News Room - Business/Economics

Posted on 28 Mar 2008

INDIAN giant Tata close to building Thai plant

Newspaper reports indicate BoI likely to give approval next week for aggressive auto firm to begin manufacturing in the Kingdom

Indian auto-maker Tata Motors, following its takeover of Jaguar and Land Rover in the UK, will likely have one more achievement to cheer about.

The Madras-based Business Standard daily newspaper reported there was a likelihood of Thailand's Board of Investment (BoI) approving the company's proposal to manufacture eco-cars in the Kingdom.

The move is part of plans by India's third-largest passenger-car manufacturer to expand into the global automotive market.

The Business Standard quoted a BoI official as saying approval for Tata's eco-car proposal could be reached at the board's meeting next Wednesday.

This would make Tata the fourth carmaker to win tax privileges under government plans to turn Thailand into a production centre for environmentally friendly vehicles. The other three are Honda, Suzuki Motor and Siam Nissan Automobile.

To win the tax privileges, auto-makers must commit to investing at least Bt5 billion. Eco-cars are either petrol-fuelled vehicles with an engine size of no more than 1,300cc or diesel-fuelled vehicles with engines up to 1400cc. They must not consume more than 1 litre of fuel for every 20 kilometres and must emit no more than 120 grams of carbon dioxide per kilometre.

A BoI official yesterday told The Nation that the agency would also likely to approve proposals from Toyota and Mitsubishi, while that from Volkswagen would be delayed.

Tata managing director Ravi Kant yesterday confirmed in Bangkok that Tata had concluded a deal to acquire the two British brands for US$2.3 billion (Bt72.47 billion). He went on to discuss the eco-car project.

"The eco-car is a very important segment of the market for Tata," Kant told the Thai media. "We'll consider which car will be appropriate for the Thai market after proper research in Thailand."

Tata makes the world's cheapest car, the Nano, for the Indian market. It promises a fuel economy of about 20km per litre, which fits BoI specifications.

On the acquisition of Land Rover and Jaguar from Ford, Kant said: "These two companies have lots of potential, and we will allow them to operate by themselves. Although the market in the US might be down, there are other markets that can offset this loss. We have looked at the business plans of both companies for the next five years and are satisfied with what we see."

Kant said he believed his company had settled on a good price. However, whether the companies will enter the Indian market will be a matter for each one's management.

Asked why Tata decided to buy the companies when the US market was not doing well, he replied that Tata was given no choice.

"Ford decided to sell the companies now, and we had to take advantage of the opportunity. The automotive trade is cyclical. The markets will bounce back in a while. We have been doing business for 60 years at Tata and know this only too well," he said, adding that action would be taken to mitigate the companies' risks.

With its acquisition of Jaguar and Land Rover, Tata's total international sales now exceed its domestic sales in India.