Following months of delay, Tata Motors has announced that the Nano, the world’s cheapest car, will officially launch on March 23rd, and should reach dealers by the first week of April, according to the company. Sales in the short term could defy the sour economy and be enough to help LSPs make up for the drop of volumes in India brought on by the economic downturn since last autumn.
The Nano, to be priced at Rs 100,000 ($1,960), was first displayed in January 2008 at the Delhi Auto show, and was intended to go on sale last year. However violent protests at the original factory in West Bengal by farmers disputing land compensation caused Tata to pull out of the region, delaying the launch.
Tata has since shifted production of the Nano to plants in Pantnagar, in Northern India, and in Pune, 170km south of Mumbai. The new mother plant, in Gujarat, in Western India, will not be ready until the end of this year.
According to VG Ramakrishnan, Senior Director, Automotive and Transportation for South Asia and Middle East at consultancy Frost and Sullivan, the Nano could jump-start the sagging Indian market. Frost and Sullivan anticipates eventual sales of 250,000-300,000 per year. Ramakrishnan told Automotive Logistics that capacity constraints before the Gujarat plant is ready, rather than the economy, will prevent Tata from fulfilling this volume. “According to reports, Tata already has 250,000 serious enquires for the Nano,” he said.
Tata will also look to export Nanos, and Ramakrishnan believes there is a high potential for success in markets in South America and South Africa, in particular. He pointed out that Western markets, particularly Italy, have shown interest as well. “Tata already has its own distribution network in Italy for pick-up trucks, which could be a starting ground for Nano sales,” he said.
But Ramakrishnan said that Tata will only be able to produce around 50,000-70,000 units in the next year, or 20-25% of demand, meaning that plans for export will probably be pushed back by 18 months.
For LSPs, the jump in sales and production should, in the short term, make up for the recent drop in sales and volumes. Tata Motors sales have been down by as much as 30% in recent months.
In the long term, however, Ramakrishnan believes that LSPs that can move vehicles both domestically and internationally, and offer added-value services like PDI and customs clearance, will have a good chance at capturing flows. Providers such as GAC India have already setup offices in Gujarat. Gracias Thevar, Business Manager, Logistics Services, GAC India, told Automotive Logistics that GAC hoped to capture not only inbound and spare parts business, but also eventual finished vehicle exports from Gujarat.
For the inbound supply chain, Ramakrishnan said that the opportunities are similar, although he does not believe that the Nano will have many components from outside India. “To build a car at this price, you have to have local production in India,” he said. “The only components likely to be imported would be some electronics, such as the ECU [electronic control unit], which is being supplied by Robert Bosch.”
Prem Verma, CEO of Tata’s logistics, distribution and sales subsidiary, has said that Tata hopes to distribute the Nano by rail from Gujarat, as well as from Pantnagar, though details have not yet been finalised with the Indian Railways (for more on this, click here: http://www.automotivelogisticsmagazine.com/Newsitem.aspx?aid=195#story).
