India’s largest commercial vehicle maker, Tata Motors Ltd, is firming up plans to produce its Xenon pick-up and its popular one-tonne Ace truck model in Thailand, the world’s fastest growing market for pick-ups.
The company also plans to take a few of its key vendors along for the Thailand project, said senior company executives who did not want to be identified because they are not authorized to talk to the media.
“Plans are to start production of the Xenon and Ace models in Thailand by January 2008,” a person close to the developments told Mint. Tata Motors has a joint venture with Thonburi Automotive Assembly Plant Co. in Thailand to manufacture, assemble and market pick-up trucks.
India signed a free trade agreement with Thailand in 2004 and certain auto components, such as engine parts, have lower import duty. This is set to become lower still and in some cases will fall to zero. With Thailand able to make some parts cheaper than India, local vehicle makers may look to source more parts from the South-East Asian country. This has also prompted Indian auto companies to explore building factories in Thailand.
Tata Motors spokesperson Debasis Ray declined to comment, citing the Parsi new year holiday at the company.
Thailand is the world’s second largest pick-up truck market, after the US, and the joint venture could help Tata Motors get access to the lucrative market as well as other markets in the region. The joint venture, in which Tata Motors will hold a 70% stake, will manufacture vehicles at Thonburi’s facility.
Thailand has already overtaken the US as the world’s biggest maker of light pick-up trucks and now produces 900,000 one-tonne pick-ups every year, which is estimated to be approximately three-fourths of the total global production of such vehicles.
Tata Motors’ initial plans are to produce 20,000 units each of the Xenon and Ace models in the first year, but one of the executives said the company is ready to ramp up numbers depending on the market response. The Indian commercial vehicle market is currently seeing a slowdown brought on by higher interest rates for the financing of vehicles.
For Tata Motors, the Thailand venture will open up another avenue to sell its popular Ace model, which will see a slew of competitors in the coming year starting with its Pune rival Force Motors Ltd’s light truck. With sales of the Ace crossing the 100,000 units mark in just 22 months of launch, a host of other automobile companies in India, including Mahindra & Mahindra Ltd and two-wheeler maker Bajaj Auto Ltd, have announced plans to launch vehicles in this category.
Tata’s Indian sales of commercial vehicles in July were 20,705 units, a decline of 3.8% over the 21,534 vehicles sold in July last year. Medium and heavy commercial vehicle sales stood at 10,367 units, a decline of 14.6% over July 2006, while light commercial vehicle sales were 10,338, a growth of 10% over July 2006.
The firm’s sales from exports stood at 4,382 vehicles in July, down 17% from 5,284 vehicles in July 2006. The cumulative sales from exports in the current period at 18,204 have recorded a marginal decline of 1% over the previous year.
Meanwhile, some vendors maintain that once the India-Thailand free trade agreement comes into effect, they can turn around and supply low-cost supplies to original equipment manufacturers in India.
Indian auto component vendors have made huge investments in expanding their capacities, portfolio and upgrading technology over the last couple of years to cater to the needs of global auto equipment suppliers who are setting up shop here. In addition to shopping for components for their own needs in India, most of these suppliers are also tapping their vendor base for purchasing components for their global operations.