Tata Having Difficulty Selling the Nano

By Henny Hemmes
Senior European Editor
Amsterdam Bureau
The Auto Channel

AMSTERDAM, December 27, 2010. The Indian car manufacturer Tata Motor has ongoing difficulties with the sales of the Nano, its ultra-low cost model that was specifically developed for Indian buyers. The little car that debuted on its home market in the spring of 2009, was an instant success. But during the last four months of 2010, sales have strongly declined. According to the Society of Indian Automobile Manufacturers, Tata sold just 509 Nanos in November, a decline of 85 percent over the same month a year ago, in a passenger car market shows strong growth.

The Nano made it across the Oceans to show America that Tata Technologies succeeded in building a ‘city car’ that would cost around 2.500 dollars. Original plans were to sell the car in Europe at some 8,000 dollars.

In July, Tata raised the price by 4% and in October by another 9%, because of rising costs of raw materials. Although these were small amounts, the impact on buyers was much larger, especially because the low price has been the major selling point of the car. It also forced Tata to initiate financing and marketing activities that it had not anticipated when making the model’s business plan, that was based on a yearly sale of one million Nanos.

During the past months, dealers have frozen orders and the plant, that has an annual production capacity of 250,000 units is reported to have assembled only 71 cars per day, or 2,000 in November. The short term sales outlook is grim, since Indian customers make their decisions to buy in the fall.