Tata Engineering and Company Limited (Telco) has announced that it is considering entering into technical alliances with global major for expansion of the product range. It is also planning to focus on the design and assembly of vehicles while outsourcing the subassemblies. The company is taking steps to introduce new products and also increase the automobile manufacturing capacity at its Pimpri plant to 400,000 nos. from the existing 125,000 nos.
Telco is India's largest heavy commercial vehicles (HCV) (65% market share) and light commercial vehicles (LCV) (69% market share) manufacturer. It also manufactures utility vehicles (28% market share) and passenger cars.
Telco's plan to enter into various alliances will help it meet the international standards and also the target export level of 15% of total sales, which it had set for itself. The company, which has one of the largest research and development setups in the country, is currently developing various models and products to expand its product range. The decision to enter into alliances will act as a stimulus to the local R&D effort and enable the company to establish a presence in all segments of the market. Finally, the decision to focus on design and assembly will enable it to divert its resources to just these two activities while the rest could be hived off as joint ventures.
The decision by Telco to enter into alliances and expand its product range is fallout of the restructuring exercise that it had been undergoing for sometime now. The company expects to emerge as a leaner and more productive organisation with a wide product range in the commercial vehicle, utility vehicle and passenger cars segment.
As many lead indicators are signaling an economic recovery, analysts are increasingly putting up 'BUY' recommendations for the scrip. The increase in diesel consumption and freight rates has encouraged analysts to turn positive on the stock.
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