Tata Nano Launches, But At What Cost?

The newest car to hit the market won’t be sold in the US, but it is getting a lot of global attention for one big reason: its extraordinarily low price. Arriving at dealers at a cost of $1945 (to dealers), the Tata Nano offers 1960s era pricing with similar era product build. No matter, compared to what most Indian consumers drive, which includes motorcycles and scooters, the Nano will give them at least a roof over their heads. Literally.

First conceived in 2003, the Nano was announced to the world in January 2008 with production expected to begin that Fall.  Political problems in one Indian state forced Tata Motors to change its plans, moving the factory to a much more receptive state clear across India. That delay along with the rapidly dropping economy has taken its toll on the automaker, but their plans to sell the Nano remain unchanged.

Tata Motors is also digesting its purchase of British automotive icons Jaguar and Land Rover, having borrowed two billion dollars last June to seal that deal. Tata must come up with the money by this June or seek refinancing of its debt. That latter option could be more difficult to arrange given the state of the world economy.

The automaker hasn’t said what sort of profit lines it will have with the Nano. Given that virtually all small cars are produced more for enhancing volume (and introducing consumers to the brand) than for making money, Tata will have to rely upon  higher contented versions of the Nano to turn a profit. Indeed, Tata is looking at producing a European spec version of the car, one that will sell for approximately three times the price as the Indian Nano but include all of the required safety features and consumer enhancements for that market.

Other automakers are looking at building Nano competing models, but those cars aren’t likely to match the Nano in price. For some manufacturers building a budget scraping car amounts to a fool’s errand, one that won’t produce the profits necessary to sustain the model or enhance brand imaging.

See Also: Nissan, Renault to Tackle Tata Nano