World’s cheapest car will be profitable, says Tata
BY JAMES STANFORD | 30th Mar 2009
The Tata Nao is light on features, doing without air-conditioning, electric windows, power steering and airbags (although a more luxurious model will also be offered), but it promises to give a whole class of Indians their first chance to travel using four wheels instead of two.
Several financial analysts suggest Tata will not make a profit on Nano for a considerable time and may even lose money for each car sold, but company chairman Ratan Tata disagrees.
“We are a socially responsible company but we are not a philanthropic trust,” he said.
“We will make profits. As for margins there would be several up-trim versions, and we will have our margins spread over those versions.”While media test drives of the Nano city car generally suggest it represents good value for money, questions remain about what effect it will have on India.
Some observers are predicting a boom in traffic that could choke India’s already clogged roads and trigger a surge in smog as well, while others see the vehicle as liberating poor families who have previously made do with scooters, allowing them to travel further than ever.
The car’s success could also result in exports to Europe and the US, setting-up India as a low-cost vehicle production hub to rival and perhaps undercut China.
Order books will open on April 9 and the 100,000 orders will be allocated using a lottery system after 60 days.
Tata had planned to produce most of its Nanos at a new plant in West Bengal, but local farmers protested the construction and the company was forced to give-up on the plan and shift to Gujarat instead.
The new factory will not come on line until late this year or early 2010, which means Nano production will be limited to between 30,000 and 60,000 this year and not the planned 250,000.
Tata is even discussing the possibility a final assembly network and has reportedly designed the Nano in a way that could be sent out it kit form to a number of advanced dealerships for assembly.
The demand for the Nano is understandable.
Indian government data shows that only seven in every 1000 people own cars compared to an average of about 700 per 1000 in most developed countries.
Mr Tata said more Indians should be able to own a car, even if doing so may place more strain on the country’s road system.
“My point is should the masses be denied their individual transportation rights? This car is not a targeted at a particular segment of consumers. But having said that I hope it will change the manner in which one travels in semi urban and rural India,” he said.
Mr Tata goes on to point out that India’s roads are already overcrowded.
“India desperately needs a mass transport system and better infrastructure. But those are issues that we don't deal with,” he said.
There are concerns that the price of the Nano will rise after the initial batch of 100,000 cars. Mr Tata hinted the price would rise, but not by much.
“Our endeavour with the Nano will be to hold our price as much as possible,” he said.
The fact Tata can offer a car for less than $A3000 is a remarkable achievement, especially when the next cheapest car available in India is the $A5490 Suzuki-made Maruti.
The Nano is not the kind of car that will feature on posters in boys’ bedrooms, not least because it takes 14 seconds to go from 0-100km/h, but it is practical.
It can seat four, do 105km/h when pushed, uses an average of 5L/100km and passes the Euro IV emissions standard that is yet to be introduced in India.
The boot is not all that big at 80 litres, but that expands to 500 litres with the rear seats folded and is certainly a step up from the luggage capacity of a scooter.
Just like a Porsche 911, the Nano has a rear-mounted engine – a 624cc two-cylinder producing a modest 24kW, paired with a four-speed manual gearbox. Lucky the Nano is economical because the fuel tank holds only 25 litres.
The Nano’s body and most panels are made from steel, it has drum brakes all round, front MacPherson strut suspension and a rear semi-trailing arm system. It passes Indian crash tests, but Tata says it has been designed with international crash test standards in mind.
Tata has already revealed an upgraded Nano designed for export to Europe from 2011, featuring airbags and leather trim.
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