Why Jaguar brings 20% of TATA Motors profit?
Building for top 5% Vs the rest.
Welcome to the 175th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
In Q1 FY24 (April to June), Jaguar & Land Rover have sold over 1500 cars. The TATA motors entity now brings almost 20% of net profits to the giant business. This is the story of building for a niche part of India with “Status”. Let’s dive in.
Before we begin, quick numbers 🔢
Jaguar & Land Rover were both purchased in 2008 by TATA Motors. Jaguar did ~ $7 Billion from April to June 2023. During the same period, TATA motors did ~$ 32 Billion.
Jaguar’s largest customer is Indians 🤯
With an expensive price tag of ₹77 Lac (goes up to ₹ 1.5 Cr), Jaguar Land Rover (JLR) is one of the most expensive passenger vehicles in the Indian market.
Why TATA Motor’s 20% profit come from JLR? 🙇🏻♂️
Selling higher cars = profits no?
Let's dive deep into the rabbit hole.
1/ The wealth equation is messed up 💸
The top 5% of Indians own ~ 60% of the country’s wealth. The bottom 50% own ~ 3% of India’s wealth. Interestingly, the middle-income class has just enough to be a future wealthy economic segment.
2/ Why do Indians buy a car? 🚘
It’s unlike the US where you can’t survive without a car. India is built on 32 Crore two-wheelers. The middle-income class buys a car for utility more than luxury. No wonder the first question before buying the car is “Kitna Deti Hai?” (what’s the mileage?)
3/ Top 5% don’t care about price tags 💸
It’s the status game for them. All they are buying a car for is to differentiate. Anyone telling you otherwise is fooling you. It’s the same logic with all the luxury products (wink wink Rolex). Debatable - new age TATA SUVs are cutthroat competition to Jaguar Land Rovers.
4/ The more the luxury = higher the margins 💰
TATA Motors make an operational profit of ~ ₹1L per car on average while Jaguar makes ~₹ 9L profit per car sold. That’s just crazy - 1 Jaguar sold nets the same profit as selling 9 middle price vehicles.
This brings me to a couple of reflections 🤯
Especially, for founders building in India.
More revenues ≠ more profits 🥹
And most Indian companies are just chasing revenues. Time to really understand the quality of our revenues & really be honest with net profit margins.
Building for luxury > saving money 💎
The more the “status” associate with your product, it’s going to be easier to price it higher. People will pay for “status” even if it requires them to borrow money. Selling the outcome of your product as a “status” trumps the core functional part of the product.
Taking informed decision on “who” to build for? 🇮🇳
Building for the billion users in India is great - but then be ready for razor thin margins. That’s the game the giants can definitely play. But, if your product operates in a niche, positioning it with a social status - might just be the answer to your pricing problems.
This newsletter issue is for you to “Think”.
Sit down with your team and ask yourself “Are we building for the top 5% Indians or not?
And if yes, are you using “status” as the core currency well?”.
Cheers!
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