Tata Motors Could Be The Next Toyota
I’m loving this company as an investment in emerging markets. Tata Motors recently signed an agreement with Boeing to provide parts for the 787 Dreamliner and plans the release of a $2,500 car aimed at Indian drivers.
The small car, the Tata Nano will come as a 4-door, 5-seat hatchback without the luxuries associated with cars today. It will be powered by a lone 2cycle, 30 horsepower engine that gives it just enough juice and maximizes fuel economy. The Nano is expected to run at 50+ miles per gallon, a near historical event for the automotive industry.
As India develops, the thirst for personal automobiles will rise. Tata has control of the large public transport industry, making heavy trucks and buses to transport India’s working class. The move to make a $2500 car opens the door for millions of people to own personal transportation– a luxury afforded only by the super rich.
The agreement made between Tata and Boeing gives the advantage of a solid bottomline to Tata Motors future endeavors. Tata Motors trades under the symbol TTM, at just 18 times this years earnings. While demand for buses and heavy trucks in India has diminished slightly, I think TTM might just be the next Toyota.
The contract for Tata to supply materials for Boeing may be extended. Boeing estimates that India will need $86Billion dollars in aircraft over the next 20 years, some of this amount probably going to manufacturers like Tata Motors. That is more than 12 times Tata Motors current market cap.
With a solid backing from Boeing, Tata Motors has much to gain and little to lose. This stock is a buy at $18 per share.
