Tata Motors to snap ties with Rover

Rover's talks with Chinese carmaker prompts move.

Tata Motors Chairman Ratan Tata has said MG Rover's potential tie-up with the Chinese Shanghai Automobile Industry Corporation (SAIC) could lead to "no engagement at all" with the British carmaker. Tata was talking to the Sunday Times in Mauritius.

Tata is reported to have said, "I will say that if their engagement is a full-fledged one, then I have no doubt that we will move to a second or third level of involvement, which is tantamount to saying there is no engagement at all."

A Tata Motors spokesperson in Mumbai refused to comment on Tata's reported comments.

In September 2004, both Tata Motors and MG Rover had sought to allay fears of a split saying they were trying to work out a plan to boost the flagging sales of the City Rover, as the Indica is badged in the UK markets.

Despite Tata Motors fending off rumours of an impending snap in its export deal with the British carmaker, MG Rover had been quoted as saying that it was close to signing a deal with SAIC.

Rover was also reported to have been talking to Malaysian car maker Proton for a technological agreement. Tata also said Tata Motors had received little information from MG Rover on the status of its proposed deal with SAIC. This indictes the deterioration in the relationship between the two companies.

The Tata-Rover deal involved the export of 1,00,000 Indicas from India over a five-year period, starting November 2003.

Reports in the UK media suggest that sales in the first year touched around 6,000 units, way off the target of 20,000.

The Sunday Times report claims that Tata executives said the car was priced too high in the UK market and they also confirmed the speculation in the UK motor industry that the cars were sold to MG Rover for just £3,500. The City Rover is priced at around £6,495-8,895 in the UK market.

Why is Tata upset?

SALES IN LOW GEAR Sales in the first year of the deal touched around 6,000 units against the target of 20,000

PRICING MATTERS The car is too costly at £6,495-8,895. Executives say they were sold to Rover for just £3,500

TWO-TIMING Despite the agreement, Rover was in talks with China's SAIC and Malaysia's Proton