Mumbai: Tata Motors is planning to spend about Rs 5 billion per annum over the next three years for product development. The company is expected to make a slew of launches and upgrades in both passenger and commercial vehicle segments in the next three years.

In the passenger vehicles segment, it is expected to come out with the Estate and the Sports versions of the Indica over the next six months. A facelift of the Indica/Indigo potentially over FY05 is also expected.

The company is building platform for a new utility vehicle over FY06. It has also formed a team to evaluate launching a car in the A-segment at the lower end of the market. The product, if launched, will come in only after 2005, according to report by Smith Barney. In the commercial vehicles segment a 1.2-tonne light commercial vehicle and a new global truck platform over the next two-to-three years are also on the anvil.

The company's engineering research centre is responsible for these launches and they appear well equipped to deliver with about 1,100 employees (including 400 engineers). The centre also has a comprehensive software and hardware base and extensive product development and testing facilities.

Tata Motors is also looking at acquiring Daewoo's heavy-truck business, for which the company has been chosen as the preferred bidder. The due diligence process is on and the final decision is expected by March 2004, says Smith Barney.

The company's management believes that the potential acquisition could be complementary as the unit manufactures trucks in the 200-400 HP segment (against its current range in the sub-200 HP segment). The plant of 1996 vintage has a capacity of 20,000 units. The focus has been on design and integration with very little aggregate manufacturing implying potential for sourcing aggregates from the Indian operations, says the report.

Key attractions on the marketing side include a 26-per cent share of the Korean market and a presence in the Chinese market. The unit is understood to make profits at the net level and the debt level is extremely manageable.

"Given the healthy cash flows and the synergies on offer we believe it could be a worthwhile acquisition for Tata Motors at about $100 million," says Smith Barney. The company is also pursuing global truck initiative independently irrespective of the acquisition.

Also, Tata Motors has been focussing on savings on costs over the past three to four years. Raw material costs were cut 13 per cent and variable conversion costs by 37 per cent in this period. It has managed to bring the break-even point for the commercial vehicle business down from 65 per cent of the capacity to 31 per cent - probably the lowest in the world, the report adds.