Tata Motors Ltd, which plans to introduce India’s cheapest car, said it can’t promise the price won’t shoot beyond the targeted Rs1 lakh.
“If there is a major rise in wages, raw material prices you can’t expect us to swallow that,” said Ratan Tata, chairman of Tata Sons, which owns Tata Motors. “We’re trying to hold on to the Rs1 lakh budget as long as we can.” Tata said the car has been fully developed and the company is making the moulds and drawing up the work flow.
Steel prices have risen by 10% in the last quarter and aluminium prices have shot up by a third in the same period. India’s inflation rate, a measure of cost, which was targeted at 5-5.5% has overshot and is expanding to 6.73% in fiscal 2007, signalling that the cost of goods will get dearer.
Tata Motors, which makes India’s largest selling fully-indegenous car, the Indica, last year announced plans to make India’s cheapest small car at Singur, in West Bengal at a cost of Rs1,000 crore.
The project has been mired in controversy after protests by farmers over the forced acquisition of land saying compensation was unfair. Work has now commenced on the factory but amid security.
Tata Motors said the car would be introduced in the middle of 2008 or in the third quarter. Priced at Rs1 lakh, it is nearly half the price of Maruti Udyog Ltd’s 800 model, which sells at about Rs2 lakh.