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Tata Motors (TTM) had quietly been one of the world’s largest manufacturers of medium and heavy commercial vehicles. Then, rumblings of the Nano began to surfacing and the auto world was intrigued by the new car being labeled “world’s cheapest.” However, not until Tata acquired Jaguar and Land Rover (JLR) from Ford Motor (F) did many take notice.

JLR held a prominent reputation of luxury and class in the showrooms. Ford’s bottom line, however, told a different story. The division was unprofitable. Even as Ford began to squeeze some profits out of Land Rover, the losses at Jaguar were more than enough to pull the group back into the red.

And as Ford saw its Detroit brethren General Motors and Chrysler heading down the bankruptcy trail, it looked for ways to shore up its capital reserves. Enter Tata, which snatched up the ailing business for $2.3 billion, about half of what Ford originally shelled out for both brands.

The question became whether or not Tata could turn the JLR business around fast enough. It seemed a question investors were going to have to put on the back burner at the outset.

Shortly after the acquisition, the auto industry, as a whole, came under immense pressure, what with two of its biggest players filing for Chapter 11 bankruptcy protection. Shares of Tata plunged into the $3 range and sales remained sluggish through a good portion of 2009.

Heading into 2010, though, the global economy began to pull itself out of the recession, and drivers started heading back onto the lots. And amid the auto group’s slow recovery, something was happening over at JLR, Tata appeared to be turning the business around.

In fact, in the first quarter of fiscal 2010 (year began April 1st), increased sales of both Jaguar and Land Rover vehicles enabled Tata to register a quarterly consolidated profit. As the global economy continues to rebound albeit irregularly, luxury appears to be coming back into favor – at least selectively. Indeed, on the strength of higher volumes, sales within this group jumped over 80% from last year. 

Given its track record in the short time its owned JLR, Tata appears clearly capable of keeping this momentum going. The company is even expanding the division’s lineup, including possible hybrid and compact models. Over the long haul, the JLR group will likely become a primary driver of growth and its profitability should prove sustainable at Tata, a state of affairs neither Ford nor Jaguar or Land Rover’s previous owner BMW were able to consistently achieve. As a matter of fact, JLR will likely even account for about 40% of Tata’s bottom line by next year. 

Investors appear to agree. The stock has traded up on the Jaguar news, and it is approaching an all-time high. As the results can attest, Tata has done an excellent job of maintaining the luxury brands identity, something that should prove critical as it builds the lineups.

The company may have even set a trend, as Zhejiang Geely recently made a Tata-like dive into the global pool with the purchase of Volvo from Ford, marking China’s largest foreign auto acquisition,

For investors, the success of JLR will likely continue to drive Tata shares. Thus, this stock is basically an economic play, more so than many of the auto’s, given its place now in the luxury market. As long as drivers are spending a little more on their rides, the Street will probably favor Tata.

We must not be quick to forget, however, that there is more here than just pricey cars. Tata was a $20 stock when it was just Indian trucks and compact cars.

That said, in an earnings season when most of the largest car manufacturers, from Detroit’s Ford and GM, to Japan’s Toyota Motor (TM) and Honda Motor (HMC), registered impressive earnings results, who’d believe that it would be Jaguar that is gaining much of the investment spotlight.

And who would have believed a few years ago that an Indian heavy- and medium-truck manufacturer that had just revealed the cheapest showroom option was going to revitalize one of the world’s most well-known luxury auto businesses.