- In 2008, Tata Motors showcased the Nano as the world's most affordable car costing $2,500. Nano's journey since then has not been easy.
- The Nano manufacturing plant had to be shifted from Singur in West Bengal to Sanand in Gujarat. Few fire incidents led to negative publicity for the Nano.
- In 2013-14 (April 2013 to March 2014), Nano sales were 21,129 units. The current production capacity of the Sanand plant is far below its full capacity of 20,833 cars per month.
- In order to improve sales, Tata motors launched the Nano Twist with power steering, and Nano CNG emax with bi-fuel options in the last one year.
- If sales figures don't improve, then Tata Motors has to re-think whether it should continue with the brand in the future.
Project site shifting
In 2008, the project site had to be shifted from Singur in West Bengal to Sanand in Gujarat due to local protests in Singur. In its annual report 2011-12, the company mentioned to have spent $62 million (INR3.1 billion, $1=INR50) towards shifting of its Nano plant from Singur to Sanand. Recently, Ratan Tata, Chairman Emeritus of Tata Sons, made the following statement:
"The shifting of the plant had a very high negative cost to us in the sense that when we launched the Nano it created global excitement and we had 3 lakh of order with full payment and a waiting list of two years when we announced the product. In the years that we lost in moving from Singur to Sanand much of the excitement died with it. People disbelieved that there were any such products while competitors got a chance to bad mouth the product in its absence in the market."
There were many fire incidents associated with the Nano after its launch. Tata Motors claimed the installation of foreign electrical equipments by car owners to be responsible for these incidents. In November 2010, the company recalled 70,000 Nano cars to provide additional protection in the exhaust system and electrical system. A year later, Tata Motors informed its 140,000 Nano customers to upgrade the starter motor, which cost the company $16.67 million (INR1 billion, $1=INR53). In January 2014, Tata Nano received zero star rating at the crash test conducted in the Global New Car Assessment Programme held in Landsberg, Bavaria. This has created a serious safety concern for the Nano. The car has been labeled as a poor man's car instead of "an affordable, all-weather, family car".
2009-10 (April 2009 to March 2010)
2010-11 (April 2010 to March 2011)
2011-12 (April 2011 to March 2012)
2012-13 (April 2012 to March 2013)
2013-14 (April 2013 to March 2014)
The above table indicates Nano sales since the launch of the first models Nano CX and Nano LX. In 2011, Tata Motors started exporting the Nano to Sri Lanka soon after its launch in the country. In October 2013, Tata Motors launched Nano CNG emax powered with CNG and petrol bi-fuel system options. This model came with a fuel economy of 36 kilometers/kg and a warranty of up to 60,000 kilometers or four years, whichever is earlier. This model was launched at an ex-showroom price range of $3,952 (INR245,000, $1=INR62) to $4,387 (INR272,000, $1=INR62).
In January this year, Tata Motors launched Nano Twist for $3,806 (INR236,000, $1=INR62). This car positioned as a "Smart City Car" has an electric power steering and is loaded with improved interiors. However, Nano sales declined more than 50% in 2013-14 compared to 2012-13. During the period April 2014 to June 2014, Nano sales dropped 23% year-over-year (yoy) to 3,029 units. The company launched a few variants of the car in the past five years, yet sales have witnessed a declining trend since 2011-12.
In June this year, the company stalled the production of Nano LX and CX variants to focus on power steering version Nano Twist. Tata Motors also plans to roll out Nano with automated manual transmission in the future. In August 2014, Tata Motors launched the Nano in Bangladesh after a delay of three years related to pricing. The four seater, 624cc car costs $10,314 (Taka800,000, $1= Taka77.56) in Bangladesh. The company is putting all efforts to improve the image of the Nano brand, but it will be the sales figures that will ultimately determine whether Tata Motors should continue to focus on this brand.
In mid 2014, Tata Motors shut its Sanand plant between 35 to 40 days on account of low demand and a resultant inventory pile-up, as well as retooling activity to manufacture new versions of the Nano. During the first half of 2014, the company operated the Sanand plant 2-3 days a week on account of low market demand. Tata Motors produced 2,000 to 2,400 cars every month during this period. The CNG version and Twist led to increase in monthly sales from 1000-1500 units to 2,000 to 2,500 units. Although the plant has annual capacity of 250,000 units or 20,833 units per month, the current production is far below that level.
In January 2009, the Gujarat state government extended a $1.94 billion (INR95 billion, $1=INR49) soft loan to the Nano project for a period of 20 years at 0.1% interest rate. This amount is about 3.27 times the investment of $592 million (INR29 billion, $1=INR49) made by Tata Motors during the first phase of the project. The agreement came with a rider that the loan would be equal to the gross value added tax levied on cars, which ties the loan with sales of Nano. Tata Motors was offered 1,100 acres of land costing $82 million (INR4 billion, $1=49). The company was liable to pay the land price in eight installments at interest rate of 8% per annum, and received exemption on stamp duty. This arrangement is exclusively for the manufacturing of Nano. The company is in talks with the Gujarat government to extend these sops and incentives for the production of other brands at its Sanand plant. The plant is producing below capacity and is liable to repay the land cost. If the Gujarat government refuses to extend these sops and incentives, and Nano sales don't pickup then operating the Sanand plant will become unviable.
I would conclude by saying that Tata Motors is putting all efforts to promote the Nano as an affordable and safe family car. However, the sales figures indicate that the brand is not as successful as expected by the company. If Nano sales don't improve, then Tata Motors has to re-think whether to continue this brand in the future.