After launching the Nano early this week, the country's leading truck and bus maker, Tata Motors, is now looking to set up a truck manufacturing plant in Myanmar with support from the Indian government in the form of financial participation.
This will be the first foray by an Indian automobile company in the military-controlled country. Tata Motors has a plant in Thailand which produces pick-up trucks.
According to the state-run newspaper, New Light of Myanmar, officials from Tata Motors met the minister of energy, Vice-Admiral Soe Thein, on Thursday in Myanmar to discuss the feasibility of setting up a heavy truck assembly plant there.
The truck project is a part of India's more-than-a-decade old "Look East" policy wherein it is striving to improve economic cooperation with ASEAN countries, which includes setting up several developmental projects.
For the project, the Indian government will sanction a line of credit of $20 million (Rs 100 crore) which would be used in putting up a heavy turbo truck assembly plant in addition to a component parts production factory by Tata Motors.
Although the details regarding the capacity of the plant were not divulged, the facility is scheduled to become operational by December this year. An e-mail enquiry sent to Tata Motors asking for details went unanswered.
This new plant will be the latest to be operated by Tata Motors in the Asian region after it signed a joint venture with Thonburi Automobiles to set up a pick-up manufacturing plant in Thailand in December 2007.
The company also manufactures and sells the Daewoo brand of trucks in South Korea. It also exports trucks from South Korea.
Analysts believe that the project will provide a fillip to the ailing commercial vehicle business of Tata Motors, which accounts for almost half of the company's revenues.
"The domestic demand for commercial vehicles as well as the demand from major international markets will be substantially less than projected earlier. In such a case, only increased government spending for purchase of vehicles will fuel sales", said an analyst.
Commercial vehicle demand from the domestic market is expected to remain flat or even shrink in the coming quarters primarily due to an expected contraction in India's economic growth.
Tata Motors posted its biggest loss in seven years at Rs 263 crore (Rs 2.63 billion) for the quarter third ended December 31 as against a profit of Rs 499 crore (Rs 4.99 billion) posted in the corresponding quarter of the previous year.
The company was even forced to shut a few of its manufacturing plants a couple of months ago so as to get rid of its excess inventory and align production with demand.