Tata Nano, world's cheapest car, struggles to gain traction

Wed Jan 4, 2012 1:47pm EST
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By Tony Munroe

MUMBAI (Reuters) - To kick sales of its ultra-low-cost Nano into higher gear, Tata Motors (TAMO.NS: Quote) needs a lot more buyers like Vijay Govind Pisal, a sugar cane farmer in Ozarde in the western Indian state of Maharashtra.

Unable to afford a big vehicle to haul crops and fertilizer and unwilling to justify paying two or three times the price for a higher-end car given his limited usage, Pisal was sold on the Nano's cost, fuel efficiency and extended warranty.

"Whenever I wanted to visit my relatives I had to rely on public transport or a bike. The car allows me to travel with my family," said Pisal, 36, who bought his Nano in October.

Unveiled four years ago, the "people's car" made headlines as the world's cheapest car, a safe upgrade for the millions of families who crowd four (or more) onto two-wheelers in India.

But the ride for the Nano has been anything but smooth and many company-watchers said Tata Motors, part of India's biggest business house, has a long road ahead of it to lift sales to its targeted 250,000 a year.

Farmer protests disrupted early production and the first buyers did not get their cars until July 2009. Reports of fires scared away customers, would-be buyers had difficulty securing financing, and the price rose well above its initial 100,000 rupees ($1,878).

Crucially, the car has struggled to find a core market.

"There was just so much media, so much attention, that the wrong kind of buyers stared buying the Tata Nano in the beginning," said Ashvin Chotai, managing director of consulting firm Intelligence Automotive Asia in London. "Rather than being a functional step above a motorcycle, it became known as a cut-price car," he said.   Continued...