Tata Nano Moves Forward; Expansion of Production, Variants Planned
July 01, 2008
NEW DELHI - India's Tata Motors confirmed Tuesday it expects to start manufacturing the
$2,500 Nano at a new factory in the fourth quarter of this year, has expansion room to produce the Nano for foreign markets and has more Nano variants under development.
Tata Motors Chairman Ratan Tata told shareholders in the company's annual report, as reported by Dow Jones, that the acquisition of Jaguar and Land Rover from Ford, a $2.3-billion deal completed earlier this month, will add "global scale, profits and visibility to Tata Motors, enabling it to take its place in the global auto industry as a credible international automobile company."
Tata Nano: More Production, More Variants Planned
Tata Motors has a new plant in Singur, in the eastern state of West Bengal, to build the Nano. Ratan Tata told shareholders the plant would be expanded in the future to meet demand for the Nano from domestic and international markets. Billed as the world's cheapest car, Nano goes sale initially only in India later this year.
He added that new variants were under development "to meet the new environmental and fuel price challenges, as also the market requirement of several international markets." He told shareholders the expected high sales volume of the Nano would "dramatically" change Tata's market share in India.
Challenges Remain
To fund the acquisition of Jaguar and Land Rover, Tata Motors is raising funds via three separate rights issues as well as through an international offering of securities.
In the fiscal year ended March 31, Tata Motor' margins already were hurt by rising interest rates, lower availability of vehicle financing and rising raw material prices, the company said in the report.
Ratan Tata said rising fuel prices will adversely impact the company's commercial vehicle and car sales this year, at a time when the automaker is absorbing the cost of acquiring the two British brands and integrating them into its operations.
"There will be an enormous and unprecedented increase in material costs in steel, tires, and the like, and there will be the impact of tighter money supply with higher interest rates," Ratan Tata said. He did not say if those rising prices will force Tata Motors to increase the price of the Nano beyond the promised $2,500, though many observers believe the price will be higher when it goes on sale.
Tata Motors plans to introduce several new products this year in the commercial vehicle and car segments to increase its sales and market share amid intensifying competition, the company said. Tata Motors sells the Indica hatchback, the Indigo sedan and the Safari SUV. The company also said it plans several cost reduction programs to minimize the impact of rising material costs.
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