UPDATE 2-India's Tata Motors Q3 net dips but beats f'casts

(Adds CFO's quote, comment on Ford, Chrysler)

MUMBAI, Jan 31 (Reuters) - Tata Motors Ltd (TAMO.BO: Quote, Profile, Research) (TTM.N: Quote, Profile, Research), India's top vehicle maker which this month unveiled the world's cheapest new car, reported a 3 percent drop in quarterly profit as high interest rates dented demand for its trucks and buses.

While better roads and tougher emission and safety rules are boosting demand for trucks, high borrowing costs are preying on buyers and rising commodity prices have increased costs for auto makers.

India's central bank this week kept rates steady, raising concerns that vehicle loan rates will remain firm.

"Margins will be under pressure in the medium term due to overall high commodity prices and competitive pressure," Tata Motors Chief Financial Officer C. Ramakrishnan said.

Tata Motors sold 143,979 vehicles in October-December, just 1.7 percent more than a year earlier.

Tata, India's third-biggest car maker after Maruti Suzuki (MRTI.BO: Quote, Profile, Research) and South Korea's Hyundai Motor (005380.KS: Quote, Profile, Research), was recently picked by Ford Motor (F.N: Quote, Profile, Research) as the front-runner to buy its premium Jaguar and Land Rover brands.

The estimated $1.5-$2 billion deal could be completed early this year.

Discussions with Ford were still continuing, Managing Director Ravi Kant told reporters on Thursday.