Tata Motors Will Expand Capacity for Nano Car Model

By Vipin V. Nair

July 1 (Bloomberg) -- Tata Motors Ltd., maker of the $2,500 Nano car, will boost capacity to produce the model, due to higher-than-expected demand in India and overseas, Chairman Ratan Tata said.

The carmaker will begin production of the model in the last quarter of this year, Tata said in the company's annual report for the year ended March 31. The Mumbai-based company is working on developing new variants of the 623-cc car, which was unveiled in January.

Tata Motors' Nano is aimed at first-time car buyers in India, where more than 45 million people rely on motorcycles for transportation. The automaker, which last month completed a $2.4 billion purchase of Jaguar and Land rover luxury brands from Ford Motor Co., wants to challenge Suzuki Motor Corp.'s dominance in the Indian car market.

``Customer response in India was unprecedented,'' Tata wrote to shareholders in the company's latest annual report. ``Enormous interest in the car was shown by certain foreign countries.''

Tata Motors is building a factory that can make 250,000 Nanos annually in Singur in eastern India. Ratan Tata didn't give details of a possible production increase.

Almost seven motorcycles are sold for every car in India, where about half the population of 1.1 billion live on less than $2 a day, according to World Bank.

At about 100,000 rupees ($2,300), the Nano will cost almost half as much as Suzuki's Maruti 800, the cheapest car currently on the market. The Nano is powered by a two-cylinder engine mounted in the back which generates 33 horsepower.

``The high volumes of the Nano range will dramatically change Tata Motors's market position,'' Ratan Tata said. Tata Motors had 13.9 percent of India's car market, compared with 51.4 percent for Suzuki and 18 percent for Hyundai Motor Co. in the year ended March 31.

Tata Motors fell 3.5 percent to 411 rupees in Mumbai trading at 3 p.m. The stock has fallen 45 percent this year.


source:bloomberg