Financial Daily from THE HINDU group of publications
Friday, Dec 20, 2002
Financial Daily from THE HINDU group of publications Friday, Dec 20, 2002 |
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Cars Corporate - New Products & Services They come, they see and ... book Indigos Our Bureau
MUMBAI, Dec. 19 AT the Tata Engineering's corporate showroom here, Mr Kasturilal K. Wasan, Managing Director, Wasan Motors Pvt Ltd, seemed a happy man. No comparison to the Indica's debut; but people are coming to see the Indigo and he already has bookings. ``That was a B segment product, this is for the C segment. The Indigo's price is attractive,'' Mr Wasan said on Thursday. Equity analysts in general do not see the aggressive pricing announced on Wednesday for the Indigo as hurting Tata Engineering. ``We are very comfortable at this price level,'' Dr V. Sumantran, Executive Director, Tata Engineering, had said. According to them, there is a reason to believe the official line that platform technology helped Tata Engineering keep its prices low. Against the average C segment price range of Rs 4 lakh to Rs 7.5 lakh, the Indigo ranges from Rs 4.35 lakh to Rs 5.20 lakh (ex-showroom, Delhi). While some analysts shied off from assessing the sustainability of the Indigo's price, others used a simple estimate to support their view. They point to the Indica's pricing. In Mumbai, ex-showroom prices span Rs 3.28 lakh to Rs 4.22 lakh (Autocar India, December 2002 issue). On Monday, at Pune, Tata Engineering officials said that the Indigo differed from the Indica on engine power, torque, suspension and turbo-charged diesel. The most obvious difference is the boot added to complete the sedan look. The cheapest Indigo, the GLE, costs Rs 4.38 lakh ex-showroom, Mumbai, higher in price by Rs 1.10 lakh than the cheapest Indica, the DL. The cheapest Indica petrol, the LEi V2, checks in at Rs 3.34 lakh. The question asked is how much more does it cost to make the cheapest Indica look like the cheapest Indigo? Analysts feel the disparity in price between the two exceeds what would logically be needed to make the change, thus indicating not just low production cost at Tata Engineering but also margins. Low production cost is one of the virtues of having a shared platform, Mr Hormazd Sorabjee, Editor, Autocar India, said. Further, the number play of a shared platform is such that as volumes rise, the manufacturing cost dips accordingly; in Tata Engineering's case, both the Indica and Indigo are capable of reaping the economies of their cumulative numbers. ``That makes even spare part prices attractive,'' the director of a leading car financier said. According to him, the Indigo makes good commercial sense, besides meeting personal transport needs. It is spacious and its diesel version, priced low in the segment, is more attractive than competitors' for use as taxis. As for the company getting hurt, he felt the Rs 350 crore being spent (on the Indigo, its estate version and turbo-charging the diesel engine) was small compared to the Rs 1,700 crore Tata Engineering spent and made a profit on, for the Indica project. Also lending comfort at present is the state of the competition. Never to be under-estimated, given players such as Hyundai, the C segment competitors with platform-sharing cars covering B and C segments in the Indian market is restricted to Fiat (Palio/Siena). Given this and the fact that the price band spanning Ambassador to Esteem is clearly out-manoeuvred by the Indigo, one analyst said of Tata Engineering's targeted sale of 1,200 Indigos per month, "I think they are secure for the next one year.''
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