Accounting - Posted by Andy Barck on Wednesday, July 30, 2008 19:09 - 0 Comments

Material costs dent Tata Motors

Tags: Material costs dent Tata Motors, Tata Motors

Material costs dent Tata Motors.jpg

Tata Motors, India’s biggest vehicle maker, has seen net profits fall 30% due to high material costs and losses from changes in foreign exchange rates.

The firm made 3.3bn rupees ($77m; £38m) in the three months to June, compared with 4.7bn rupees a year earlier.

Price rises and cost cutting will be used to protect profits, it said.

Tata, which bought Ford and Land Rover earlier this year, will launch what it has hailed as the world’s cheapest new car, the Nano, later this year.

Share slump

As well as being the country’s third-largest carmaker, Tata has about 60% of India’s truck and bus market.

"Undoubtedly, for the industry this will perhaps be the most challenging year," said Tata Motor’s director Ravi Kant.

"In spite of quite a gloomy situation, we are feeling quite confident of our position, because of steps we have been taking, such as price increases and cost reductions," he said.

Like some other Indian manufacturers, the firm was hit by a drop in the value of the rupee, which fell 6.8% against the dollar in the period.

That made its raw materials more expensive as many of them are priced in dollars.

Tata’s shares have been under pressure in recent months after costs in developing the Nano overran, and it announced plans for three rights issues to fund the purchase of Jaguar and Land Rover from Ford.