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Tata Motors considers 50% hike in car output

Mumbai, Dec. 17: The sustained spurt in the demand for Tata Indica and Indigo has prompted by Tata Motors to look at increasing its production capacities by 50 per cent to cope with the surging orders.

“We are facing constraints in meeting the increased demand,” a senior official at Tata Motors said. The waiting period for Indigo is five to six weeks, while for Indica (petrol version), it is up to three weeks.

Tata Motors has a current production capacity of 1.50 lakh cars in two shifts. Having scripted a remarkable turnaround in both divisions, the company finds current capacities insufficient to meet demand.

Therefore, the plan is to hike capacity by 50 per cent to 2.25 lakh cars per annum. “We will consider various ways to do this. While analysts say the fastest way to ramp up production would be to add an additional shift, they also feel that it would be a short-term solution. If demand growth continues, we would have to achieve this through de-bottlenecking and expansion. So, all options will have to be considered,” the official said. Sources say the company is in advanced discussions with its vendors to increase output.

Production levels currently average 400 cars a day and the internal target is to ramp this up to 700 by next year.

The surge in demand for cars is not peculiar to Tata Motors alone. Hyundai and Maruti have already reported impressive growth in sales in the past few months. The Korean major is also considering a production boost.

For Tata Motors and other B-segment car makers, the easy finance at low interest rates and their tie-up with banks have fuelled demand.

Analysts say it makes sense for Tata Motors to raise capacity, failing which potential buyers could go to rivals. “The waiting lists could spill over to other manufacturers who are not constrained by bottlenecks.”

Analysts say the Tatas will be in a position to roll out more cars by 2005. Company sources say it would be earlier. The success of Tata Indigo Sedan has been a shot in the arm. Further, its tie-up with Rover to sell Indica abroad will help drive its export in European countries.

Tata Motors is now in the midst of a due diligence for acquiring Daewoo’s commercial vehicle plant in South Korea that analysts say will help reduce the time-lag in introducing next-generation trucks in India.

Meanwhile, Tata Indigo completed its first anniversary of launch on December 18th, 2003 as the largest selling sedan for the period, not only in its segment but across all segments of the industry. “Over 25,000 Indigos are currently on the road and the car enjoys a leading market share of 27 per cent in the entry mid-size segment. Indigo is one of the rare brands that became a best seller in its first full month of launch and one that continues to hold that position for a year,” the company said.

“The car’s unique positioning and compelling product proposition has been instrumental in growing the segment to an average of 8300 vehicles a month in which the Indigo itself accounts for a segment leadership figure of 2200 units per month on average”, it added.

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