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World’s cheapest car struggles

2010-12-02 08:34
Sales of India's Tata Nano have fallen to their lowest since its launch as the world's cheapest car battles for popularity among India's burgeoning middle class.

Only 509 cars were sold in November, 2010 - a fall of 85% from the same period in 2009, according to data released by Tata Motors on Wednesday, despite the offer of free safety upgrades after a series of fires affected the minicars.

Sales of the snub-nosed jelly bean of a car have now fallen for four consecutive months from a high of 9000 in July 2010.


Analysts attributed the decrease to concerns to safety, a lack of financial loans and operational hiccups after production shifted to a new plant.

"Quality perception about the safety of the car could be a concern," Mahantesh Sabarad, senior analyst with Fortune Equity Brokers, told AFP, adding that a continuing fall in sales could affect the brand.


The Nano has been pitched as "the people's car" for India's aspiring middle class, many of whom currently use a motorcycle but want to upgrade to four wheels.

More than 71 300 Nanos have been sold since its launch in July 2009.

Tata Motors declined to comment on the reason for falling sales but said it was taking a series of measures to boost sales.

The Nano is now being sold in 12 Indian states, including Kerala and Karnataka in the south, Maharashtra in the west, northern Uttar Pradesh state and West Bengal in the east of the country, the company said.

"We are working with financiers to ensure adequate funding at reasonable rates. Sales will increase, as we go on covering more states," Tata Motors admitted.

The company last month began offering free safety upgrades for the Nano, saying it wanted to assure the more than 70 000 owners in India that "there are no generic defects" in the car which retails for around $2500 (about R17 500).

The upgrade involves new safety features being added to the exhaust and electrical system.

The company maintains it was not "a recall" though a half-dozen fires have been reported that involved the four-door car. There have been no injuries.

The company said an investigation by a team of internal and international experts concluded the reasons for the fires were "specific to the cars which had such incidents" rather than being a general fault.

Deepak Jain of Mumbai-based brokerage Sharekhan said the car was suffering from a "migration effect", as production has shifted to the new plant in Sanand, in north-western Gujarat state. Production was likely to improve in two months, he added.


Analysts estimate that Tata Motors will sell between 80 000 and 85 000 cars by the end of the fiscal year to March 2011 - below initial company predictions.

Tata Motors has twice put up the price of the Nano this year, blaming the rise on the increasing costs of raw materials such as steel and rubber over the last two years.

The arrival of the Nano sparked a race among global automakers to create other inexpensive cars for the fast-growing Indian market and meanwhile Tata has unveiled a version of the car intended for sale in Europe and America, redesigned to meet higher safety standards.

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