Tata Motors may set up Nano production facility in Indonesia

Tata Motors Ltd might build a factory to produce its Nano small car in Indonesia, one of the fastest expanding markets in Asia.

The firm is conducting a feasibility study to establish a facility in Jakarta, three people familiar with the company’s plan said on condition of anonymity.

Should the plan come to fruition, it will help the company not only get a foothold in the large but untapped market of Indonesia, but also address the adjoining markets of Thailand, Malaysia and the Philippines.

Robust economic growth, rising consumer confidence levels and affordable credit made 2010 a record year for all the four markets in South-East Asia.

Sales of light vehicle expanded 36% to 2.23 million units compared with a year ago, according to a January report on the automotive market in the Asean region by JD Power and Associates, a forecast and research firm.

“Indonesia is almost like Indian market,” said Abdul Majeed, auto practice leader at consulting firm PricewaterhouseCoopers Llp.

The fact that it has a large rural population will help sales of Nano, touted as the world’s cheapest car, Majeed added.

Tata Motors was earlier planning to expand its facility in Thailand where it makes the Xenon and Ace small trucks, to make room for the Nano. However, those plans have now been shelved in favour of Indonesia, according to one of the three persons cited above.

Among all the four markets, JD Power places the biggest bet on Indonesia that is quickly rivalling Thailand. It expects the automobile market there to grow 11% year-on-year in 2011. The planned facility is likely to start production in fiscal 2013. Besides the Nano, it will also produce some of the variants from the Ace range.

The factory will turn out an estimated 50,000 units of Nano and Ace every year, said the person cited above.

Tata Motors has invited quotations from key suppliers, said a person associated with the project. Some have visited the country earlier this month and many more will make similar trips in the months ahead, said another person, whose firm has also received a quotation from Tata Motors.

Debasis Ray, spokesman at Tata Motors, did not to comment specifically on the development.

The firm will start exporting the Nano to Sri Lanka, Prakash M. Telang, managing director, India operations, told reporters on 12 February. “We are looking at geographies similar to India,” he had then said.

The company plans to produce 12,000 to 15,000 Nano cars per month at its factory in Sanand, Gujarat, from March, Carl-Peter Forster, group chief executive and managing director, said on 12 February. Source: Livemint Wall Street Journal