India's Sonalika group to make SUVs with Rover

India's Sonalika group to make SUVs with Rover

NEW DELHI, March 23 (Reuters) - India's Sonalika group, a leading maker of tractors, said on Tuesday it will begin making sports utility vehicles in the first quarter of 2005 and price them attractively in a potentially fast growing market.

The group signed technical collaboration agreements on Tuesday with Britain's MG Rover Group Ltd that will help it with product engineering and Powertrain Ltd that will help it make the 2.0 litre diesel engine to power the vehicle.

Group chairman Lachman Dass Mittal told a news conference it will spend 2.0 billion rupees ($45 million) on a plant to make 24,000 vehicles and 50,000 engines a year in India's northern Himachal Pradesh state.

Products manufactured in Himachal Pradesh are exempt from excise duty or production tax for 10 years and companies in the state enjoy an income tax waiver in the first five years of beginning production and a 30 percent break in the next five.

"The excise duty on utility vehicles is 24 percent now, so we will save over 100,000 rupees on every vehicle which we will pass on to consumers," Mittal said, adding the Indian utility vehicle market had great untapped potential.

Ten companies sell utility vehicles in India, Asia's third-largest economy and one of the world's fastest growing, where sales are expected to jump 30 percent in this fiscal year to March 31 to more than 140,000 vehicles.

The top players include market leader Mahindra and Mahindra Ltd , also India's top tractor firm, the local unit of Toyota Motor Corp and No 3 Tata Motors Ltd .

Utility vehicles make up 16 percent of India's passenger vehicle sales, which also includes cars and vans and industry officials expect that share to rise to 30 percent over time.

The Sonalika group, that comprises 10 companies with combined revenue of 10 billion rupees, will float a new company International Cars & Motors Ltd for the venture.

Group flagship International Tractors Ltd is the country's fifth largest tractor maker, in which France's Renault holds a 20 percent stake.

The new plant will make diesel engines using common rail direct injection technology and also export parts and aggregates to Powertrain in UK. The engine will be available with a turbo-charger and have a horsepower of over 100, officials said.

MG Rover Group Ltd and Powertrain Ltd are owned by Phoenix Venture Holdings Ltd, Britain's seventh largest private group.

In December 2002, MG Rover signed a deal with Tata Motors Ltd, India's third-biggest car maker, to buy 100,000 Indica compact cars over five years for sale in Europe. ($1 = 44.9 rupees)