Tata Motors says holding margins a challenge

Mon Jun 18, 2007 10:33am BST

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PUNE, India, June 18 (Reuters) - India's top truck maker, Tata Motors Ltd. (TAMO.BO), launched two new passenger vehicles on Monday, and said it was tough to maintain margins in light commercial vehicles because of high steel prices and competition.

Tata Motors has more than 60 percent of India's bus and truck market, the world's fifth-largest by volume.

"It is a challenge to maintain margins because the market is very competitive and commodity prices keep moving," P.M. Telang, executive director of commercial vehicles, told reporters.

The firm, which spent up to 2 billion rupees ($49 million) to develop each of the two new passenger vehicle, believes demand for smaller vehicles would remain strong on expanding highways and demand for passenger transport in buses-starved rural India.

"With the emphasis on building infrastructure, we believe there's going to be an explosive growth in transport of goods and passengers," Telang said.

One of the new launches, Magic, is based on Tata's successful sub 1-tonne mini-truck ACE that can carry up to seven passengers. It is priced above 260,000 rupees ($6,388).

The other, Winger, built on French automobile firm Renault's Traffic platform is priced above 470,000 rupees. It can carry up to 13 people.

Both the diesel-run vehicles are initially launched in the western region, and will be available nationwide in two months. Tata also aims to launch a variant that uses compressed natural gas.

Stricter safety and pollution controls, as well as regulations to curb overloading and large trucks in congested cities is also pushing demand for smaller vehicles.

But competition is rising: top utility vehicle maker Mahindra & Mahindra (MAHM.BO) is developing a multi-utility vehicle with cargo and passenger capabilities and number-two truck maker Ashok Leyland (ASOK.BO) is also keen to make a small truck.

Motorbike maker Bajaj Auto (BJAT.BO) has also said it would develop a small multi-application vehicle, while three-wheeler maker Piaggio (PIA.MI) has launched a four-wheel cargo vehicle.

($1 = 40.7 rupees)

((Reporting by Rina Chandran, editing by Ranjit Gangadharan; Reuters Messaging: rina.chandran.reuters.com@reuters.net; +91 22 6636 9251)) Keywords: TATA MOTORS/

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