Tata diesel models may lure Hyundai, Suzuki buyers

Tata Motors Ltd., challenging Hyundai Motor Co. as India's No. 2 automaker, may gain an edge over the South Korean carmaker from India's decision to end state controls on gasoline prices.

Tata may lure drivers from Hyundai and Maruti Suzuki India Ltd., the nation's biggest carmaker, as it has a wider range of diesel models, said Mahantesh Sabarad, a Mumbai-based analyst at Fortune Equity Brokers India Ltd. Prime Minister Manmohan Singh last week freed gasoline prices to pare spending, while keeping diesel subsidies for the time being.

"When you think of the beneficiaries of this move, the first name that comes to mind is Tata," said Sabarad. "They have a sizeable portfolio of diesel vehicles."

Tata gets as much as 80 percent of sales from diesel models, according to Sabarad. The carmaker sells Indica hatchbacks and Indigo sedans that run on the fuel and it's developing a diesel- powered version of the Nano, the world's cheapest car. Diesel accounts for about 20 percent of sales at Maruti and less at Hyundai. Honda Motor Co., the No. 5 automaker in India, doesn't offer any vehicles that run on the fuel.

"Honda will have a problem," said Deepesh Rathore, managing director of IHS Global Insight India. "Hyundai doesn't have any diesel engines for small cars. These two companies will be adversely affected."

Tata rose 2.6 percent to 789.25 rupees in Mumbai trading today, ending four days of declines. Maruti fell 0.2 percent to 1,394.75 rupees, while the Sensex Index rose 1.1 percent.

20 Percent Cheaper

Diesel is about 20 percent cheaper than gasoline in India. The end of gasoline subsidies may help diesel cars account for as much as 30 percent of nationwide sales within two years from less than 25 percent now, according to Surjit Singh Arora, a Mumbai-based analyst at brokerage Prabhudas Lilladher Pvt.