Nano Poses Threat to Tata

Wednesday 06 August 2008, 00:00 AM by Rishi

Tata began its Nano project in 2003. The input costs have increased from 13 percent to 23 percent since then. It has been finding it tough to keep the project under the promised cost. Ratan Tata recently shared his views with the investors about the project. He assumes that if the costs are passed on to the customer, it shall affect the demand and if the same is not done, it shall drastically affect the margins.

Nano is proving to be a costly affair for Tata Motors. It is looming up as a commercial flop for the car maker with raw material costs surging each day. Tata intends to limit the sales of basic model and push its upgraded models in order to cover the costs.

The potential buyers are also experiencing tough times while making their purchase decisions. Rising fuel costs and extremely high interest rates are making it difficult for the Indian car customers to make a buying decision. Indian consumer is extremely price sensitive and a slight increase in the cost can seriously alter the purchasing idea for any commodity or product. Reserve Bank of India has recently revised its repo rate and CRR reserves for the third time in the country. It has made the retail bank increase their lending rates which has made car loans extremely costly affair.

Hyundai has already scrapped its $5000 saloon project in China as its doubts it viability. Moreover, Renault Nissan had announced a budget car in collaboration with Bajaj, but the project is also under scrutiny for its success.

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