UPDATE: Tata Motors Says To Start Manufacturing Nano Minicar In 4Q

July 01, 2008

NEW DELHI -(Dow Jones)- Tata Motors Ltd. (TTM), India's biggest automaker by sales, said Tuesday it expects to start manufacturing the INR100,000 minicar Nano at a new factory in the fourth quarter of this calendar year.

The Mumbai-based automaker is constructing the plant at Singur in the eastern state of West Bengal to make the 623-cubic centimeter rear-engine vehicle, billed as the world's cheapest car when it goes on sale later this year.

"These manufacturing facilities would be expanded to meet the demand in the domestic and international markets in the future," Ratan Tata, Tata Motors' chairman told shareholders in the company's annual report for the year ended March 31.

"New variants of the Nano are also currently under development to meet the new environmental and fuel price challenges, as also the market requirement of several international markets."

The expected high sales volume of the Nano will "dramatically" change Tata Motors' market share in India, the chairman said.

Tata Motors, part of the diversified conglomerate Tata Group, produces passenger vehicles such as the Indica hatchback, Indigo sedan and Safari sport- utility vehicle in the country.

Tata also said the acquisition of the Jaguar and Land Rover brands 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 Motors completed the acquisition of the two iconic car brands from Ford Motor Co. (F) in June for $2.3 billion.

To fund the acquisition, Tata Motors is raising INR72 billion via three separate rights issues, and an additional $500 million-$600 million through an international offering of securities.

Looking ahead, Tata said rising fuel prices in India will adversely impact the company's commercial vehicle and car sales this year.

"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," Tata said.

The company also has to absorb the cost of acquiring Jaguar and Land Rover and deal with their integration during the year, he said.

In the year ended March 31, Tata Motors margins were hurt by rising interest rates, lower availability of vehicle financing and rising raw material prices, the company said in the report.

Tata Motors plans to introduce several new products this year in the commercial vehicle and car segments to increase its sales and marketshare amid intensifying competition, the company said.

The company has also planned several cost reduction programs to minimize the impact of rising material costs, it said.

source:cnn money