Wednesday, July 1, 2009

Nano May Rule out the Indian Rural Market

Nano is likely to replace M800 and Omni in rural India and is likely to dominate the Indian roads owing to the fact that the new emission norms in India will be enforced from April 1, 2010. The existing models of Maruti 800 and Omni are not compliant with the new BS-IV norms which may force the M800 off the road. The new BS-IV compliant model from Maruti will be available only by end of 2011. Meanwhile, the absence of M800 will give added leverage to Nano in the market.

“This (absence of Maruti 800 and Omni) would mean no direct competition to Nano. The important question is whether Tata Motors would be able to manufacture enough units of Nano that would meet the demand.” said Kapil Arora, Partner (Automobile), Ernst & Young.

Tata Nano is already a raging hit amongst Indian customers and people are anxiously waiting for the models to be available on road. However, one of the drawbacks of Nano is that its mother plant is still not operational and will be completed towards the end of 2009. Full capacity production at the plant will begin only after the plant is completed which means Nano is also likely to miss out on the crucial lead time it was supposed to gain over Maruti models.

Tata Motors has reported loss of Rs. 2500 crores last year largely due to its luxury models and its acquisitions. In order to cover the loss, the company will need to sell at least 2.5 lakh units of the Nano to make money from the world’s cheapest car. This figures is not too difficult looking at the booking figures and purchasing power of Indian customers.

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