Telco keen on tie-ups with global auto majors

This is the first time Telco has acknowledged that it needs a foreign partner to bring in new products.

DailmerChrysler AG is one of the many companies with whom Telco had been talking to market Indica in the Latin American markets, analysts said. He said DaimlerChrysler had shown interest in the Indica car to market it around the world.

In a late evening clarification, Telco, however, said that its talks with DaimlerChrysler were only exploratory in nature and currently there is nothing between the two companies to swap products.

The company did not comment whether the marketing tie up could ultimately result in an equity tie up in the backdrop of an intensive consolidation now taking place in the entire automobile industry around the world.

Incidentally, DailmerChrysler is already having a minority stake in Telco and both had promoted the joint venture Mercedes Benz India Ltd before the multinational bought the entire stake held by Telco in MBIL.

On Telco’s plan to come out with a mid-sized car, Tata said: "It would probably be fair to say it would be a 24-month period before we have such a product in the market."

On Monday, the company announced a 26.9 per cent dip in its net profit for the fiscal 2000 but the company managed to remain in black due to sale of its three sub-assemblies – gear box, axle and machine tools – into wholly-owned subsidiaries, which has notched up a profit of Rs 134.34 crore from the sale of the divisions.

"The company’s major investments in the new car facilities, as anticipated, adversely impacted profitability as is the case in any new fully integrated car activity during the ramp up period," Telco said yesterday while announcing its annual results.

"The company’s production of the Tata Indica increased steadily during the year but did not reach the break-even level, which is expected to be reached towards end of 2000-01," it said.

Tata said the upturn cycle for the commercial vehicle industry has begun and it plans to complete negotiations in 2000/01 with global firms for strategic alliances for the heavy duty transmission division, heavy duty axle division and machine tool and growth division.

On its small car Indica, Tata said the company is hopeful of achieving sales target of 90,000 Indica cars in the fiscal 2001. In the fiscal 2000, its passenger car sales rose to 82,835 units from 33,459 units. Of this, Indica sales totalled 54,992 units from its launch in early 1999, recording a 19 per cent market share.

"The commercial vehicles division recorded higher sales commensurate with an improvement of demand for medium and heavy commercial vehicles. The market share too improved to 67 per cent, driven by the implementation of marketing initiatives and the launch of Euro I Cummins powered vehicles," Telco said. The company expects a 12-15 per cent sales growth in commercial vehicle volumes in the current fiscal.

“We expect the automobile demand to move from urban to semi-urban and to the rural segment which would drive the company’s growth,” he said. “We are envisaging a capital expenditure plan of Rs 2-3 billion per year over the next few years

On the light commercial vehicle (LCV) front, the company’s sales fell to 33,956 units from 34,108 and sits operating margin also came down from 5.89 per cent from 8.32 per cent, the company said.

Tata said the company is planning to hive off the unrelated business and reduce degree of vertical integration so that it can focus its businesses more effectively.