Tata prepares to launch the Nano, the world's cheapest car
Mar 23 2009 By Marc Reeves, Birmingham Post Editor, in Mumbai
Tata, the owner of Jaguar Land Rover, was today gearing up for the launch of the world’s cheapest car, whose success in the showrooms is crucial to the Indian giant’s ability to pay off the $2 billion dollar bridging loan it used to buy JLR exactly a year ago.
The Nano, a small, snub-nosed four-seater, goes on sale today across India for just £1,300 – a price designed to appeal to the country’s emerging middle classes who up to now could afford only scooters for family transport. A European model is promised, but no release date has yet been announced.
Market analysts believe Tata may eventually sell up to two million Nanos a year, but the project has been hit by controversy and delays since it was first announced last year.
Forced to relocate its factory due to protests from local farmers, Tata cannot now reach the levels of output it had hoped for, and is expected to produce fewer than 80,000 this year. It only moves into profit when it sells 350,000 cars, and that is expected to take at least three years, said India Infoline Ltd. analyst Jatin Chawla.
Tata has been criticised for forcing Jaguar Land Rover to appeal to the UK government for financial aid when it is a multi-billion dollar international business empire. But the company, India’s largest and led by the charismatic Ratan Tata, last year posted its first quarterly loss in seven years, and has been hit by falling demand for its other products, most notably trucks and buses. Its shares have fallen 73 per cent in the past year.
While the short-term returns for the Nano appear modest, its long-term prospects could be spectacular. The burgeoning middle class in India is expected to lift demand for entry-level cars such as the Nano to 2.8 million units annually – up from 1.72 million in 2008.
