World's cheapest car begins the final lap to launch.
With the long-awaited launch of Tata’s Rs 1 lakh Nano just days away, leading automobile companies are busy assessing its impact on their businesses.
Some companies think the Nano will replace the three- wheeler auto-rickshaw market, creating an alternative mode of commercial transport. Others believe the small car will wean away potential Maruti 800 buyers, convert automatic and gearless scooter owners and prove an attractive alternative to both second-hand car and premium motorcycle customers.
But the real threat from the Nano, they say, will begin only when it launches its diesel version, which might be more expensive but is expected to draw in large volumes.
Tata Motors is expected to produce around 100,000 cars in the first year and will ramp up capacity once its plant in Gujarat goes on stream by October this year.
“The Nano is similar to or cheaper than an auto-rickshaw and offers similar mileage. But it provides more safety and has superior technology, so I see the conversion of this market to the Nano,” said R C Bhargava, chairman of Maruti Suzuki India, the country’s largest car marker.
Over 300,000 auto rickshaws are sold annually with price tags ranging from Rs 1 lakh to Rs 1.5 lakh. The Nano could provide an alternative even for commuters who use auto-rickshaws.
Bhargava conceded that some potential Maruti 800 buyers might also shift to the car though their numbers would be small. “Some marginal customers who really stretch their pockets to buy Rs 2 lakh-plus car might now look at the Nano,” he said, adding: “Potential motorcycle buyers who get a loan may also look at a Nano. Its real impact on the small car market, however, can be gauged only when the product stabilises.”
Bhargava rules out the possibility of cutting the price of the Maruti 800, saying its margins are already wafer thin. “For a price reduction, you are dependent on tax concessions given by the state and, unlike the Nano, we don’t get any in Haryana” he pointed out.
Overall, both car and two-wheeler companies think the Nano may have a more immediate impact on the two-wheeler market than on small cars. But they differ on the degree of the impact. Bajaj Auto predicted that the Nano would wean away scooter buyers, especially those driven by women, who account for nearly 30 per cent of sales (approximately 95,000 scooters are sold every month). Scooters constitute 11 per cent of two-wheeler sales.
“Nano is an intra-city product that will have an emotional connect with families that buy scooters either for the daughter or wife,” said S Sridhar, CEO of the two-wheeler segment at Bajaj Auto. “Most of these consumers are well-to-do and would prefer the safety and reliability that Nano would provide over a scooter. Plus, the mileage of scooters, unlike that of a motorcycle, is not that attractive.”
Car-maker Hyundai Motors sees the Nano eating into two-wheeler sales even as it expands the passenger car market.
“The Nano will have an adverse impact on the motorcycle market, but we don’t see it taking away customers from the current small cars,” said Arvind Saxena, senior vice-president of Hyundai Motors India Ltd.
He pointed out that customers are not looking only at low price as the sole criterion to buy a car but also seating capacity, style and comfort. “If price were the only criterion, then sales of the Maruti 800 — the cheapest car currently — would not have declined,” he added.
Motorcycle makers, however, argued that less than 5 per cent of premium customers may be weaned away to the Nano, so its impact on their sales will be limited (30 per cent of motorcycle sales are in the premium segment). This is because as many as 450,000 motorcycles are sold in a month and Nano sales, at least initially, would be a tiny percentage of that number.
“The 100 cc bike is available at Rs 30,000, so it is one-third the price of a Nano. And the maintenance cost of a car is four times that of a motorcycle. And remember, the motorcycle buyer has a monthly salary of much less than Rs 10,000 a month. For him the Nano is out of reach,” said a top executive of a leading two-wheeler company.
Bajaj’s Sridhar added that those who buy premium motorcycles in the range of Rs 50,000 to Rs 75,000 are unlikely to switch to the Nano because their purchase decisions are driven by different motives. “They have high income levels and they buy bikes to make a statement and enjoy the power. Such customers will not go and buy a small, cheap car. ”
Bajaj has also ensured that it offers customers more power in its motorcycle without compromising mileage that, at 70 km to a litre, is a major disincentive for customers to shift to a small car.
| ALL THAT YOU WANTED TO KNOW ABOUT THE NANO |
| * The Tata Nano will initially be available in three models — the Nano (base model), the CX (mid-level model) and LX (top-end model) |
| * The cost of the base model will not exceed Rs 1 lakh (ex-factory, Pune) |
| * Booking forms will be available at SBI, Westside, Croma stores and, of course, 400-odd Tata Motors dealerships |
| * Booking forms will be available for only 14 days |
| * Nano merchandise, including Nano phones and watches, will be marketed through various outlets |
| * To begin with, only the petrol engine version will be available. The 624-cc two-cylinder petrol engine with a single balancer shaft (to avoid excessive vibrations) will have four valves. It will develop 35 bhp at 5,500 rpm and 4.8 kgm of torque at 3,000 rpm |
| * The Nano should crack 60 kph in eight seconds and will have a top speed of 105 kph |
| * The Nano will be available in BS II and BS III variants |
| * The Nano will weigh 600 kg without load |
| * The Nano will have only one spare tyre and it can be used to repair only the front tyres, since the rear tyre is of a different size. However, the car can be driven slowly even after a puncture (and should be repaired as soon as possible) |
| * The Nano will have four forward gears and one reverse gear |
| * The Nano will have a 15-litre fuel tank. With an expected mileage of slightly over 20 kpl, a full-tank will take you over 300 km |
| * Only the driver’s seat will be adjustable in the base model |
| * The Nano CX model will have air conditioning with a heater |
| * The LX model will have power windows, central locking and fog lamps |
| * The Nano will come with a warranty of 18 months or 24,000 km |
The testing point, of course, will be when the diesel version is launched.
“Considering the teething problems of the Indica in its first few years, most customers will wait and watch . Also the volumes of 4,000 to 5,000 per month are too small to make any impact,” said a CEO of a leading automobile maker.
“Once the diesel version comes out, and I expect it to be priced at around Rs 1.70 lakh, the real volume numbers will come out. But that might take one to two years and pose a real challenge to small car makers,” he added.
