With demand slumping, production taking a nosedive and unsold cars piling up, the world's cheapest car, the Nano, now poses a daunting challenge for Tata Motors.
As many as 7,000 cars are parked in the open at the company's Sanand factory in Gujarat amid record low sales figures of just 509 cars in November, according to the Society of Indian Automobile Manufacturers (SIAM).
The rise in inventory has forced the firm to slow down production and only a few dozen cars are being produced every day, sources at the factory told Hindustan Times , though the company said the situation was in line with its plans.
"The slow rate at which cars are being picked up from the factory, it will take more than six months to clear the stock lying in the ground," an insider at the plant said.
Originally billed as the Rs 1 lakh car, the Nano, now has a showroom price range of Rs 1.37 lakh to Rs 1.88 lakh in Delhi, depending on the features a particular model includes.
Vendors who supply parts to Tata Motors said orders have been reduced and it was unlikely sales would match the projections of 20,000-25,000 units every month by March 2011 that the firm had made when it inaugurated the Sanand factory in June this year.
"We are concerned about the slow production because we have seen cuts in orders for components that we supply to the company for the car," a leading vendor told HT .
"Earlier, we were given a very higher projection of production, but the demand has not been as per the expectation, which apparently forced a fall in production."
Tata Motors said the situation wasn't abnormal and in keeping with its plan "to keep inventory which is just appropriate during the end of the year".
"Tata Motors has clear visibility and an action plan on the marketing, financing, sales and manufacturing of the Nano," the company said in an email response to HT.
"Existing customers are happy with the car and as open sales are expanded the numbers will also increase."
The firm has allocated plots to 41 vendors at the vendor park adjacent to the car plant spread over 375 acres. Of these, 25 have started construction and six plants are on the verge of commencing production.
Its suppliers are hopeful the company's optimism is not misplaced.
"Our plant is almost ready and we should start production next month," said Arvind Kapur, CEO and managing director, Rico Auto Industries.
"I think the inventories have gone down and by March when sales open up around the country, Nano sales should go up. At present the company has placed orders for only as much as they need."