Nano - Is It People's Car?

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If owning a car was a long unfulfilled dream for many Indians, then an incredible offer was up for grab for the past two weeks. Tata Motors had recently opened bookings for its car – Nano – a dream car for an average middle-class Indian. The booking for the car had started on April 9 and continued till April 25, 2009. Nano was made available in three variants namely standard, CX and LX carrying price tags of Rs 95,000, Rs 1,20,000 and Rs 1,40,000. The standard will be available in red, white and blue whereas CX in gold and silver. The LX variant will be made available in yellow, gold and silver.

Know The Nano
Nano represents a class in itself but is expected to make rides tough for other small cars, its closest competitors being Maruti 800 (M800) and Hyundai Santro. However, this competition may not get fierce until Nano’s bottlenecked supply issues are resolved. Customers who need a car immediately or may be wary of the lottery system will opt for other choices. Among the small cars, Nano has the smallest engine (624cc) with just two cylinders but it still delivers a power of 35 ps at 5,250 rpm. On the other hand, M800 gives 37 ps at 5,000 rpm with an engine capacity of 796cc but has three inline cylinders with MPFI technology. Santro seems to be quite distant with its lowest price tag placed at Rs 2.7 lakh. Its engine is also the most powerful in its class (1,086cc) with four inline cylinders. It generates 63 ps at 5,500 rpm. Nano and M800 have the capacity to seat a maximum of four people at a time whereas Santro seats five. Indian roads are usually considered to be a driver’s nightmare and high ground clearance becomes essential on rough terrains. Nano fares better on this front with a higher ground clearance (180mm) than M800 (170mm). Safety is an important aspect and Santro and M800 clearly mention the presence of crumple zones in their exterior which Nano apparently doesn’t have. But as Nano predominantly is projected a city car these issues should not matter. Its maximum speed (105 kmph) is also much lower than the other cars due to its lower engine capacity. The other aspect that gives it an edge as a city car is its smaller dimensions implying that it requires lesser parking space and the lowest minimum turning radius gives it high manoeuvrability to skillfully weave through the city’s peak traffic. [PAGE BREAK]

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These are the features that essentially make it a city car. It has a much smaller fuel tank (15 litres) than M800 (28 litre) and Santro (35 litre) which means trips to the gas station would be more frequent. M800 offers a LPG variant and Nano may also come up with a LPG and electric variant although when is yet to be announced. Nano also has a better fuel efficiency (23.6 kmpl) as compared to M800 (14 to 16 kmpl) and Santro (11 to 13 kmpl).

Bookings And Budgets
When the booking had started, application forms were made available widely over 30,000 locations in 1,000 cities through Tata Motor dealers, SBI branches, other preferred branches, and at Westside, Croma, Titan and Tata Indicom exclusive stores. Although this is the lowest segment of any time that a car has been offered in India, Tata Motors realised that this may over-stretch some households out of their budgets. Debasis Ray, Head, Corporate Communications, Tata Motors explains, “Knowing that some may not be able to bear the total amount right away or pay a lump sum, we have partnered with preferred financiers. Customers can avail financing from these financiers if they wish.” It was left to the buyer whether to avail the financing or not. If you didn’t opt for financing then you were supposed to pay the whole amount as the booking amount. In the other case, the booking amount depended upon your chosen financier. You may also have to note that the booking amount may be non-refundable as some financiers pay the whole amount on behalf of the customers. Post the booking period, Tata Motors has collected all the applications and will select the lucky first one lakh by a random generation program and then announce the lucky allotees. Those who haven’t been allotted will either retain their deposit or receive a refund depending on the choice made at the time of the booking.

Those who choose to retain their amount can expect to earn an interest of 8.5 per cent for a retention period of more than a year and 8.75 per cent if the period is over two years. Tata Motors will re-open booking later only after exhausting the list of the retainees. This system obviously will continue till the supply catches up with the demand. Ray said, “It is not possible to comment now as to when the supply will catch up with the demand. However, Tata Motors will make an announcement when that happens. [PAGE BREAK]

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Financing Fundas
In case the customers wish to use the services of a financier then they should be even more careful with the fine print. Explaining the role of the financier, Ravi Naryanan, GM, Head of Retail Loans, ICICI Bank says, “Tata Motors expects the customers to pay the full booking amount but in case they are not able to then customers can approach financiers like us. The customer can pay us the booking charges and we can finance the booking amount for him. This is what we are now discussing in case of auto loans.” He further clarifies, “This booking charge is non-refundable and valid only for the first allotment.”

What is then the advantage of a financier? Says Narayanan in response: “Customers unable to pay the whole booking amount now can participate in the process through us. This gives them time for arranging the deposit amount when they get allotted. We basically make the booking process hassle-free for customers who are short on time. Also, they can avail the services of the bank for that period.” However, that is not always the case, as Mortaza Vohra, Branch Manager, Tata Finance, tells us that, “The deposit is non-refundable but stays with us for further allotments. Booking charges also differ from financier to financier as the charge includes a sum total of the interest on the full amount paid by the financier on behalf of the customer to Tata Motors, the processing fee and the documentation charges.”

Positive Response
The response to Nano has been gauged to be good although Tata Motors hasn’t officially released any numbers yet. Ray from Tata Motor says, “The response is definitely good but bookings are being accepted over many locations. Once the booking period is over, we would compile all the data from different locations and only then we would be able to speak in exact numbers.” Narayanan too states the same saying, “The response is encouraging but as we operate through our branches, Tata dealers and the internet, we will have to compile all the applications to arrive at a definite number. But if this can be considered a measure of good response then our website has received around 6,000 hits since the start of the booking period though we guess this is mostly for acquiring information. We expect the booking pace to get hectic towards the last few days of the booking period.” [PAGE BREAK]

However, Vohra is more confident of the positive response and says, “We have already made around 1,500 bookings and are looking forward to getting more. Many people have contacted us to get financing options. Also 60 per cent of the bookings have been made for the LX variant at my branch so probably that’s the popular variant although my observation is specific and does not represent the general trend.” At the prices being offered, Nano undoubtedly emerges as the people’s car. Nano is small, compact and light, perfect to be a city car. Its commendable fuel efficiency also makes it dearer to both the commoners and the greens. But there are initial challenges that remain which dampen customer enthusiasm like constrained supply. But as the supply increases gradually and people would not have to wait long getting their cars, it is quite likely that Nano may emerge as India’s most popular car.

Safety is an issue that remains to be seen under practical use and time would only tell for certain how the absence of crumple zones been compensated with other measures. It is also quite likely that competitors worldwide may respond aggressively by offering new schemes or subsiding base models off others and Nano may have to work there countering these influences on the market. Nano also suits the genre of campus transport and it will depend on the company’s marketing teams to explore these possibilities in India and overseas. Here it has the chance to bag hefty contracts from academic institutes and government organisations. All in all, Nano not only provides a new and cheap alternative to the Indian masses but has the opportunity of being a mascot of innovative thinking of resurgent India.