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Tough times ahead for auto sector: Tata

BS Reporter in Mumbai | July 25, 2008 09:37 IST

Ratan Tata, chairman of Tata Motors [Get Quote] said that rising costs of fuel and raw materials are the biggest worry for the automobile industry. Tata also warned of tough times for the company as its market share slid in the last financial year.

The company's market share fell from 19.21 per cent in 2006-07 to 15.78 per cent last year, according to the Society of Indian Automobile Manufacturers (Siam).  

Addressing the company's shareholders at its 63rd Annual General Meeting, Tata said, "The fuel price increase and a subsequent rise in the cost of raw materials have pushed overall costs. There are uncertainties over government  policies. It's going to be a very difficult year."

Tata Motors is less than a week away from announcing its first quarter results on June 30. Rival Maruti [Get Quote] Suzuki has already announced its results, posting a dip of almost 7 per cent following the spiralling input costs.

On the sales count, however, Tata Motors saw a growth of 11 per cent in domestic sales. It sold more than 57,000 passenger cars in the first quarter ended June 30.

Addressing shareholder concerns over the quantum of dilution in the upcoming rights issue, Tata said, 'When looking at the gains (that) we will have through the profit-making businesses of Jaguar and Land Rover, the dilution over the rights issue is marginal'. The company plans to have a rights issue to fund the acquisition of JLR. Tata, however declined to give details of the pricing.

The company is working hard to bring out the Nano as per the earlier timeframe. Tata said, "There has been flooding at the Singur factory due to the monsoons. But this has not impacted the equipment. Work has slowed down, but the team is committed to meet the deadlines. We should be able to launch the car in the final quarter of this calendar year."

Tata said the car is designed to give mileage of 50 miles to a gallon of fuel or 23 kms to a litre of petrol. The company is planning to offer a range of variants.

The company will launch the new Indica next month amid a sluggish Indian automobile market.

Analysts say that the surge in sales in the earlier months of this year did not provide any indication of a slowdown and a clearer picture will emerge in this month. Tata also hinted on a further price hike as input materials, including steel and tyres (rubber), have begun to put margins under pressure. 


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