Nano set to stay in red this year too
Tata Motors still bleeding over world’s cheapest car, but new model may bring turnaround in 2012-13. Manu P Toms reports.autos Updated: Jan 16, 2012 01:48 IST
Tata Motors is unlikely to achieve break-even for its small car, the Nano, this fiscal, two-and-a-half years after it started selling the world’s cheapest car in July 2009.
And it is not just Tata Motors that is suffering. Some companies that supply components for the Nano have said their investments have not paid off yet, though the are hopeful of a turnaround with the upgraded Nano that hit the market in November.
Operating at 26% of its plant capacity, the company is still bleeding to make Tata Group chairman Ratan Tata’s dream project. Small car projects typically need to attain 60-65% production capacity realisation to make money.
Tata Motors chief finance officer C Ramakrishnan had said a few weeks ago that more than 60% realisation of production capacity is needed for a car like Nano to break-even.
“In a small segment car, the margins are low, it is a volume and scale issue. Typically one would operate at around 60% to 65% (to) break even,” he said.
Tata’s Nano plant at Sanand can make 250,000 units a year. Given that it sold 47,112 units so far this fiscal, touching 60% production — 1,50,000 units — by March can be safely ruled out. In 2010-11, Tata Motors sold just 70,000 Nanos.
Asked about the company’s outlook on the Nano project achieving break-even, Tata Motors managing director PM Telang said, “I cannot comment on that. And I cannot say it did not break even either.”
Sulajja Firodia Motwani, vice-chairperson of Kinetic Engineering, which supplies gears for the Nano, has said her company has been hit by the car’s lukewarm performance. Kinetic has invested Rs 260 crore for the gear-manufacturing facility.
Another supplier, GKN Driveline India, has not recovered investments made to develop an ultra-low cost drive shaft for Tata Nano as “volumes did not come up”, its managing director, Ravindra Ojha, said.
Since the upgraded Nano was launched in November 2011, however, things have improved. Nano sales were up 29% in December after a manifold increase in November.
Maintenance staff at a Tata Motors service centre in Mumbai said customer complaints have come down with the new model, giving rise to hope that the people’s car might turn profitable in 2012-13.
(With inputs from Tushar Srivastava in New Delhi)