Tata Revives Faltering Nano Sales

| About: Tata Motors (TTM)

Sales of the Nano, the world’s cheapest car, have jumped back to nearly 6,000 a month. The story is important not only to manufacturer Tata Motors but to the overall emerging car market.

Tata (NYSE:TTM) launched a number of incentives to get small-town Indians to start buying the Nano — which currently costs as little as $2,750 — again after the combination of safety concerns, price increases and, according to the company’s own PR, the collapse of small-scale financing opportunities knocked sales down 95% over the last six months.

As it is, Nano sales bounced back to 5,784 in December, about halfway between the low of 509 touched in November and the record of 9,000 from back in July.

This is not an enormous business for TTM, since at current levels, it only represents about $15 million in revenue a month and profit margins on Nanos are not exactly luxurious. As a rule of thumb, right now in Mumbai you can trade 100 shares of TTM for one new Nano.

But for a company trying to bring car ownership to a vast market that the majors simply cannot compete in — the roughly 2 billion to 3 billion people in the Asian hinterlands — it is a promising and theoretically sustainable start.

Meanwhile, rising costs are forcing the company to raise its prices on higher-end vehicles in order to preserve its overall margins. This is a sign that inflation is alive and well in India, so look out.

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