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TELCO sees truck sales in 2001-02 rising 6-7 per cent

Tata Engineering and Locomotive Company Ltd, India's largest truckmaker, on Wednesday forecast its truck sales will increase 6-7 per cent this year, narrowing its loss but not enough to restore profitability.

New launches and aggressive marketing to boost sales in faster-growing southern India will lead to this growth, TELCO's executive director for truck sales, Ravi Kant, said.

"The south is now the largest market for trucks in the country. We are increasing our penetration to grab market share," Kant said.

Part of the Tata group, one of India's largest conglomerates, TELCO also sells passenger cars and sport utility vehicles.

TELCO's truck sales fell 34 per cent to 95,064 in the past year to March, as slowing industrial growth and high fuel prices put off buyers.

In previous years more than 70 per cent of TELCO's profits had come from its truck making division. This past year, though, the drop in truck sales contributed to TELCO's slide into the red. TELCO lost Rs 3.54 billion ($75.5 million) in the nine months through December.

For the full year ended in March, TELCO is expected to post a loss of Rs 3.84 billion, according to a Reuters poll of 12 brokerages. That compares to a profit of Rs 712 million the previous year.

The major cause of the company's slide into the red is its decision to invest Rs 17.0 billion to start making passenger cars three years ago, according to analysts.

Sales of its Indica small car -- India's first indigenously-developed passenger car -- have never really gotten out of first gear.

At the start of last year, TELCO set a target of selling 90,000 cars. Yet it sold half that amount -- 44,165 -- in the face of intensifying competition in the small car segment with the Indian units of Hyundai, Suzuki and Daewoo.

And competition is certain to intensify. At the beginning of this month India lifted quantitative restrictions on automobile imports to comply with a World Trade Organisation ruling.

Possibly even more worrisome are recent reports that Toyota Motor Corp, the world's third-largest automaker and most efficient, plans to invest at least $400 million over the next five to 10 years to expand production in India.

INDUSTRY OUTLOOK

Kant forecast that industry-wide truck sales will grow 4-5 per cent in the year begun this month. Sales fell 11.8 per cent in the 11 months through February.

Prospects are muted by the uncertain outlook for industrial growth. Sales of trucks depend heavily on industrial growth, which slowed to 5.1 per cent in April-February from 6.5 per cent in the year-ago period.

In February alone, the growth in industrial production plunged to just 0.6 per cent, down from 8.2 per cent a year earlier.

But a recent court order requiring bus operators in the national capital Delhi to switch to cleaner burning fuels should benefit TELCO.

Last week TELCO said it received orders worth Rs 4.82 billion ($103 million) for 4,590 bus chassis.

The company's shares were up 1.5 per cent in early Wednesday trade at Rs 67.65 while the main Bombay index rose 0.41 per cent.

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