NEWSFOCUS TATA MOTORS:THE LAUNCH in India this week of the world's cheapest four-seater Nano car by the owners of Britain's luxury Jaguar and Land Rover brands has raised hopes of reviving the declining fortunes of its manufacturers Tata Motors in the worldwide economic downturn.
For company chairman Rattan Tata the formal, albeit delayed kick-off on Monday of the Rs 100,000 ($2,000) Nano in Mumbai offers the chance to reclaim some of the financial optimism of the last 15 months, during which his Tata Group acquired Corus, the Anglo-Dutch steel conglomerate for $13 billion and Jaguar and Land Rover for $2.3 billion two months later in March 2008.
But ominously, the Tata Motors scrip slipped on Monday as analysts feared it would not bring about the desperately-needed turnaround for the $62.5-billion Tata group, India’s largest maker of trucks and buses and owner of luxury ultra-hotels in India and abroad.
“While Nanos launch will be seen in a positive light by Tata Motors’ (financial) lenders, it won’t have a significant impact on the group’s fortunes as there is not enough capacity to roll out a huge number of cars,” Jagannadham Thunuguntla, equity head with SMC Capital said.
Tata, he declared, would also have to sell some two-three million of the 33hp Nano with a 624 engine at the rear, just to break even.
“One also needs to verify how much of a margin the company will make on each car.
“Until some more clarity comes through, the market will remain sceptical,” Thunuguntla warned.
Other market analysts said the Nano would not register a profit for at least six years and with around $2 billion of Tatas debt due in June, the Group would have to come up with a credible plan swiftly to stem losses and bolster investor confidence.
“I think we are at the gates of offering a new form of transport to the people of India and later, I hope, other markets elsewhere in the world,” the soft spoken 71-year old Tata declared optimistically at the Nano launch.
“I hope it will provide safe, affordable four-wheel transportation to families who until now have not been able to own a car,” he stated.
Tata declared that he was the ‘most difficult critic’ while the Nano was being produced and had been pleasantly surprised and enthused by the result.
He said they were also looking to develop an export Nano model for Europe by 2011 and one for the US market a year later. The Tata Nano Europa had been display at the Geneva Motor Show earlier this year and attracted a lot of attention as much for its novelty value as for its size and performance.
“It would not be a $2,000 or $3,000 vehicle but will encompass all the features required as per European regulations,” Tata declared adding that it would also have a more powerful engine and comply with all the requisite emission norms.
“I just hope the dream that we’ve all had and weve worked so hard for proves itself to be the kind of product that we would like it to be,” the architect from Cornell University said.
The Nano suffered many birth pangs, having to move its $350 million manufacturing plant late last year from Eastern Bengal state to western Gujarat state following a bitter land dispute between competing political parties.
This confrontation not only postponed the car’s October 2008 launch, timed to coincide with India’s festival season, but was also viewed by Indian economic planners, seemingly accurately as time has now proven, as a ‘debilitating’ blow to domestic efforts aimed at attracting overseas investors, capital and technology.
Meanwhile, environmentalists warn that the Nano would add to India’s already chaotic and traffic-choked roads and augment soaring pollution, despite Tata’s claims to the contrary.
Driving across India and in its cities is little better than nightmarish as it involves dodging cows, camels and even elephants squatting on dimly lit roads or ambling through varied traffic, negotiating unmarked speed breakers the size of small hillocks and vehicles driven at break-neck speed, often by unlicensed and drunken drivers.
Additional hazards on highways, other than pot holed surfaces, include zigzagging cyclists, meandering pedestrians and at times trucks, buses and tractors headed the wrong way even at night, often without lights.
Sunita Narain, one of India’s best known environmentalists, said Tata’s projections on initially manufacturing around 250,000 Nanos annually and significantly increasing capacity would only add to this confusion and chaos.
Narain’s Centre for Science and Environment said Tatas new car could “jam cities” and raise pollution levels.
The average vehicle speed in New Delhi, for instance, had dropped from 14km/h in 2002 to half that today and additional vehicles would further slow it down.
“As congestion and vehicles slow down, emissions increase up to five times,” she declared.
“When India gets to the level of car ownership that we enjoy in the west, which is about 700 cars for every 1,000 people, it could double the number of cars on earth, presently 900 million to 1.8 billion,” Australia’s Wheels magazine declared.
That, it cautioned, would have a profound impact on carbon dioxide production, greenhouse gases, the environment and health generally.
But, despite such gloomy predictions, many potential customers were enthusiastically anticipating acquiring a Nano. Bookings for the car, through a lottery system, will begin next month for initial deliveries of 100,000 Nanos from July onwards.
“It is indigenous, cheap, fuel efficient and economical to drive,” New Delhi housewife Neel Kamal Puri said. I hope it’s in my karma to get one of the first 100,000 Nanos, she gushed.
The 3.1m long, 1.5m wide and 1.6m high, petrol-fuelled Nano has an average consumption of 23.6km/l.
In addition to the 33hp (25kW) petrol version, Tata is expected to release an air-powered model running a compressed air engine at a future date, having invested in technology to design such a power pack.
Launching the car in the US and Europe: aiming for 2010 or 2011
RATAN TATA, head of the Tata group, said that tough times in the world’s largest car market had convinced the group to start designing a version of the Nano for possible export to the US as early as 2011 or 2012.
Mr Tata said he had once viewed the US, with its exacting consumers and obsession with large cars, as unsuitable for the diminutive Nano.
However, he said: “In this economic situation, we see perhaps there is a place .”
The Nano was launched in India on Monday with a starting price of Rs100,000 ($2,000) before transport charges and tax.
Tata plans to sell a version of the Nano in Europe from 2011.
Tata gave no indication of what the car would cost in America where it would need to meet stricter safety and emissions standards than it does in India.
However, analysts said that, because Tata would be a newcomer to the US, the Nano would still need to be priced significantly lower than the cheapest economy cars currently on the market such as the Hyundai Accent and Nissan Versa, which sell for less than $10,000.
“Given the state of flux here and the rise of gas prices last year, the market is certainly more open to this than it would have been a year ago,” said Jeff Schuster, executive director of forecasting with JD Power, the consultancy.
In addition to competing on price, Tata “would have to convince American car buyers that the vehicle is safe and reliable and that it offers exceptional value”, said Joseph Barker, an analyst with CSM Worldwide. Tata would also need to build its dealer base and brand in the US.
Mr Tata acknowledged a US launch would not be easy. “It’s not something that we would take lightly,” he said. “The US is very unforgiving of mistakes.”