Is the Tata Nano doomed? Sales crash, production slashed, offers begin

The Tata Nano has not had an easy drive ever since its launch. And in the past two months sales have crashed badly. The Tata Nano sold only 1,505 cars in February and a similar number in January, its lowest number since August 2011.

There is no ostensible reason for the crash in sales for the Tata Nano, as it continues to be one of the most inexpensive cars in the world. Prices of the Tata Nano start at Rs. 1.44 lakh for the base variant going up to Rs. 2 lakh for the top-end LX variant. It is still Rs. 1 lakh cheaper than its closest competitor, which is the Maruti Alto 800.

Tata Nano - Special Edition

Nano production cut

However, it appears that buyers, even first time buyers are shunning the Tata Nano in favour of other brands. Since sales have slumped so badly, Tata dealers are left with a pile up of Nanos in their stockyards and Tata has cut production of the Nano at its Sanand, Gujarat, plant by 80%. The plant has a capacity to produce 250,000 Nanos a year. The Nano is also produced at its plant in Pantnagar, Uttarakhand. Also read: Tata Nano to get facelift, new CNG variant

Falling sales

The Nano has never really been able to reach its sales targets. Tata had planned to sell at least 15,000 Nanos a month at the time of its launch. This would have allowed it to make money on the car as well as benefit its vendors, but that was not to be. The highest number the Tata Nano has ever sold was 10,475 units in March 2012 and its worst figure was 509 cars in November 2010. If you look at sales numbers of the Nano for the past six months, sales have steadily dropped from 5,491 cars in September 2012 to 1,505 cars in February 2013, with the festive season and special edition Nano doing nothing to lift sales.

What appears to be the problem? In the first few months after it was launched, Tata had to deal with at least five known instances of fires in the Tata Nano. A recall followed that fixed that issue. Tata then upgraded the Nano in 2012, giving it better power and also improving quality further. During the festive season last year it launched a special edition of the Nano, with alloy wheels, decals and glove boxes, but that too has not made a mark. It even tried repositioning the car with a new ad campaign as a “cool” car for the youth, but that too hasn’t cut it.  The Nano was also voted as the Most Trusted 4-wheeler brand in India in the Brand Trust Report India 2013. That too hasn’t helped. Also read: Tata Nano diesel and CNG spotted testing

Tata Nano sales

Offers on Nano begin

Tata has now come out with an innovative easy finance offer for the Tata Nano. If you own a credit car from Axis Bank, Kotak Mahindra Bank, HSBC, ICICI or Standard Chartered, you can just swipe it at a Tata Nano dealership and drive home your car. The instalments can be paid interest free over a period of 12 months at Rs. 8,333 per lakh per month. Tata had also tied up with Big Bazaar earlier for a similar scheme, where you could buy a Nano at a Big Bazaar outlet, along with your groceries.  Also read: Tata offers limited edition Nano

In the next few months Tata plans to introduce the CNG variant of the Tata Nano, which should give fuel economy and running cost conscious consumers a good reason to pick up one. Prices for the CNG variant are likely to be about Rs. 35,000 more than the petrol variant. The company has put off the launch of the diesel variant till next year. The diesel will apparently give a fuel economy of close to 40 kmpl! Also see: Tata Nano video review 

What we think

The Tata Nano is a good product that was marketed wrong in the first place. It has a good chance of becoming a cult car, and the ideal second car in a household. The premise of getting two-wheeler riders to upgrade to four-wheelers with the Nano didn’t work. These days with easy access to finance, most people look at a car that is more of an all-rounder (has luggage space, can do highway trips etc) like the Maruti Alto 800, rather than the Nano, as it’s just a matter of Rs. 2000 more per  month per lakh on a 5-year loan tenure. Just look at the difference is sales. The Alto 800 costs Rs. 1 lakh more and sells nearly 18 times more than the Nano at 25,000 units. The Nano is in need of a serious image makeover and a strong marketing campaign, not just focussed on low price alone. Also read: February SUV sales: Duster celebrates, Aria almost dead 

 

Data source: Team-BHP / Industry data