Rough road ahead, warns Tata

Tata Motors chairman Ratan Tata on Tuesday cautioned that the year ahead would have major challenges...

Tata Motors chairman Ratan Tata on Tuesday cautioned that the year ahead would have major challenges as high oil prices was making operations tough for the industry. “Higher fuel prices will negatively impact both commercial vehicles and passenger car sales. There will be an unprecedented increase in material costs in steel, tyres, and the like, and there will be the impact of tighter money supply with higher interest rates,” Tata warned.

Tata also said that his company was working on new variants of its much-talked about Rs 1-lakh car Nano in order to overcome the threat posed by high fuel prices. “New variants of the Nano are also currently under development to meet the new environmental and fuel price challenges, as also the market requirement of several international markets,” he said in a letter to shareholders in the annual report of the company for 2007-08.

The Tata Motors stock slumped 4.23% on the Bombay Stock Exchange on Tuesday, to close at Rs 408.45. The stock also touched a 52 week low of Rs 405.05 in intraday trading on Tuesday.

“In addition, the company will have to manage the completion of the Singur plant and introduction of the new Nano in the market. While dealing with these challenges in India, the Tata Motors’ operations will also have to absorb the cost of the JLR acquisition, and deal with its integration,” Tata said in the letter. The company also said that it has raised prices of its commercial vehicles by an average of 3% across its commercial vehicle range with effect from Tuesday, July 1, on account of the increase in input prices. Last month, the company had hiked prices of its passenger cars by up to 3%.

Noting that the Nano plant in Singur in West Bengal is expected to go into operation in the last quarter of this calendar year, Tata in the letter said that these manufacturing facilities will be expanded to meet the domestic and global demand in the future.

The Tata Motors chairman said that the company could have grown at a much faster pace had there been no roadblocks to major investments arising from ideological differences, state-centre conflicts and vested interests. “Some of these self-serving obstacles delayed major projects, depriving the country the opportunity to bridge the gap in infrastructure, energy and power,” Tata said.