The now world renowned automaker known for its $2500 (100,000 rupees) car has contracted with Boeing to produce parts for the 787 airliner. This news adds more strength to Tata Motors’ (TTM) bottom-line, confirming the company as a great investment.
Boeing partnership increases revenues and exposure
Tata motors has agreed to start production on various parts needed to produce the mid-sized Boeing 787 Dreamliner. The plane is set to fly in early 2009 as a lighter, more fuel efficient passenger jet than other Boeing models. The new Dreamliner will feature LED lighting and electronic window shades to increase comfort to paying passengers.
Tata Motors had an optimistic approach to the agreement, going as far to suggest that the contract might bring more outsourced manufacturing to Tata Motors. Tata Motors will make the parts in Nagpur, India which will then be shipped to Boeing factories around the world for assembly.
Capitalizing upon the rising middle class
This comes just one month after the carmaker released its plans to make an affordable car designed for Indian drivers. Known as the Tata Nano, it will be a four door, five seat hatchback powered by a small 30hp motor. The company has nicknamed it the “People’s Car” for its affordability. The Nano represents fuel efficiency is at its best, which estimates put at 50+ miles per gallon.
The market for Indian drivers is huge. Car ownership in India is somewhat rare, reserved only for the more wealthy members of society. As jobs shift to India, the rising middle class increases the number of people who are now in the market for automobiles.
Presenting a Potentially Excellent Investment Opportunity
The stock has great potential with a 1.9% dividend yield, trading at just 18 times next year’s expected earnings and only .85 times growth. The automaker should benefit greatly from the contract with Boeing and the release of the Nano after fighting for market share in the competitive Indian truck and bus industry.