Tuesday, May 25, 2004
People's Car: The Tata edition
On the heels of news that Tata Motors was going to sell its Indica brand of cars in the U.K. under the Rover brandname, comes news that Tata are planning a $2000 entry level car for the masses. The Financial Times reports that Tata are planning to license the manufacture and assembly of its 4-5 seater utility vehicle to low-level rural businesses.
Tata Motors will begin product development later this year while also setting up a network of low-cost, low-volume manufacturers around India for component production and assembly, acting under license. Tata might retain the manufacture of key components such as the engine, whose size would be about 600cc. Mr Tata told the Financial Times "this new way of manufacturing should also address issues of rural employment" - creating jobs in rural areas is a core theme of India's new government.
The low-cost cars would be aimed at people graduating from two-wheelers to cars. Five million two-wheelers are sold each year in India, while 200,000 Indians made first-time purchases of "entry level" cars last year. The cheapest entry level car is made by Maruti and costs about Rs220,000 ($4,860) excluding taxes. Tata's product would cost about half that. Tata officials believe that demand for the utility vehicle could rise to 500,000 within two years, with opportunities in other parts of Asia and Africa.
Mr Tata's comments follow the announcement last week that Tata Motors plans to expand capacity of its mainstream passenger cars by 50 per cent to 225,000 units a year, capping a remarkable recent turnround. Last year, Tata Motors announced net profit of Rs8.1bn ($180 mn) in the year to March, up 170 per cent year-on-year. Three years ago, the company reported a loss of Rs5bn ($110 mn).
Tata had a huge success with its Indica venture. So, there's reason to be optimistic about its people's car plans. What's more, the last time there was an attempt to create a "people's car", the result was the Volkswagen Beetle.
Tata Motors will begin product development later this year while also setting up a network of low-cost, low-volume manufacturers around India for component production and assembly, acting under license. Tata might retain the manufacture of key components such as the engine, whose size would be about 600cc. Mr Tata told the Financial Times "this new way of manufacturing should also address issues of rural employment" - creating jobs in rural areas is a core theme of India's new government.
The low-cost cars would be aimed at people graduating from two-wheelers to cars. Five million two-wheelers are sold each year in India, while 200,000 Indians made first-time purchases of "entry level" cars last year. The cheapest entry level car is made by Maruti and costs about Rs220,000 ($4,860) excluding taxes. Tata's product would cost about half that. Tata officials believe that demand for the utility vehicle could rise to 500,000 within two years, with opportunities in other parts of Asia and Africa.
Mr Tata's comments follow the announcement last week that Tata Motors plans to expand capacity of its mainstream passenger cars by 50 per cent to 225,000 units a year, capping a remarkable recent turnround. Last year, Tata Motors announced net profit of Rs8.1bn ($180 mn) in the year to March, up 170 per cent year-on-year. Three years ago, the company reported a loss of Rs5bn ($110 mn).
Tata had a huge success with its Indica venture. So, there's reason to be optimistic about its people's car plans. What's more, the last time there was an attempt to create a "people's car", the result was the Volkswagen Beetle.
