Tata to Start Producing Minicar

By SANTANU CHOUDHURY
July 2, 2008

NEW DELHI -- Tata Motors Ltd., India's biggest auto maker by sales, said Tuesday it expects to start manufacturing the Nano minicar, billed as the world's cheapest car, in the fourth quarter.

The Mumbai-based auto maker is constructing a plant at Singur in the eastern state of West Bengal to make the 623-cubic-centimeter, rear-engine vehicle, which is expected to be priced at 100,000 rupees, or about $2,300.

"These manufacturing facilities would be expanded to meet the demand in the domestic and international markets in the future," Ratan Tata, Tata Motors' chairman, said in the company's annual report for its fiscal year ended March 31. The expected high sales volume of the Nano will "dramatically" change Tata Motors' market share in India, he said.

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

Mr. Tata also said the acquisition of Jaguar and Land Rover 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. in June for $2.3 billion. To fund the acquisition, Tata Motors is raising 72 billion rupees ($1.7 billion) via three separate rights issues, and an additional $500 million to $600 million through an international offering of securities.

Looking ahead, Mr. Tata said rising fuel prices in India will adversely affect the company's 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," he said.

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

In the 12 months ended March 31, Tata Motors margins were hurt by rising interest rates, lower availability of vehicle financing and rising prices for raw materials, the company said in the report.

Tata Motors plans to introduce several models this year in the commercial and passenger-car segments to increase its sales and market share amid intensifying competition. The company said it also plans to cut costs to minimize the impact of rising material costs.

source: The wall street journal