It has been developed as a car that will break all benchmarks of affordability, but with its high booking cost, the Tata Nano may well end up setting benchmarks in exclusivity.
To book a standard Maruti car, one has to pay just Rs 5,000. In contrast, the minimum one has to shell out to book the people's car is Rs 95,000 — 77 per cent of the car’s total cost!
Even for a high-end car like Honda City, which sports a price tag 6 times that of the Nano, the booking amount is just Rs 15,000 — a mere 1.9 per cent of the total price.
The high booking amount may help Tata Motors restrict demand, say experts. However, the downside is that it may also keep the lower income group — who need the car the most — at bay.
"Obviously, demand is not much of a concern for Tata Motors, for whom the ability to supply is the constraint," said Sachin Mathur, head, Crisil Research.
"Ultimately the growth is going to come in places outside big cities and in lower income groups, but in the first year it is going to be just an average car buyer. As and when supply is bolstered, efforts would be made to lower the booking amount to make the Nano more affordable,” he felt.
The high booking price also makes the Nano vulnerable to used cars. Some manufacturers like Maruti, who have used car verticals of their own, could in fact leverage this against the Tata car.
"Suzuki could attack Nano via a used-car programme luring its buyers with re-furbished, certified Maruti 800 piced at about Rs 100,000," said Vikas Sehgal, partner, Booz & Company.