Tatas, M&M Gear Up For Russian Market

New Delhi, April 29 | Updated: Apr 30 2004, 05:30am hrs
After Southeast Asia, the auto sector is now trying to get a toehold in Russia. It is emerging as a preferred destination for auto companies including Tata Motors and Mahindra & Mahindra, which plan to set up assembly operations there.

While Tatas are looking at commercial vehicles, Mahindras are working on their multi-utility line-up including Scorpio to start with.

We are in negotiations with three or four parties to locate a partner and are exploring the assembly option. A lot of details have to be finalised, Tata Motors executive director, commercial vehicle unit, Ravi Kant told FE.

Mahindra & Mahindra believes that Russia is a good market for sports utility vehicles (SUVs), the companys chief operating officer Pawan Goenka said.

The company is working on making its SUV, Scorpio, suitable for meeting the harsh cold conditions in Russia.

To start with, we are concentrating on Scorpio and may look at Bolero only after establishing the SUV. We may launch Scorpio end of this year through an assembly set-up there, Mr Goenka said.

Mr Goenka added that a lot of changes will have to be carried out to make Scorpio run on Russian roads. For one, its a left-hand drive market. Around 400 parts will have to be changed and a lot of engineering work is required so that the engine is redesigned to start working at -25 degree centigrade. Some tests have already been conducted in this winter in Russia on Scorpio.

Meanwhile, Tatas have already signed an agreement with a Russian auto manufacturer for assembly of Tata trucks at a plant in the Urals. The plant plans to assemble trucks including 400 Tata-407 vehicles before the end of 2004.

We have an order for 500 light trucks from Russia to be supplied in CKD and assembled there. It is likely to be a long-term arrangement for more, but there is no certainty as yet, a Tata company spokesperson added.

Once a particular product has been redesigned to conform to the harsh weather conditions, it can be then taken to other similar markets, Mr Goenka said.

Elaborating on the reasons for looking at Russia, he added: The Russian market is quite similar to the Indian market in terms of affordability and purchasing power of consumers. It is not yet developed for high-end high- priced products, like India where a majority of vehicle sales happen in the Rs 4-5 lakh range.

According to a Russian auto industry organisation, ASM Holdings, vehicle sales in Russia have been on the rise this year. Automobile production increased by 24 per cent to 320,949 vehicles in the first quarter January-March 2004, as compared to the same period last year. In particular, car production went up by 27.5 per cent to 254,747 in the first quarter of this year.

The industry also rolled out 49,487 trucks in the first three months of this year, which is 17.5 per cent more than in January-March 2003.