Geneva: Tata Motors Ltd said it might look at licensing the building of the Tata Nano, the world’s cheapest car, if it finds itself unable to meet the demand for the much anticipated car, whose base models will sell for Rs1 lakh.
It plans to have different models of the Tata Nano for India and the overseas market if it finds demand outstripping its domestic capacity.
While Tata could farm out licences to make the car outside India, it intends to set up multiple car making units within India that it will then sell to entrepreneurs, should demand exceed 500,000 units a year.
While it isn’t accepting bookings yet and there is no way to estimate if the initial hype will translate into huge initial demand, the Tata Nano website has had about 15 million hits since the car was unveiled in early January.
“Every decision must be ba-sed on demand for the car,” said Ratan Tata, chairman of Tata Motors. “If there’s dem-and we can’t meet, we will look at licensed manufacturing.”
In India, the satellite manufacturing plants need to be low-cost and break even early so entrepreneurs will be encouraged to buy such facilities. “This is not in lieu of our distribution system,” said Tata. “It’s in addition to it.”
“It is a new and interesting way of looking at things. It seems a very good way to paring production costs,” notes Ian Fletcher, automotive analyst for Asia at Global Insight.
The Tata Nano is scheduled to roll out in India in the second half of this year from a factory the company is building in Singur, West Bengal. The company plans to make 250,000 cars a year, though the facility can produce up to 350,000 cars at full tilt. It wasn’t clear where Tata Motors plans to make the remainder of the 500,000 target it spoke of.
Going places: Tata would be looking at selling different versions of the Nano in markets such as Europe. (AP)
Tata also said that the company would be looking at selling different versions of the Tata Nano in markets, such as Europe, as he unveiled a version at the 78th Geneva Motor Show that met safety and emission regulations in the region and had bigger wheels.
“There’s enormous demand in India and the developing world,” said Tata. “Before we sell it to the EU, US or other places, we’ll try to address the demand in India.”
The four-door car is due to hit the Indian market at a time when India’s finance minister has just cut excise duties on cars by 4 percentage points to 12% to boost flagging demand for small cars.
Tata Motors, which is also India’s largest truck maker, said the firm doesn’t plan to cut the Tata Nano’s base price because of the duty reduction.
“I don’t think that will be a fair thing,” he said. “We said a Rs1 lakh car and it will be a Rs1 lakh car. We kept our promise. Also, we didn’t raise the price when steel prices increased. The steel industry is facing a 30-60% increase in prices and steel prices are hurting and a challenge to the entire auto industry.”
When asked if the tax cut would help make the business case for the Tata Nano more viable, Tata said: “Anything that contributes is welcome. Tomorrow, (if) there’s a cut in steel prices, it’s a contribution to us. Interest rates fall, it will be a contribution. Any of these in a product that has been costed to the core is going to (be)—in its own way—a plus for us.” Tata said he expects the car to be a profitable business eventually.
Fitted with a 623cc engine at the rear, the Nano is widely expected to eat into the used car market for cheaper small cars, woo value-buyers as well as motorbike owners who want a safer, four-wheeler. The Tata Nano base model has no air conditioning, no electric windows and no power steering but add-ons are planned and will cost more. With it, India, where some 1.4 million new cars are sold each year and is a nation of bargain hunters, has now also become a destination for frugal or low-cost engineering.
India’s car market is expected to touch 2.2 million units a year by 2010, according to the Society of Indian Automobile Manufacturers.
The closest competitor to the Tata Nano is the Maruti 800, which was India’s largest selling car for almost two decades since its introduction in 1983. It basic model is now priced at just under Rs2 lakh.
Ravi Krishnan is in Geneva as a guest of Tata Motors.
Ammar Master in Mumbai contributed to this story.