Thursday, December 14, 2006

Tata Motors, Fiat to Invest 40 Billion Rupees in India Venture

Tata Motors Ltd., India's biggest truck and bus maker, and Fiat Auto SpA, Italy's largest manufacturer, will invest as much as 40 billion rupees ($895 million) to make new cars, engines and transmissions in India.

The automakers will manufacture and sell more than 100,000 vehicles annually, the companies said in a joint statement. Fiat will start selling its Grande Punto hatchback and Linea sedan models in India, the statement said.

Fiat Chief Executive Officer Sergio Marchionne is forging alliances with Tata and Ford Motor Co. to share costs of developing parts and models after returning the 107-year old carmaker back to profit after four years of losses. Tata is spending 120 billion rupees in four years to expand capacity locally and overseas and develop new products.

Today's agreement followed a preliminary accord signed between Tata and Fiat in July to form the equal joint venture for the local and overseas markets. Fiat formed an alliance with Tata in January to market its cars through Tata's dealerships.

The European company currently sells the Palio hatchback and the Petra sedan in the country, producing it at the Kurla factory in western Maharashtra state.

Cars from the two companies will be made at Fiat's facility at Ranjangaon in western India. The facility is expected to produce as many as 100,000 cars and 200,000 engines and transmissions, they said.

Tata is developing new cars, sport-utility vehicles and trucks because demand for vehicles is rising in Asia's fourth- biggest automotive market. Tata raised $500 million in the past two years selling bonds overseas to raise funds for expansion and acquisitions.

Investment Plan

Global automakers are spending more than $4 billion building factories in India and to introduce new models to meet rising demand as India's passenger car sales are forecast to triple to 3 million units by 2015, according to the Society of Indian Automobile Manufacturers.

General Motors Corp. is spending more than $300 million to make minicars in India starting next year, while Volkswagen will develop an India-specific hatchback by 2009, based on its Polo model.

Tata, which makes Indica cars and Sumo multi-utility- vehicles, is also exploring the possibility of cooperating with Fiat in Latin America, the companies said.

The current alliance with Fiat will help Tata to source technology and designs for competing with companies such as Suzuki Motor Corp. and Hyundai Motor Corp. in India, where only seven in 1,000 people own a car.

Three out of four cars sold in India are hatchbacks. Around half the car market is controlled by Maruti, a unit of Suzuki, as it produces five hatchback models, which are more efficient and cost less than sedans.


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