Tata signals pricier Nano after world’s cheapest tag flops

Mumbai: Can a car be too cheap? Tata Motors Ltd. is hinting at pricier models based on the Nano, the Rs.1 lakh compact it introduced with great fanfare in 2008. The reason: Few buyers wanted a vehicle that was primarily pitched as an inexpensive alternative to a motor scooter.

Though the Nano captured global attention, Indians never really warmed to the tiny, egg-shaped car. The company has sold just 229,157 Nanos since deliveries began in July 2009, and sales in March were off by 86% from a year earlier.

While Tata managing director Karl Slym says he won’t kill the Nano, he says the company will soon add improvements designed to breathe new life into the model—which would bring prices closer to those of rival offerings.

While Tata managing director Karl Slym says he won’t kill the Nano, he says the company will soon add improvements designed to breathe new life into the model—which would bring prices closer to those of rival offerings.

“The Nano’s marketing didn’t gel with anybody,” Slym, 51, said over coffee in his spacious office filled with cricket and soccer memorabilia at Tata group headquarters in Mumbai. “Scooter drivers weren’t attracted because others don’t think I’m buying a car, they think I’m buying something between a two-wheeler and a car. Anyone who had a car didn’t want to buy it because it was supposed to be a two-wheeler replacement.”

Slym points to the Pixel, a Nano-based concept Tata showed at the Geneva Motor Show in 2011 as an example of what he has in mind for the brand. The two-door hatchback takes the skeleton of the Nano but adds scissor doors that rotate up from the front, an automatic transmission, and a diesel engine.

The Nano will be offered to a wide variety of buyers and price points, Slym said, without providing more detail.

Updating the existing Nano may not be enough, said Haritha Saranga, a professor at the Indian Institute of Management in Bangalore.

“Just creating variations is not going to help increase sales,” Saranga said in an e-mail. “It is important to change the current image of the Nano as a cheap car.”

With Nano sales in freefall, Tata’s passenger vehicle sales dropped 15% in the year ended 31 March even as industrywide sales rose 2.2% in the same period, according to the Society for Indian Automobile Manufacturers.

The problems extend beyond the Nano: Tata’s Indica Vista hatchback, Indigo sedan and Safari sport utility vehicle ranked near the bottom of J.D. Power’s 2012 India Initial Quality Study. The company sold 17 Aria and Xenon utility vehicles in March, versus 389 a year earlier, and sales of its Indigo and Manza sedans dropped 63% in the 12 months through March.

Jaguar success

The Nano’s woes have persisted despite Tata’s success with the Jaguar and Land Rover luxury brands, which it bought from Ford Motor Co. in 2008 for $2.3 billion. With the cars winning praise from reviewers, global sales rose 30% in 2012 to 357,773 vehicles. Profit at the luxury unit contributed 74% of Tata Motors’ operating income in the year ended March 2012.

Tata Motors’s Indian business has seen earnings fall for two years, and it’s expected to post another profit decline in the year ended March 2013, according to the median of 17 analysts’ estimates compiled by Bloomberg.

Last month Tata sold 1,507 Nanos, versus 10,475 a year earlier. For the year through March, Nano sales were off by 28%, to 53,848 units. Tata’s factory in Gujarat was designed to make 250,000 Nanos a year—almost half the company’s car manufacturing capacity. By contrast, Maruti Suzuki India Ltd, the country’s biggest carmaker by volume, has sold 125,000 units of its revamped Alto 800, a Rs.2.44 lakh hatchback introduced in October.

 

AMIT KUMAR SINGH

PGDM 2ND SEM