Tata Nano sales slow despite a surging market

Tata Nano sales slow despite a surging market

New Delhi: Sales of the Nano, the small car from the Tata Motors Ltd stable that was touted as the world’s cheapest car, have seen a steady deceleration in the three months ended September.

The number dropped from 9,000 in July to 8,103 in August and 5,520 in September, according to data posted on the company’s website and also confirmed by spokesperson. In the same period, overall sales of passenger cars rose from 158,764 and 160,974 and 169,082, respectively, marking a 34% increase in the quarter from the year-ago period.

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The company spokesperson maintained that sales would increase once the company expanded its footprint to other states. At present, the car is sold in five states—Uttar Pradesh, West Bengal, Karnataka, Kerala and Maharashtra.

However, some analysts disagree. “In India, 70% of cars are sold in the small-car segment. To challenge a leader in this segment you need to have a reliable product, a strong sales and service network and a good image. The Nano, so far, has not been able to meet these standards. It has not been the product which it promised to be," said an analyst from a leading brokerage firm who did not want to be identified. “Issues like (the cars catching) fire, delays in delivery have hampered its prospects in the long term."

Launched in March 2009, the car drew instant international attention. Since then there have been six known instances of the car catching fire. In the latest of these, a Nano caught fire in the capital on 17 August, three months after a company probe had declared the car “absolutely safe". The reasons for the fires were external and there was no design or engineering flaw with the car, R. Ramakrishnan, vice-president, commercial, passenger car business, Tata Motors, said on Friday. In one of the cases, for instance, the car was fitted with aftermarket accessories, putting strain on the electrical system. “The fire incident has hardly impacted Nano sales," Ramakrishan said in Mumbai at the launch of the Fiat Linea T-Jet. He attributed the drop in sales to other factors. Buyers who were selected in the first draw but not part of the initial round of deliveries have postponed picking up their cars to the upcoming festive season. Besides this, component suppliers are in the process of setting up bases in the vendor park allotted by Tata Motors. At least 41 suppliers have been allotted land at the vendor park, Ramakrishnan said. Separately, the company spokesperson said declining sales was not a concern for Tata Motors. “It is neither because of production constraints nor that brand image has taken a hit. We are completing (deliveries of) bookings of the last year. Fresh bookings have already started and we have received positive response as of now," the spokesperson said.

In order to boost sales, Tata Motors on Tuesday started spot bookings for the Nano in four states—Maharashtra, Uttar Pradesh, West Bengal and Karnataka. The company said it will gradually open sales in other parts of the country as well. The country’s largest auto maker had started open sales of the Nano in Kerala in August. Bookings had been stopped soon after the car was launched so that existing orders could be met.

However, a Tata Motors dealer said on condition of anonymity that company hasn’t told the dealership whether to make fresh bookings. “Most of the dealers have pending bookings from last year. We are trying to clear them first," he said. Asked whether customers are still positive about the car after all the news related to safety issues, the same dealer said: “The company has tried to address those issues. We would also like to see a similar response to new bookings as happened last year."

Another analyst said it was too early to come to any conclusion. “I think a little bit of reshuffling of vendors from Uttarakhand (where the Pantnagar plant is located) to Sanand (in Gujarat) could have hit production. Fresh bookings have already started," said Vaishali Jajoo, an auto analyst with Angel Broking Ltd. “Safety issues were there in the beginning. I think we have to watch it for another two months to arrive at a conclusion on whether there is anything wrong with the product."

Tata Motors was forced to move the Nano factory to Sanand from Singur in West Bengal following an agitation over land acquisition. The Sanand plant started production in June, helping the company clear initial bookings made last year. In the interim, the company was making the Nano at Pantnagar.

The company has stopped producing the car at the Pantnagar facility. The Sanand facility, which can make as many as 250,000 cars, is expected to reach full capacity in the first quarter of the next fiscal.

Graphic by Ahmed Raza Khan/Mint

Shally Seth in Mumbai contributed to this story.