Tata's Nano Sales Show the way Forward for Detroit?

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A hit in the auto world? Is it a flash back? A time warp? No it’s here and now and it’s the story of the not so new Tata Nano. We say not so new because the car should have launched some time ago and we have been hearing all kinds of hype about it for months. Yet finally Tata seems to be getting their production problems sorted. Sales opened on April 9 for just 2 weeks. During that time, Tata’s website received 30 million hits, salesrooms received 1.4 m visitors and punters put down 80% deposits (yes 80%!) on 203,000 cars. That’s 17% of the Indian market in 2 weeks, though most of which won’t be delivered before the latter part of next year. Not bad for a country that only consumed 1.5m new cars last year according to the NY Times. Well this is India, not so long ago you had to put your deposit down on an Ambassador car and wait years for delivery. The scarcity of the Nano due to production problems has been turned into a marketing coup by Tata, holding lottery style allocations of production slots for the first 100,000.

Buyers have deposited $512m with Tata and interestingly 50% of them are for the luxury version with a/c and power windows, (stop chuckling youngsters, some of us can remember cars without a/c’s, its not funny, especially in an Indian summer). 30% of buyers went for the mid range model and only 20% went for the basic $2,050 version according to a report in Daily Finance. The article goes on to suggest Detroit could learn a thing or two from the Nano and suggests US car makers should bring out stripped down no-nonsense frugal models. We think they are missing the point, however as lower cost frugal cars have been available in the USA for some time, mostly from European and Japanese car-makers and have largely proved unpopular. Temporary changes of behavior as seen during the oil spike last year notwithstanding, America has a long standing love affair with big cars and though some will trade down from a SUV to a sedan the sedan will still be large by the standards of any other country.

If the Nano shows a trend it is for the developing world. India is not alone in having a large portion of the population relying on motorcycle transport, for whom the upgrade to a car was always going to be one step too far but for whom the upgrade to a Nano at $2,000-2,500 is a different matter. In addition, the Indians are notoriously thrifty and the fact 50% of sales have been for the high end model suggests many middle class families may be moving from their Suzuki Maruti to the Nano rather than from a motorcycle.

The $512m of cash flow will come as a welcome boost to Tata who borrowed $3bn via a bridging loan last June to buy Jaguar Land Rover at the top of the market. The firm has since repaid $1bn raising funds from a rights issue but is due to pay the balance in 4 weeks time. Tata is more than capable of funding the acquisition though and in covering the cash JLR is hemorrhaging at the moment ” that won’t stop them coming for state aid to the UK government though, in spite of Nano sales.

–Stuart Burns

Comments (2)

  1. planet automatic says:

    Excellent Article. The writer really has done his homework (compared to all the fiction from other sites). Well Done Stuart. A Very fair balanced as informative artcile on the TATA Nano. Thanks

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