Press Report : Tata scales back production of low-cost Nano car

John Reed in London and Joseph Leahy in Mumbai, Financial Times, 20th May, 2009

Tata Nano Europa

Tata Nano Europa

The Nano, the world’s cheapest car due to launch in India on Monday, will have an initial production run of 40,000 – a fraction of Tata Motors’ original target.

The Indian carmaker, which was forced to move the site of a plant building the vehicle after protests last year, will produce about 3,000 Nanos a month at an existing facility near Delhi, before its plant in Gujarat comes on line in 2010, industry consultants say.

“Tata can’t produce more than 3,000 cars per month, so we are looking at a number of 40,000 units in 2009,” said Vignesh Chandran, team leader for automotive and transportation with consultancy Frost & Sullivan.

The lower volumes mean that the car will have little initial impact on Tata’s profitability as it faces slower demand for vehicles in India and digests its acquisition of Jaguar and Land Rover, the UK carmakers it bought from Ford Motor for $2.3bn last year.

“Overall, I don’t expect the Nano to become a significant contributor to Tata’s profits anytime soon,” said Ashvin Chotai, managing director of Intelligence Automotive Asia, who also estimated production of the car at about 40,000 units this year.

The lower volumes mean that the car will have little initial impact on Tata’s profitability as it faces slower demand for vehicles in India and digests its acquisition of Jaguar and Land Rover, the UK carmakers it bought from Ford Motor for $2.3bn last year.

Unveiled last year, Tata’s “People’s Car”, to be priced in its entry-level version at Rs100,000 (£1,370) riveted world attention as a symbol of Indian ingenuity in an industry in perpetual battle with high fixed costs.

At the time, Tata spoke of initial production volumes of 250,000, which it said could later rise to half a million. Even after shifting production to Gujarat it stuck by its original production forecasts.

Tata is to announce plans for the car on Monday. The launch comes at a difficult time for the group, which is looking to refinance a $3bn bridge loan it used to buy Jaguar and Land Rover.

Tata Motors must refinance the bridge loan by June 2. Tata declined to comment on its debt refinancing plans.

[Source: Financial Times]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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