Friday, January 4, 2008

Tata Motors Said To Plan Small Car Assembly In Thailand


Ruth David,

MUMBAI -

Even before Tata Motors releases its much-heralded small car in India comes the news that the firm is planning on assembling it in Thailand. The company has already filed an investment proposal there.

A spokesperson for Tata Motors (nyse: TTM - news - people ) confirmed plans for a project in Thailand but refused to reveal any details. Tata Motors reportedly plans to invest around $200 million and roll out 100,000 cars annually from Thailand, where it could create an auto components hub around the small car.

Tata Motors’ proposal is part of Thailand’s eco-car project, aimed at manufacturing smaller vehicles that are more fuel-efficient. Japanese carmakers like Honda (nyse: HMC - news - people ), Suzuki (other-otc: SZKMF - news - people ) and Mitsubishi (other-otc: MMTOF - news - people )--which control more than 90% of the Thai market--as well as Volkswagen, are also believed to have expressed interest.

Tata Motors, which operates in Thailand under a joint venture with Thonburi Assembly, won incentives from that country's Board of Investment last year to produce a redesigned pickup truck there. The project will produce 35,000 1-ton trucks a year, to be sold in the domestic market.

Since its tie-up with Thonburi, the Indian company has been looking to leverage its presence in Thailand, which gives it a point of access to other markets that are part of the Association of Southeast Asian Nations. But Tata Motors faces an uphill climb in its plans to expand throughout the region. "Thailand is not a small-car market. It’s a mid size market, dominated by Japanese manufacturers," pointed out Mohit Arora, director for India at J.D. Power and Associates. It’s a similar story across ASEAN, where even the two most popular U.S. brands have only 6% of the overall market. "No Indian manufacturer has yet made a dent in the market, which is very brand-conscious," he noted.

But as an access point, Thailand is well placed, with good sea and land links. It has "a well developed supplier base, global manufacturers and a fairly open market," Arora said. Manpower at reasonable rates isn’t a problem either, and the Thai government offers attractive tax incentives.

Tata Motors unveils its small car next week, and in India it is targeting customers in the two-wheeler market, hoping the cost of the vehicle (around $2,500) will lure people to switch to a car. Countries like Vietnam and Indonesia also have a large two-wheeler market that Tata Motors can tap into.

The Mumbai-based company, which controls around 60% of the bus and truck market in India and is known there for its fuel-efficient, low-cost cars, is looking to establish itself as a strong brand globally. The possible acquisition of Ford (nyse: F - news - people )’s Jaguar and Land Rover brands would most certainly help in that mission.

Tata Motors’ shares were trading up 0.1% on the Bombay Stock Exchange Friday, at 792.55 rupees ($20.16).

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