Tata Nano, the world’s cheapest car, is back in the spotlight again.
Analysts commenting on former Tata Group chairman Cyrus Mistry’s observations on Nano said the project should be discontinued to prevent a further drain on Tata Motors’ resources.
‘No buyers’“It was an out-of-the-box idea and created a lot of excitement in the global automotive market,” said an auto analyst, asking not to be named. “But now there is no point in continuing with Nano as it has failed in the market since its introduction in 2008. The Tatas have done everything to revive sales but there is hardly any buyer. Now, time has come to move on,” the analyst said.
According to auto analysts, Nano sales have come down to 600 a month as compared with 2,300 a month a year ago.
Nano sold 21,012 units during the last financial year ending March, while the recently unveiled Kwid model of Renault India sold 41,204 units during the same period. During the last fiscal Maruti’s four models up to one litre engine capacity sold 432,977 units.
When Nano was conceived, its business model was based on volume.
That was why Ratan Tata, then Chairman, Tata Sons, whose vision was to enable families travelling in two wheelers to buy a car, had said that the price of the Nano would be Rs.1 lakh when it was introduced. But a delay in production due to shifting of the Nano plant from Singur to Sanand and the changing preference of buyers had adversely impacted the car.
Changing market“The whole car market has now changed,” said another analyst, also requesting anonymity. “If a product is not doing well, it needs to be replaced. You cannot keep it for long time,” he said.
“Almost all OEMs replace products which fail to garner volume in two to three years. Why should the Tatas hold on to a product that has failed?” the analyst said. In his letter to the Tata Sons board Mr. Mistry had stated that this product caused a loss of Rs.1,000 crore for Tata Motors.
Emotional reasons“As there is no line of sight to profitability for the Nano, any turnaround strategy for the company (Tata Motors) requires to shut it down. Emotional reasons alone have kept us away from this crucial decision,” Mr. Mistry had stated.
Abdul Majeed, partner and Leader Automotive, PwC said: “Looking at industry trends over the last couple of years, customer preference is changing from small cars to compact SUVs. In India it is important to keep looking at new products to address the customers’ preferences, else it would be very difficult to retain the market.”
