Dwindling sales on the Tata Nano - India's no-frills one lakh car

The Tata Nano is the cheapest car in the world today, though the price continues to rise due to increasing material costs.

Also called the people's car, the Nano is a rear-engined, four-passenger city car built by the Indian company Tata Motors.

Aimed primarily at the Indian domestic market, the Nano is considered an exemplary of Gandhian engineering, a concept involving deep frugality and a willingness to challenge conventional wisdom.

“Since we started the project four years back, there has been a steep increase in input cost but a promise is a promise,” said Tata Group chief Ratan Tata after displaying his dream project at the Ninth India Auto Expo in New Delhi back in December 2007.

Nicknamed the "one-lakh car", it was first sold in the Indian market in March, 2009. With a population of one billion, India's dream is to make everyone afford the one-lakh car or 100,000 rupee (RM7,226).

In 2008 the Financial Times reported: "if ever there were a symbol of India’s ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the $2,200 (€1,490, £1,186) Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity."

While the cars were reported to have sold over 200K units worldwide, a report on the U.S. base autoblog.com said only 70,000 copies of the $2,500+ econobox have been sold to date. Bloomberg reports that only 589 Nano models were sold in November 2010; a minuscule total for a mass-market car.

Carl-Peter Forster, who became Tata group Chief Executive in January, 2010 reportedly blames a lack of financing options as the reason customers aren't buying. Forster claims that the Nano is popular with customers who currently use a bike or motorcycle for transportation, and the feeling is that banks fear that extending a loan to a lower income buyer could bring increased risk of default.

Another issue could stem from the fact that the Nano has been in the news for catching fire. Recently, there was a report on a Tata Nano going up in flames only minutes after it was delivered to a customer. But this isn't the first incident involving a Nano catching fire – in fact, the folks at Indian Autos Blog report that three other Nanos have suffered similar issues, all while the cars were parked.

Read also: Tata orders probe into Nano fire

That's definitely not a desirable feature. Customers who plunk down their life savings for their first vehicle don't want their low-cost car to turn into a pricey car-b-que.

The 'no loans' theory sounds even less likely after hearing that overall Tata sales in November were 54,622, up one percent year-over-year.

And the icing on the cake? Tata has also raised the price of the Nano twice over the past few months; $198 in October and four percent back in July. That's about $300 more than the car sold for at launch.

The dwindling sales figures have made some rethink on current opinions whether selling no frills products to the poor will be a winning strategy in the future.

Anyway, at the current price of $2,800+ or approximately RM9,000, the Nano is definitely cheap, which I think is the reason this car is not yet available in the local market.

In a June 2009 news report by Bernama, Thailand is expected to import the price-competitive 650 cc Tata Nano soon. It will be commercially priced between Bt80,000-150,000 (RM8,000 – RM15,000).

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