India's biggest bus and truck maker, Tata Motors Ltd, said on Friday it would team up in a joint venture with Brazilian bus maker Marcopolo as it gears up for increased competition in India.
The joint venture, with an investment of 1.5-2.0 billion rupees ($33.5-$44.5 million), would set up a new plant in India with an initial capacity of 7,000 vehicles a year to make standard, luxury and city buses for Indian and overseas markets.
"The joint venture with Marcopolo will enable Tata Motors to successfully address the growing demand in India, as well as relevant markets abroad," Chairman Ratan Tata said in a joint statement. Tata will hold 51 percent of the venture. Shares in Tata Motors were marginally lower at 967 rupees in a slightly weak Mumbai market. The stock has gained about 48 percent so far this year compared with a 32 percent rise on the BSE index.
Tata Motors has nearly 60 percent of India's $5-billion bus and truck market, which has attracted the attention of several foreign firms as incomes rise and infrastructure improves in Asia's third-biggest economy.
Analysts said the joint venture would give Tata Motors greater access to advanced design and technology to take on the likes of Sweden's Volvo, whose luxury buses have become a common sight in India.
"After years of stagnation, the bus market is growing quickly as highways improve, as domestic tourism grows and stricter emission rules are being mandated by the government," said Ashutosh Goel at Edelweiss Securities.
"This JV gives Tata Motors the tools to tap the luxury market in India, as well as overseas markets," he said.
Tata Motors, which is also listed in New York, bought South Korea's Daewoo Commercial Vehicle Co Ltd in 2004, and 21 percent in Spanish bus maker Hispano Carrocera a year later.
Marcopolo's chief executive, Jose Reubens de La Rosa, told Reuters last November the company was keen to set up a joint venture with an Indian firm to tap Indian and Asian markets.
"The joint venture with Tata Motors will help us extend our presence in the high-potential markets of India and also other countries which we can jointly develop," Marcopolo's Chairman Paulo Bellini said in the statement.
Volvo and Scania are reportedly in a race to acquire 15 percent in Tata Motors' closest rival, Ashok Leyland Ltd, from Fiat Group's Iveco.
South Korea's Hyundai Motor Co is also studying the market, while India's Force Motors Ltd has joined hands with Germany's MAN AG to make buses and trucks.
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