Ahmedabad / Mumbai: Tata Motors Ltd will now manufacture its Tata Nano car in Gujarat, chairman Ratan Tata confirmed on Tuesday, ending speculation about where the high-profile cheap car will end up after pulling out of West Bengal over violent land-related protests.
The proposed Gujarat plant, to be built at Sanand near Ahmedabad on a 1,100-acre site, will have an initial capacity of 250,000 cars, expandable to 500,000 cars, Tata said. The project will involve an investment of Rs2,000 crore.
The shift marks a significant coup for the Narendra Modi-led Gujarat government, which has long made the case for the state’s pro-industry policies.
Under an agreement signed with the Gujarat government, the auto maker would purchase land from the administration at current market price.
The site in Gujarat, already under the possession of the state government controlled by the Bharatiya Janata Party, will help Tata Motors establish a new plant with the “shortest possible time lag and least possible incremental project cost”, Tata said.
Together with Tata Motors, about 60 component makers would also move to the new location.
Tata Motors, which had planned to launch the Tata Nano around October, will, in the meantime, explore the option of making it at existing units in Pune and Pantnagar.
“We lost a lot of time unfortunately, and I think we can try our best to do what we set out to do...in a new home,” Tata said at a news conference he jointly addressed with the Gujarat chief minister. “It will be our endeavour to be as close to the timelines we set earlier, (but) we may not have the volumes initially.”
Tata Motors quit the Singur site in Marxist-ruled West Bengal after construction was hampered by violent protests by farmers, who demanded return of the land acquired for the factory.
“From a long-term perspective, the delay further pushes Nano break-even timeline and relocation will add to increase in costs,” Binay Singh, an analyst at Morgan Stanley, wrote in a report on 5 October. Full-scale introduction of the Tata Nano will be delayed by at least a year, Singh estimated. The base model of the car was to sell for Rs1 lakh.
Tata praised chief minister Modi for the swift allocation of land.
Asked about the deal offered by the Gujarat government to draw the project to the state, Tata said, “It is as good as or slightly better than the one we had previously (in West Bengal).”
Gujarat was considered to be an early leader even though Karnataka, Andhra Pradesh and Uttarakhand were also wooing Tata.
“Tatas and Gujarat have started a new chapter of partnership, which will give a new direction and dimension to the state,” Modi said. “After the Nano car project, Gujarat will make an important place in surface transport.”
In New Delhi, Communist Party of India (Marxist) leader Sitaram Yechury said on a television programme that the Tata decision was disappointing.
“You cannot go into an area and say I will build my house only if everyone gives the assurance that it will not be burgled,” he said on the programme India Tonight, hosted by Karan Thapar.
Despite the blase statement, the Left Front government did understand the difficulties faced by the Tatas in West Bengal, Yechury claimed. “The Tatas also had international commitments to meet,” he said. “It is not that Bengal, but the whole of east India has suffered.”
Tata Motors has said eventual demand for the Tata Nano would be about one million units. The company had invested about Rs1,500 crore on the Singur plant.
When asked about the loss incurred because of the pullout from West Bengal, Tata said, “We would be retrieving most of our costs out of Singur and I don’t believe that there will be a need to have any appreciable loss reflected in our financials in the current year.”
“The cost of moving out would be the cost of dismantling and the cost of moving to a new location,” he said.
PTI and Bloomberg contributed to this story.