Ace story spurs on auto makers

Buoyed by staggering sales of Tata's Ace, the one-tonne mini-truck launched mid-2005, Mahindra & Mahindra, Ashok Leyland Ltd (ALL), Bajaj Auto Ltd (BAL), Piaggio and Hyundai are drawing up plans to introduce similar products in the hottest-growing segment of the commercial vehicle market.

As a result, the one-tonne segment is expected to account for over half of commercial vehicle market sales, more than double the current 19 per cent, over the next two years. The segment grew 80 per cent in 2006-07, against 30 per cent for the overall commercial vehicle market.

Tata Motors' Ace alone corners a little under a fifth of the commercial vehicle market, recording sales of 90,629 units for the fiscal year 2006-07, against total domestic commercial vehicle sales of 467,882 units.

This year, the company's Rudrapur facility in Uttarakhand is expected to go on stream with an annual capacity of 2,25,000 units. In two years, Ace's production capacity is expected to be 3,50,000 units.

The new players in the segment are expected to add 100,000 units by the end of 2008-09. Among them, Bajaj Auto Ltd is expected to be the next big producer.

"We are developing the product at our R&D facility in Pune. Our totally indigenous four-wheel goods carrier would debut in the second half of fiscal 2007," Rajiv Bajaj, managing director, BAL, said recently.

Ashok Leyland is scouting for a technological partner. "A small one-tonne truck has a limited market at the global level, so there are few manufacturers worldwide. We are negotiating with some manufacturers to source the right technology and start production from our facility in Chennai," said an Ashok Leyland spokesperson.

South Korean manufacturer Hyundai Motor India Ltd (HMSI) is also contemplating an entry, but is mulling an entry strategy since its Porter model is outpriced by Ace.

"We could bring Porter to India, but its price is expected in the range of Rs 4.5-5.5 lakh, making it unviable," H S Leem, managing director & CEO, HMIL, told Business Standard. The company is looking at other options.

M&M and Piaggio are both looking at one-tonner entries by next year.

Analysts say Ace has been a success because of its superior performance against its nearest competitor, the traditional three-wheel goods carrier.

"Despite a slightly higher investment its operational cost is almost half of any three-wheeler," said a Mumbai-based analyst.

"With a top speed of 64 kmph compared with 50-56 kmph for three-wheelers, it leads to more trips, besides a higher load-carrying capacity," he added.

Meanwhile, Tata Motors is also working on modifications to make Ace a passenger vehicle. The company has fine-tuned the 700 cc direct injection diesel engine to suit the hilly terrain in Nepal and plans to launch a similar version in India shortly.