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TELCO plans foray in mid-car segment - Views on News from Equitymaster
 
 
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  • Sep 7, 1999

    TELCO plans foray in mid-car segment

    According to news reports, Tata Engineering and Locomotive Ltd. (TELCO) is planning a foray at the premium end of the mid-car segment with the launch of 'Tata Midi'.

    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.

    The Tata Midi has been designed by IDEA, the same company that designed the Indica. According to company sources, the car will be ready to roll-out in 14 months time.

    The Indian mid-car segment is very crowded as most of the international majors already have a presence in the country. Mercedes Benz has a tie-up with the Tatas, Ford with M&M, Toyota with the Kirloskars, while BMW, Opel, Honda and Fiat are on their own.

    The passenger car segment has posted robust growth of 40% in April-July 1999, over the corresponding period last year. However, the small car segment has accounted for most of this growth, with the mid-car segment yet to take off. Most manufacturers set up operations in the country because of India's large upper/middle class. They set huge production capacities only to find out that the majority of Indian consumers weren't interested in buying a premium car. Instead, the consumer found the small car to his liking. In fact, manufacturers like Daewoo (Cielo) slashed prices to push up volumes, at the expense of margins.

    However, despite rising competition, TELCO's foray in the mid-car segment makes a lot of sense for the company, given the success of the Indica (7% market share). Moreover, the company has its marketing and distribution network in place and will find it much easier to counter competition on that front.

    Market view:
    Analysts have flagged a 'BUY' on the company largely due to its restructuring efforts to hive off its auto components division. Rising CV demand and Indica's impressive performance are other factors that have found favour with analysts.

     

     

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