March 23 (Bloomberg) -- Tata Motors Ltd., the owner of Jaguar and Land Rover, will begin sales of the world’s cheapest car, the Nano, from July as the company targets motorcycle buyers wanting to trade up to four wheels.

The company will accept bookings for the Nano April 9 to April 25, Chairman Ratan Tata said today in Mumbai. Customers will need to pay almost the full price of the car as deposit, said Ravi Kant, managing director. The price of the car, which will be sold in three variants, will start at 123,360 rupees ($2,500) in showrooms in New Delhi, he said.

“The Nano was conceived as a car that will give the people of India an opportunity to own a car that was not within their reach earlier,” Tata said. “We made a promise and kept that promise.”

Pushed into its first loss in seven years last quarter, Tata Motors can produce as many as 60,000 Nanos a year compared with its plan to have an initial factory capacity of 250,000. The low price and a delay in production mean the car won’t generate enough revenue to refinance by June $2 billion of a bridge loan the Indian truckmaker used to buy the U.K. luxury units from Ford Motor Co. last year.

“The production isn’t sufficient to make any significant impact on the financials in the near future,” said Gaurav Lohia, an analyst at K.R. Choksey Shares & Securities Pvt. “Refinancing the $2 billion debt is a big deal in today’s conditions.”

Top Variant

The Nano’s top variant will cost 172,360 rupees in New Delhi and 185,375 rupees in Mumbai. The booking amount for the cheapest variant will be 95,000 rupees, Kant said.

Tata Motors may sell the Nano in the U.S. after 2 1/2 years while sales to Europe may begin in 2011. It’s too early to comment on break-even for the Nano project, Ratan Tata said. The company can produce as many as 60,000 Nanos a year at its factory in Pantnagar in northern India.

Moody’s Investors Service and Standard & Poor’s downgraded the automaker due to slowing sales and the need to fund the $2.4 billion purchase from Ford last year.

The company has $915 million of bonds and loans due by 2012, according to Bloomberg data. Sales of trucks and buses, the company’s traditional products, have plunged as economic growth in India cools.

‘Too Many Things’

“If you try too many things, you may fail,” said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp., which manages $3.1 billion. Tata needs “deep pockets to pour in money” into reviving Jaguar and Land Rover, he said.

Tata Motors gained 3.3 percent to 166.15 rupees in Mumbai trading today compared with the benchmark Sensitive Index’s 5.1 percent advance. Tata Motors shares have risen 3.9 percent this year after plunging 78 percent last year. The company’s American depositary receipts rose 11 percent to $4.9808 at 11:24 a.m. local time in New York.

The Nano will be sold in three variants in India and customers can book the vehicle through State Bank of India, the nation’s largest bank. The company will guarantee prices for the first 100,000 units and bookings after that will earn 8.5 percent interest, it said.

Last year, the carmaker began offering the public 11 percent annual interest on three-year deposits as it tried to raise cash. It was the first time in 13 years Tata Motors had turned to the public for funds.

Factory Location

The company’s plan to start selling the Nano in the last quarter of 2008 was delayed after it had to shift the location of the factory due to protests by farmers losing their livelihood. A new factory at Sanand in Gujarat will be ready in 2010 and it will have a capacity to make 350,000 units a year.

Tata Motors will make a profit from the Nano only when annual sales cross 350,000 units, according to India Infoline Ltd. analyst Jatin Chawla, who wrote a report titled ‘The Nano Effect.’ The project will be profitable in three years, he said.

The abandoned factory in eastern India had an annual capacity of 250,000 Nanos.

Tata, 71, a Cornell University-trained architect, decided to develop the car when he saw a family on a scooter. Almost seven motorcycles are sold for every car in India, a nation of 1.1 billion people. The company first showed the 623-cc car in January 2008.

‘Affordable Price’

“We started the Nano project to find a safer way to move Indian families at an affordable price,” Tata said. The greatest challenge was to produce the car within the cost goals we had set, to make sure that it is not a ‘half-car,’ but one that is robust and capable of all-weather transport for Indian families.’’

As sales in the U.S., Japan, and Europe tumble, Toyota Motor Corp., the world’s largest carmaker, Renault SA, France’s second-biggest automaker, and other automakers plan to build cars for the middle class in emerging markets. Indian annual light vehicle sales will surge to about 2.8 million units by 2014 from about 1.72 million last year, according to Tim Armstrong, director of Global Insight Inc. The Nano could account for as many as 450,000 of that, he said.

Toyota has an early prototype for a model that may be able to compete with the Nano, President Katsuaki Watanabe said in Detroit last year. Renault and Nissan Motor Co. have teamed up with Bajaj Auto Ltd., India’s second-largest motorcycle maker, to build a $2,500 car. They are targeting a middle-class population of about 50 million in India, where incomes have doubled in the last eight years.

Tata Motors may end up selling as many as 2 million Nanos annually in 10 years according to India Infoline’s Chawla, who estimates that the cost of owning the Nano may be about $4 a day.

“The only formula that works with the masses in India is a compelling value-for-money offering,” Chawla said.

To contact the reporters on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net; Stephen Foxwell in Mumbai at sfoxwell@bloomberg.net.

Last Updated: March 23, 2009 11:54 EDT