New Delhi: Wheels India Ltd's proposed plant at Jamshedpur is a response to the growing competition from China.
Chairman and Managing Director of the Rs 870-crore TVS group company S Ram said on Monday that Chinese products were about 20 per cent cheaper.
From its new plant in Jamshedpur, Wheels India, would be able to supply to Tata Motors at a lower cost, but would still find it difficult to match the Chinese prices, Ram said.
On the other hand, he noted, the customer (Tata Motors) would have the comfort of having a supplier close-by. Capacity of and investments in the Jamshedpur plant are being worked out.
In an informal chat with Business Line on the sidelines of the company's annual general meeting, Ram said the company's sales to the medium and heavy commercial vehicles manufacturers went down 17 per cent in 2005-06, thanks to competition from Chinese products.
Apart from impacting sales directly, the China factor has also made it difficult for the company to seek price increases of its customers, even though steel prices had been going up continuously, Ram said. "The Jamshedpur plant will significantly reduce the transport of raw materials and finished products".
Wheels India, which has its principal manufacturing unit in Padi, Chennai, has of late been following a policy of putting up units close to the customers.
It has commissioned a 1.5-million-unit plant at Bawal, Haryana, at a cost of Rs 20 crore to cater to Maruti.
The company is investing Rs 8 crore initially in another plant at Uttaranchal for supplying to Tata Motors.
Asked if it would make sense for the company to set up a plant in China, Mr Ram said it would not, unless the company also looked at the Chinese domestic market.
Another company of the TVS group, Brakes India, is planning a plant in Oman, considering the relative proximity to European and US markets and the low cost of power in West Asia. Asked if Wheels India would follow suit, it might, if a customer wanted that, said Ram.
Answering another question, Ram said Wheels India was flooded with offers for taking over units in the developed countries.
He said locating a manufacturing unit in Eastern Europe made sense, but categorically denied that any proposal was under consideration.
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