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Local assembly for Land Rover?

Local assembly for Land Rover?

Mumbai: Tata Motors Ltd, which acquired UK-based JaguarLand Rover in June 2008, is considering a plan to assemble a few of the Land Rover models in India.

According to two persons with direct knowledge of the project, Tata Motors, India’s largest auto maker by value, will commence assembly of Land Rover’s Freelander in India by the end of calendar 2010 and launch the locally assembled models by the first half of the next calendar year.

“Trial production will begin by December," said one of the persons. Both spoke on condition of anonymity.

The company will use its facility at Pimpri near Pune, earlier used by Mercedes Benz India Pvt. Ltd, to assemble its cars, to put together the Freelanders. The factory has been idle since Mercedes shifted its production base to a new, larger facility at Chakan, also near Pune.

Tata Motors has drawn up a budget of Rs150 crore to set up assembly operations for the Freelander. Depending on costs, the company may consider doing the same for other models from the Land Rover stable, said the person cited above.

“At this point, it’s not clear whether JLR will use the factory to address markets outside India," he said.

While this marks a significant development in JLR’s history as it’s the first time the company is looking at setting up an assembly unit outside the UK, analysts are sceptical about the move.

“It doesn’t make economic sense for the company to set up assembly operations in India as it has bigger markets like China, where sales are much higher," said Mahantesh Sabarad, senior analyst at Fortune Equity Brokers (India) Ltd.

Through a single outlet in Mumbai, JLR sold 242 units in India in 2009-10. The firm doesn't share monthly sales data for the domestic market.

Priced upwards of Rs34.69 lakh (on the road in Mumbai), the Freelander’s higher-end variants will compete with BMW India Pvt. Ltd’s X3 and Audi India Pvt. Ltd’s Q5, among others.

According to an expert with a consulting firm who declined to be named, the local assembly will give Tata Motors cost benefits as the duty on imported completely built units is around 110%, while that of completely knocked down units is approximately 40%.

“While it will have an impact on the profitability, it will not have too much impact on the pricing of the model," he said. Pricing is a function of volumes, he said. The factory will assemble up to 20 units a month, said the person quoted earlier.

According to the second person, setting up an assembly unit in India was always on the company’s radar. “Sourcing of parts from India was a measure to gauge the quality," he said. On 21 March, Mint reported on the company’s plans to set up a sourcing office in Pune for Land Rover.


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