Mumbai: A scheme launched three weeks ago by Tata Motors Ltd to encourage scooter and motorcycle owners to upgrade to the company’s inexpensive small car Nano has met with limited success, according to dealers, because of the lack of financing options.
Meanwhile, sales of the Nano continue to decline, and according to the Tata Motors website, they have fallen from 9,000 units in July to 8,103 in August and 5,520 in September.
In early October, Tata Motors started selling its small car, the entry-level variant of which costs Rs 1 lakh as it leaves the factory (several taxes are added on at the dealer level), in Maharashtra, Karnataka, West Bengal and Uttar Pradesh.
It simultaneously launched a promotional scheme allowing owners of scooters and motorcycles to turn in their vehicles as part payment for the Nano.
“We sold only four cars through the scheme,” said a Mumbai-based dealer for the company, who did not want to be identified.
R. Ramakrishnan, vice-president (commercial), passenger car business at Tata Motors, said the scheme was a response to the large number of queries received by the company from scooter and motorcycle owners keen on an exchange.
“It’s too early to count the numbers,” he said, and added that given the huge number of scooters and motorcycles in India (around 1.2 million), the scheme should succeed in coming months.
When it was launched, analysts and Tata Motors executives said the Nano—engineered for a family of four on a bike—would eat into scooter and motorcycle sales. That hasn’t happened.
According to industry lobby group Society of Indian Automobile Manufacturers, in the six months to September, Indians bought 5.6 million motorcycles and scooters, 26% more than in the same period last year.
No one, however, is attributing the Nano’s sluggish sales to problems with the car itself.
Most dealers claim it is because potential buyers aren’t getting loans for the car. One dealer, who did not want to be identified, said almost nine out of every 10 people looking to buy a Nano are also shopping for a loan.
But banks are rejecting many applications because many buyers do not have all the documents needed to apply for a loan, he added. When financed, a Nano is an attractive and affordable buy.
According to an ad that appeared in Mint’s associate publication the Hindustan Times on 20 October, a customer can drive home a Nano with a down payment of Rs 23,515 and monthly payments of Rs 2,077 for seven years. Separately, the company declared on Friday an average price hike of Rs 9,000 effective 1 November.
Tata Motors’ Ramakrishnan concedes financing has indeed been a challenge. A Nano costs around twice the price of a motorcycle and most buyers need a loan, yet, their risk-profile remains similar to that of a typical motorcycle buyer’s.
The rate of interest on two-wheeler loans is 20-22%, almost double the rate on cars and commercial vehicles, according to Ramakrishnan. “We are in dialogue with several financiers and are requesting them not to treat finance for Nano on par with that for two-wheelers,” he added.
The company is also trying to fund Nanos through its motor finance arm Tata Motors Finance Ltd. Unlike other finance firms, however, this offers loans for only a four-year tenure, which doesn’t suit most buyers.
Mohit Arora, executive director at JD Power Asia Pacific, a consulting firm, said that while it may be too early to conclude that the Nano hasn’t attracted motorcycle and scooter owners, Tata Motors “will need to make bigger efforts to attract two-wheeler buyers”.
Mahantesh Sabarad, senior vice-president (equity) at domestic brokerage Fortune Equity Brokers (India) Ltd, would also like to see the company look beyond the banks—at non-banking financial companies that have a “higher risk appetite”. He added that Tata Motors could also increase sales of the Nano by offering dealers “better margins” to hard-sell the car.