Monday, June 15, 2009

Will Tata Nano turn around Tata Motors’ luck?

Tata Motors is finally launching Tata Nano, the ultra-low-cost car, on March 23, 2009. Had things gone according to the plan, Tata Motors would have launched Nano six months earlier. Tata Motors was supposed to build its Tata Nano manufacturing facility in West Bengal. Due to political pressure, the project was scrapped and replaced in the industry friendly Gujarat province. Tata Nano which costs Rs. 100,000 ($2050) is the cheapest car in the world. The snub nosed car is 10.2 feet long. It comes with a windshield wiper, a 623cc rear engine and diminutive trunk. There are no extra-safety or comfort features. The car does not have any air bags, anti-lock brakes, air-conditioning, radio, or power steering. If buyers want to have these features, they would have to pay extra money.

Now, the million dollar question is: Will Tata Nano see the face of profit? Had Tata Nano released the car six months earlier, the question could be answered with a positive note but now, the gloom of economic recession is hanging over India and stalled its economic growth.

Like many other companies Tata Motors is also facing the heat of the recession. Only two years ago, Tata was on the path of unprecedented growth. Last year, it bought Jaguar/Landrover from Ford for $2.3 billion. The company took huge loan to buy the two brands. Now, everything has changed for Tata Motors. In the economic recession, commercial vehicles which make up Tata’s core business had been badly hit. The company registered a loss of $54 million in the last October-December quarter.

Moreover, the relocated factory of Tata Nano has not been finished yet. Tata officials said that it would take at least one year to finish the new Tata Nano manufacturing facility. Initially, Tata announced to roll out 250,000 Nanos but analysts think that the company would not be able to produce more than 50,000 units. According to Vaishali Jajoo, auto analyst, Angel Broking, even if Tata can achieve its target it would only add 3% to the total revenue of the company and it would make much of a different.

Like it or not, I like what Paul Polman, CEO, Unilever Group said, “Recession can’t be an excuse for business to go down.” It is true that companies are suffering for economic recession but they must continue and try their best to survive this recession. Tata is going to launch Tata Nano tomorrow. I wish them all the best with the car.

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(This entry was originally published in March 2009.)

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