COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

FIPB moots changes ins Tata joint venture's plan to trade in second-hand cars

The Foreign Investment Promotion Board has refused to allow Tata group joint venture -- Concorde Motors Limited -- to trade in second-hand cars.

However, the board is not averse to the company's plans to hike the equity base and increase presence within the country by setting up a number of service stations and workshops for Telco vehicles, sources in the industry ministry said.

The board has already sent a communication to the company indicating its stand. ''We have not rejected the proposal outright but have asked them to redraft the application with the required changes,'' the sources added. ''The company is yet to submit the redrafted proposal.''

The company's plea to trade in second-hand cars was rejected as under the Indian guidelines, a foreign company is allowed to market only the products which it produces. As per CML's proposal, the company intended to commence trading in second-hand cars. Under the project, the company would offer new Telco cars in exchange of old vehicles.

The Tata group holds 50 per cent equity in CML through Telco, Tata Finance and Tata Industries while the balance is held by Jardine Company of Hong Kong. The partners were planning to infuse additional equity to the tune of Rs 350 million into the venture for expanding its presence across the country.

The fresh infusion would be done equally by both the partners and would not result in any alteration to the equity distribution within Concorde.

The company had stated that with the scale of Indica bookings being overwhelming, Concorde felt the need to set up a greater number of workshops to cater to the increased number of cars which would be on the road.

Presently, around 14 workshops are operational across the country under the umbrella of Concorde Motors. With the fresh investment, six more such centres would be set up.

Besides, the company is also envisaging enhanced investments in after-sales in its existing sites. ''Ludhiana, for instance, had recorded 4,000 bookings for the Indica and to cater to the needs of all these cars, we need to have another service station in the city,'' company sources said.

The company had originally scheduled to commence trading in second-hand cars from Bangalore. It has already initiated talks with a few local dealers for offloading these second-hand cars. However, there are no plans to get these dealers under the Concorde umbrella.

Concorde Motor Company was established for putting in place a retail network for the sales and service of the Telco range of passenger vehicles in the country.

Initially, Concorde has set up centres in seven cities -- Delhi, Bombay, Bangalore, Madras, Hyderabad, Ludhiana and Lucknow, which would later be extended to other parts of the country.

Although the initial investment in the joint venture company has been envisaged to be Rs 1 billion, the company had earmarked that over the years it would be raising another Rs 500 million for expansion of operations.

With its entire network in place, the company hopes to sell over 25,000 passenger vehicles in the first year of operations. However, the company had stated that it does not intend to foray into selling Telco's commercial vehicles.

Telco, it may be recalled, had booked 115,238 orders against full payment for the Indica. It has decided to retain 60,000 of these bookings for delivery till the end of 1999-2000 financial year.

The company now aims to produce 150,000 cars in fiscal 2000-2001.

Telco has pinned all hopes on the car with its chairman Ratan Tata even stating that the 1400cc Indica would steer the company out of the red. The Indica, in fact, is not the end of the road for Telco as it is presently working on a mid-size car, which would be the company's second offering for the Indian passenger car market.

The company would break-even with its investments on the Indica project at 68,000 units.

UNI

Business news