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TELCO redesigns mid-car - Views on News from Equitymaster
 
 
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  • Sep 16, 1999

    TELCO redesigns mid-car

    Tata Engineering and Locomotive Company (TELCO) has reworked its mid-car (Midi) design so as to make it more affordable. This was revealed by news reports in a leading financial daily.

    TELCO is India's largest heavy commercial vehicles (66% market share in July 1999) and light commercial vehicles (64% market share) manufacturer. It also manufactures utility vehicles (28% market share) and passenger cars (7% market share).

    Banking on the success of its small car - Indica, TELCO plans to launch a car in the mid-car segment. The Tata Midi has been designed in-house with inputs from IDEA, the same company that designed the Indica. According to company sources, the car will be ready to roll-out by April 2001.

    TELCO has had to re-work the design of the Midi, so as to accommodate it in the Rs 500,000-Rs 600,000 segment. This is priced just below Maruti Esteem, and is seen as a bid by TELCO to grab market share from Maruti. Maruti Esteem is the leader in the mid-car segment, and other manufacturers like Ford (Ikon) are also eyeing Maruti's large market share.

    TELCO wants to enter the mid-car market with a focus on volumes. It will compete with its peers on the price front, just as it did in the case of the Indica, forcing even others to cut prices. This could lead to a shake-out in the mid-car segment, with more manufacturers trying to break into the Rs 500,000-Rs 600,000 category. This is largely due to the fact that sales in the Rs 600,000+ segment has been affected by lower demand.

    TELCO's decision to delay the launch of the car is noteworthy, as it has taken this step even as its peers are rushing in with new models. In the long term, this will help the company compete more effectively on the pricing aspect of its car. Moreover, TELCO will enjoy an edge over others in marketing and distribution.

    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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