TELCO apes Ashok Leyland...raises CV prices - Views on News from Equitymaster

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TELCO apes Ashok Leyland...raises CV prices

Dec 17, 1999

India's largest truck manufacturer, Tata Engineering and Locomotive Co. (TELCO) has raised commercial vehicle (CV) prices by 3-5% in response to higher input costs. Tata Engineering and Locomotive (TELCO) is India's largest medium/heavy commercial vehicles (M/HCV) (65% market share in September 1999) and light commercial vehicles (LCV) (63% market share) manufacturer. It also manufactures utility vehicles (28% market share) and passenger cars (7% market share).

TELCO's proposed price hike is triggered by higher input costs for complying with the rigid Euro emission norms. The revised price will come into effect from January 2000. Earlier, Ashok Leyland (TELCO's biggest competitor) had hiked CV prices by Rs 10,000-12,000.

As demand for CVs continues to remain strong, higher prices will have little impact on sales. Cement and steel offtake is still robust. Moreover, as disclosed by analysts, fleet owners have entered into long term contracts with consumer goods majors.

Market view:
Analysts have flagged a 'LONG TERM BUY' on the company due to its disappointing 2QFY2000 results. Analysts are bullish on the company's improved CV performance and expect it to pull the company into the black in FY2000. However, Indica's impact on profitability will continue to be negative.

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