Tata sees South Africa as car assembly hub

Tata, the Indian steel-to-telecoms conglomerate, has identified South Africa as the next frontier in its globalisation strategy and a possible hub from which to assemble and export passenger cars to Europe, according to the group's chairman.

"Very positive" sales of the group's trucks and passenger cars since their launch at the Johannesburg motor show last November could accelerate a decision to launch a local assembly factory, Ratan Tata said in an interview.

Such a plan could, for instance, see Tata Motors, the largest passenger car and commercial trucks manufacturer in India, ship vehicle kits from its main plant south of Mumbai to South Africa for assembly.

This would allow Tata Motors to take advantage of South Africa's free-trade agreement with the European Union to access European markets. A Tata unit already builds bodies for buses in South Africa.

"We would need sales volumes of about 10,000 units in South Africa [to go ahead with local assembly] and that now seems

possible," Tata said.

Tata Motors already exports its best-selling Indica model to the UK, where they are sold under the Rover marque.

Tata's South African ambitions are part of a globalisation strategy designed to ease the group's dependency on its main market of India. A fifth of Tata group sales of US$14.25 billion were earned from overseas markets in 2004.

And the scale of Tata's foray into South Africa could transform the country into the biggest market outside India for Tata products and services. In the next two years, Tata plans investment of $245 million on new projects in South Africa, where its interests include IT services, telecoms, bus-body building and car distribution.

"Perhaps within three years South Africa could be our biggest market in terms of the breadth of what we hope to be doing there," said Tata.

Bangladesh, where Tata is committed to investments totalling $2 billion for projects in power, steel and fertilisers, is Tata's biggest overseas market by value.