The Hindu Business Line : Tata Motors serves an Ace in 3-wheeler space

Tata officials believe that 3-wheelers might remain attractive for their manoeuvrability, but the company's entry with a 4-wheeler should expand the segment and convert some 3-wheeler buyers to owning the Ace.

Mumbai , May 6

AT Tata Motors, officials include the new mini-truck, Ace, in a product quartet that shaped the company (others being the 407, the 207 and the Indica) - all platforms that spawned several products.

Ace's USP and the challenge it thereby poses to competition is simple - it is a 4-wheeler in the 3-wheeled goods carrier space.

Production capacity is 30,000 units; it can be doubled to 60,000.

In 2004-2005, total domestic sales of 3-wheeled goods carriers stood at 1,36,007 units or 44.2 per cent of total 3-wheeler sales.

Tata Motors' initial capacity at 22 per cent of segment sales compares with 49,534 units sold by Piaggio Vehicles, the market leader in goods carriers.

More relevant comparison would be the 21,589 units sold by Bajaj Tempo and 18,028 units by Mahindra & Mahindra (M&M), which manufacture the Minidor and Champion ranges respectively.

Neither company has a 4-wheeled version yet (past reports have cited a likely `Minifour' by Bajaj Tempo) and the Ace's 700 cc 16 hp engine (a two cylinder version of the 1.4 litre Indica diesel) compares with the single cylinder 499 cc 7 kW engine of the Minidor and the 510 cc 10.2 hp engine of the Champion.

Plus, the Ace conforms to BS II and III norms, has a 30 litre-fuel tank, and meets safety standards including frontal crash, roof crush and rear wall strength.

Formal response from neither M&M nor Bajaj Tempo could be had on what the Ace's debut means for competition.

In 1996, the Firodia company had pioneered this segment with the Minidor.

While 3-wheeler sales grew by 8.38 per cent last year to 3,07,887 units, that of goods carriers therein grew by 24.24 per cent.

According to a senior 3-wheeler industry official who did not wish to be named, goods carriers such as Piaggio's Ape or Bajaj Auto's GC 1000 won't be affected because a sizable price gap exists between them and the Minidor league.

But within the Minidor-Champion-Ace bracket, pricing would be a critical differentiator as segment sales has been sluggish, the combined goods carrier sales of Bajaj Tempo and M&M creeping from 36,524 units in 2004-04 to 39,617 units in 2004-05. At the same time, the corresponding figure for Bajaj Auto and Piaggio rose by 37.31 per cent from 59,702 units to 81,980 units.

"A new product may kick start the Minidor segment but a lot would depend on whether the customer agrees that the Ace's pricing and any premium therein is justified by the value addition offered," the official said.

Tata Motors is of the opinion that competition would need time to respond as the Ace is classified in the N1 vehicle category.

Conventional 3-wheelers on the other hand qualify against norms meant for quadricycles, a vehicle concept of European lineage meant for less strenuous highway use.

Meeting N1 norms is not as simple as visualising an existing 3-wheeler with a fourth wheel to qualify.

"It calls for a whole new product," said Mr P.M. Telang, President (Pune & Dharwad Works), Tata Motors.

The Ace, priced in the range of Rs 2.25-2.35 lakhs should therefore, enjoy lead-time. Volumes it garners in the interim would be key to the Tata game, for despite the low investment of Rs 180 crore, the Ace's introduction coincides with a period of high input costs.

Some steps did contain cost such as using plastics to cut steel use and reworking the Indica engine, ensuring commonality of parts in sourcing. But cost pressures have to be partly absorbed.

Consequently, the Ace would be a volume play and the eventual idea, according to Mr Shyam Mani, Vice-President (Sales & Marketing), Commercial Vehicles Business Unit, is to make sure that the customer gets vehicle and support service within 25 km.

There would be financing for 80 per cent vehicle cost and some 450 service centres would be available across the five States chosen (South India plus Maharashtra accounts for 70 per cent of 3-wheeler sales, Mr Mani said) for the Ace's debut.

Tata would benefit from the lower amplitude of truck business cycles at lower payloads, the Ace thus offering a cushion to Tata Motors' truck revenues.

Further, as Mr Ravi Kant, Executive Director, said, the entire segment is gaining impetus from road development, which means that the last-mile distribution market would have a growth momentum all its own.

Mr Kant preferred not to guess what segment growth rate would be with the entry of Tata Motors.

The company is already talking of customised variants, a passenger option, and a higher payload version with a bigger engine for international markets.

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