Ratan Tata, chairman of India?s second largest automobile manufacturer, Tata Motors, has indicated that high fuel prices will have a negative impact on commercial and passenger car sales. Tata also said his company was working on new variants of its Rs 1-lakh car Nano in order to overcome the threat posed by high fuel prices.
In a letter to shareholders in the annual report of the company for 2007-08, Tata said that there would be “an enormous and unprecedented increase in material costs in steel, tyres and the like, and there will be the impact of tighter money supply with higher interest rates.” However, he added that “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 Tata Motors stock slumped 4.23% on the Bombay Stock Exchange on Tuesday, to close at Rs 408.45. The stock also touched a 52-week low of Rs 405.05 in intra-day trading on Tuesday.
“In addition, the company will have to manage the completion of the Singur plant and introduction of the new Nano in the market. While dealing with these challenges in India, the Tata Motors? operations will also have to absorb the cost of the JLR acquisition, and deal with its integration,” Tata said in the letter.
The company also said that it has raised prices of its commercial vehicles by an average 3% across its commercial vehicle rangewith effect from Tuesday, July 1, on account of the increase in input prices.
Last month, the company had hiked prices of its passenger cars by up to 3%. Noting that the Nano plant in Singur in West Bengal is expected to go into operation in the last quarter of this calendar year, Tata in the letter said that these manufacturing facilities will be expanded to meet the domestic and global demand in the future. ?The year ahead will be no more daunting than the challenges they have faced in difficult years in the past,? he cautioned.
Tata said that the company has an exciting future and apart from the growth domestically in both commercial vehicles and passenger cars, for which the company has ambitious plans, the high volumes of the Nano range will dramatically change Tata Motors? market position, reach and visibility. Internationally, 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 said that although the company registered a growth of 5.5% in the commercial vehicles (CVs) segment, it had lost market share. ?The company introduced several new models and variants of CVs, but was unable to exploit the full market potential due to inadequate deliveries of powertrains and components from major suppliers,? Tata said.