Tata Motors Outsource - Fall or Rise - A Preview
Tata Motors Ltd’s decided to outsource distribution to a newly formed unit may aid it keep few costs off its books and make money from through contracts with other manufacturers, analysts say.
India’s biggest auto maker is planning to outsource the logistics and distribution part of its business to a wholly owned unit, TML Distribution Co. Ltd, which was started on 28 March, as per the company’s latest annual report. The unit has not yet begin operations. The Times of India reported Tata Motors’ plan to outsource distribution on Thursday.
“Distribution is no longer a core operation for them,” said an analyst at a Mumbai-based brokerage, who didn’t want to be identified because he is not authorized to talk to the media. “This will let them get some value through contracts from other manufacturers, although it will take time.”
Tata Motors already has a distribution alliance with Italian car maker Fiat SpA under which it produce Fiat cars through Tata dealerships. Tata Motors and Fiat are also combined building a factory in Ranjangaon in Maharashtra that will build automobiles made by both the companies.
Tata Motors’ distribution plan is not new in the Indian automobiles business. Rival Mahindra and Mahindra Ltd, India’s biggest utility vehicle maker, has a unit called Mahindra Logistics, which controls the logistics business for the entire Mahindra Group and also for other manufacturers.
RSS