Tata Engineering and Locomotive Ltd. (TELCO) has announced plans to increase Indica production to 7,000 units per month from the current level of 5,000-5,500 units.
TELCO is India's largest M/HCV (66% market share in July 1999) and LCV (64% market share) manufacturer. It also manufactures utility vehicles (28% market share) and passenger cars (7% market share).
TELCO's plan to increase production of Indica is influenced by the large backlog in orders. Moreover, positive response to the Indica subsequent to its launch, has created additional demand, which could not be met at the current level of production. If the demand growth in the small car segment continues unabated, TELCO may even consider hiking production level to 12,500 units per month.
At 5,044 units, Indica sales in September 1999 were the highest since its launch in January 1999. But there is increasing competition from Hyundai (Santro). Santro sales in September were just shy of overcoming Maruti Zen's tally. And the Matiz (Daewoo) has also received positive response from consumers.
Competition in the small car segment looks set to rise even further after auto majors like General Motors (Corsa) launch their cars. Even Honda and Toyota have announced plans to break into this segment. In addition to the lure of the domestic market, exports will be one area of interest for some of the international car majors who have set up shop in the country.
Rising competition in the small car segment will see companies innovating at competitive prices to catch consumer fancy. While global auto majors will have strong technological backing, local companies try to exploit their distribution networks and better insight of Indian markets. TELCO is well-placed to face competition at the current level of technology, while its distribution network is also superior to its competitors.
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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