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Analysts fear Nano cancellations over production problems

Analysts fear Nano cancellations over production problems
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First Published: Tue, May 05 2009. 04 54 PM IST
Updated: Tue, May 05 2009. 04 54 PM IST
Mumbai: Auto analysts on Tuesday suggested that orders for the world’s cheapest car, the Tata Nano, could be cancelled because of supply problems.
Tata Motors said on Monday that it had received over 203,000 fully paid orders for the tiny, jellybean-shaped car, just weeks after it appeared in Indian showrooms.
“Bookings beat expectations but the company may not be able to retain orders going ahead,” said Mahantesh Sabarad, an analyst at Centrum Broking in Mumbai.
All 203,000 customers who placed orders will go into a lottery with computerised random selection being used to choose 100,000 people to be the first to get keys to a Nano by the end of next month.
Tata Motors is likely to produce just 50,000 cars at present from existing plants after being forced out of its planned factory in eastern India over a land dispute.
A new plant in western Gujarat state is being built and expected to be operational by year’s end.
Unsuccessful customers in the ballot can either cancel their order or keep the cash advance they paid with the company to earn 8.5% interest for the first year.
But analysts said the rate was not competitive and expected between a third and half of the outstanding orders after the lottery to be cancelled.
“This is a common trend... there is not much incentive to hold onto the order,” Sabarad said, estimating that some 30,000 people would ask for their money back.
Most of India’s state-run banks offer higher rates of return on deposits.
“Most applicants who fail to get a Nano in the first round will withdraw bookings,” said Deepak Jain, analyst at Edelweiss Securities, who expects Tata Motors to retain only 50,000 of the outstanding orders.
The four-door Nano, whose basic model sells for just Rs100,000 ($2,000), has been hailed as “The People’s Car” and touted as a revolution in transport for millions of Indians who currently travel on two-wheels.
It is expected to hit the streets from July.
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First Published: Tue, May 05 2009. 04 54 PM IST
More Topics: Auto | Tata Motors | Nano | Booking | Supply |