduce six new products in the domestic passenger car market by the end of 2013, which will enable the company to refurbish its present vehicle portfolio. In the JLR division, Jaguar recently introduced a special edition of the XKR. The company also has plans to launch the XJ Ultimate and XF S 2.2 by December or the start of next year. The assembly of the XF S will also start soon. For the 3 Series competition, the company has already started the testing and will launch soon in a couple of years. These plans are expected to improve its profitability and sales growth.