CVTech to make parts for Tatas' small car

Tata Motors has mandated Canadian firm CVTech Group Inc to produce continuously variable power transmission (CVT) units in India for its Rs 1-lakh car through a possible joint venture with New Delhi-based Ruchkika Engineering Private Ltd.

This will be Tata Motor's first major component sourcing exercise for the much-awaited car. The proposed manufacturing facility, the location for which is yet to be disclosed, will have an annual capacity of 350,000 units.

Tata Motors is expected to buy about 250,000 CVT units, a little over 70 per cent of the total output, in the very first year of operation. This CVT plant is expected to commence production in 2007.

CVTech is expected to initially invest 6-8 million Canadian dollars (Rs 24-32 crore) for the first phase of the project. Revenue from the first year of operation for the joint venture can be in the region of 13 million Canadian dollars (Rs 52 crore).

A Tata Motors spokesperson said the company did not wish to comment on the matter. This deal indicates that the Rs 1-lakh car, or at least a large part of its production, will have an automatic gear shift.

A CVT unit in an automobile allows seamless gear shift, with the driver barely noticing the change. In India, only the Honda City CVT, a premium sedan, uses this technology. Experts said though this technology was an expensive proposition, good volumes would help make it more affordable.

Apart from an initial capacity of 350,000 units, Tata Motors has also indicated to the Canadian firm that an annual volume of 1 million units is in the offing.

Although the joint venture in India will be set up only to address the domestic market, CVTech is also considering tapping other Asian markets, including the markets for two-wheelers and all-terrain vehicles.