INDIA BUSINESS WORLD - JULY 2006
THE MONTH THAT WAS...

ONE FORMULA RACE :TATAS, SUZUKI MAY USE SAME 1.3 L DIESEL ENGINE

CONSUMER is going to be the winner in this race between the giants. Auto industry sources say the Tata group is in the process of finalising its decision to set up a diesel engine plant in India to produce the same 1.3 litre Fiat diesel engine that Suzuki has also licensed from the Italian company.

This new generation diesel engine will not only be strapped onto Fiat products in India but also Tata vehicles, say sources. When they debut, this would be the first time that rival car companies would have products with the same engine.

When contacted, a Tata Motors spokesman said: “Tata Motors and Fiat are discussing various aspects of the automobile business. It is premature to comment on any aspect, which may be a matter of media speculation at any given point of time. If there is any announcement on any initiative, the two companies will jointly announce it at the appropriate time, as has been done in the past.”

Dittoed a Fiat India spokesperson: “The two companies are in discussion on various topics pertaining to the automobile business. As and when things get finalised the same will be made known. Until then it would only mean speculation.”

Sources say Fiat's decision to give the Tatas the compact diesel engine is part of the overall alliance between the Tata group and Fiat SpA. At present, Maruti doesn't have a presence in the diesel market.

WITH SWIFT diesel due later this year, the company will target the segment that is now dominated by Tata Indica and Indigo.

Given the significance of diesel strategy for Maruti, Tatas decision to use the same engine for its own and Fiat products would trigger a face-off in the volume end of the diesel segment, says an auto analyst. Maruti MD Jagdish Khattar, however, said: “We knew that our agreement (with Fiat for the engine) is non-exclusive, and a car is not only about the engine.”

The Fiat 1.3 litre diesel engine is in high demand because there are very few options in the compact end of the diesel segment. Since the demand for compact diesel cars is not very high in Europe , the other big diesel market, there are not too many small diesels available globally.

Maruti's new engine and transmission plant, being set up at an investment of Rs 1,747 crore, will eventually have a capacity of 3 lakh diesel engines a year. Initially, though, it will crank out 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission systems a year. This is the first time the company is manufacturing diesel engines. Its earlier diesel strategy involved importing engines from Peugeot, which turned out too expensive to make volume sense. India 's diesel car sales are set to zoom and auto industry watchers say the market could see a 50% rise by 2010. According to industry estimates, the diesel share of the car mart should go up from the present 31% to around 45-50% within next 2-3 years across cars and utility vehicles.