December 15, 2005

Quebec company to supply transmission parts to Indian manufacturer

Drummondville, Quebec – Canadian component supplier CVTech Group Inc. has announced that it has approved setting up a joint venture company in India for the production of continuously variable transmission (CVT) parts for Indian car manufacturer Tata Motors Ltd.

Tata Motors produces automobiles, commercial vehicles, and light- and heavy-duty trucks; the CVT is for a new small car that will retail for around 100,000 rupees (approximately $2,500). Production is expected to begin in 2007.

One of the stipulations by Tata Motors is that CVTech partner with a local manufacturer; to that end, negotiations are currently being held with Ruchkika Engineering Private Ltd., located in the New Delhi area.

CVTech will initially invest $6 to $8 million for the project’s first phase, which should allow plant production of 350,000 transmissions a year. The company believes that, in its first year of operation, the new division could reach sales of around $13 million, mainly from sales to Tata Motors, which expects to assemble 250,000 small cars in the first year following the project launch. If the joint venture company becomes a hub, allowing penetration of other Asian markets such as two-wheeled vehicles and ATVs, CVTech believes it will be a strong argument for a second investment phase of $3 to $4 million.

The Indian car industry is currently at a crossroads, with vast opportunities in its domestic market, but with a recent major influx of international car manufacturers. Several major global automakers entered the Indian market following the opening of the economy in 1991; the largest Indian manufacturer, Maruti Udyog Ltd., was recently privatized and since 2002 has had Suzuki running its operations. As well, the Indian automobile part industry has an estimated value of US$6.7 billion.

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