Tata Nano Sales Plunge as Customers Lack Loan Options

Tata Nano Sales Plunge as Customers Lack Loan Options
A Tata Motors Nano automobile. Photographer: Daniel Acker/Bloomberg

Tata Motors Ltd.’s sales of Nano plunged 85 percent in November to 509 units, the lowest since the car’s debut last year, as customers faced difficulty in accessing loans to purchase the world’s cheapest car.

Tata Motors is hiring more sales people at dealerships and working with banks to help buyers get loans, the automaker said in an e-mail response to Bloomberg News today.

Chief Executive Officer Carl-Peter Forster said last month that a lack of financing options available to buyers was causing a slump in Nano sales. Banks are reluctant to lend to many low-income customers on concern that they may default, while instances of some Nanos catching fire may have also deterred buyers, said Mahantesh Sabarad, a Mumbai-based analyst with Fortune Equity Brokers (India) Ltd.

“The product has had a difficult time in terms of its perception ever since those fire incidents came in,” Sabarad said. “A lot of people bought the car in the initial sales period for its novelty factor and didn’t go for loans.”

The automaker, also the owner of Jaguar Land Rover, increased the price of the Nano by 9,000 rupees ($198) in October, after raising as much as 4 percent in July. Sales of the car had begun at prices ranging from 123,360 rupees to 172,360 rupees in New Delhi.

“The profile of such customers who are desirous of the Tata Nano is that of a two-wheeler purchaser or those who do not own any personal mobility at all,” Ashmita Pillay, a corporate communications manager at Tata Motors, wrote in the e-mail. “Many of them do not know driving.”

Record Every Month

Demand for the Nano has declined since July’s dispatch of 9,000 cars while car sales in India, Asia’s second-fastest growing major economy, rose to a record every month since then through October.

Tata Motors sold more than 70,000 Nanos since deliveries began in July last year. The company selected the first 100,000 customers through a lottery from the 206,703 orders it got in the initial sales period in April the same year.

Total sales at Tata, also India’s biggest truckmaker, rose 1 percent to 54,622 vehicles in November, the company said in a statement today.

Tata Motors rose 4.2 percent to 1,286.75 rupees at the 3:30 p.m. close of trading in Mumbai today. The benchmark Sensitive Index of the Bombay Stock Exchange gained 1.7 percent.

Additional Protection

The company said last month it would retrofit Nano cars with additional protection in the exhaust and electrical systems after some of them caught fire earlier this year. Investigations concluded that the reasons for the fire were ‘specific’ to the cars involved in the incident, Tata said.

The automaker opened a new factory for the 624-CC Nano in the western Indian state of Gujarat in June. The plant with a capacity to build 250,000 cars a year is fully operational, Tata Motors said last month.

Tata Motors currently sells the car in 12 Indian states as it worked through the initial orders and ramped up production. The company had to abandon a near-complete factory in West Bengal in 2008 because of farmers’ protests over land acquisition.

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