Discounts, Easier Finance on offer for Tata Nano

Mumbai: Tata Motors Ltd is offering heavy discounts and attractive finance schemes to revive sales of the Nano, the world’s cheapest car.

The company is offering a cash discount of up to Rs. 20,000 and has also reduced the down payment on financed cars to Rs. 15,000 from Rs. 35,000 for the base model.

This is nearly equivalent to what one pays when buying a motorcycle, said a Delhi-based dealer, who did not want to be identified.

The company is also offering high tenure financing of up to 60 months through special arrangements with major financiers.

The ex-showroom price for the base model of the car after the discount is Rs. 1,25,880. The discounted price brings it nearly at par with its launch price of July 2009, Rs. 1,23,360.

“As families, in state after state, get ready for the festive season, despite high fuel prices and interest rates, this is a limited-period offer.” Debasis Ray, a spokesperson for Tata Motors, said in an email.

Sales of the Nano dropped two-thirds to 3,260 units in July from the same month a year ago because of high fuel prices, repeated hikes in interest rates, and new, attractively priced models from rivals.

The contraction in July sales numbers for the Nano has worried the top management of Tata Motors. In an 8 August meeting in Bombay House, the company’s headquarters in Mumbai, the top brass—including Ravi Kant, the company’s non-executive vice-chairman; Carl-Peter Forster, the Tata Motors group chief executive, and Prakash M. Telang, managing director of India operations—discussed the pricing of the car, according to one of the officials who attended the meeting and spoke on condition of anonymity.

Dealers and analysts are sceptical whether these efforts will translate into sales. “The discounts and schemes have not been able to increase sales even for company’s diesel models like Indica and Indigo. I doubt it will help Nano, which is already priced competitively,” said Vineet Hetamasaria, an analyst at PINC Research.

At these discounts, for every five cars, the company “will have to sell two more or else it will have an impact on profitability”, said Mahantesh Sabarad, an analyst at Fortune Equity Brokers (India) Ltd.

Poor Nano sales may not have a big impact on the company’s overall profitability, but slow growth in sales will result in a higher break-even target for the model, according to Sujeet Arora, an analyst at brokerage Prabhudas Lilladher Pvt. Ltd. “Ideally, the monthly sales run for the car should be 20,000 per month. That’s nowhere in sight. The schemes will not push it beyond 10,000 units,” he added, attributing the higher break-even volumes to higher costs in the Nano project owing to the expenses incurred by the company while shifting machinery to Sanand in Gujarat from Singur in West Bengal.