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World's cheapest car set for launch

The world's cheapest car, the Tata Nano, will be launched on Monday with its makers hoping it will be a hit with India's emerging middle-classes. Once the Nano is seen performing on choked Indian city streets, analysts will assess whether it can make a significant dent in Japanese-owned Maruti Suzuki's dominance of the Indian passenger car market.

autos Updated: Mar 22, 2009 13:51 IST

The world's cheapest car, the Tata Nano, will be launched on Monday with its makers hoping it will be a hit with India's emerging middle-classes.

But although marketed as the affordable car for millions of Indians, analysts say the Nano and its maker, Tata Motors, could be in for a bumpy ride because of production setbacks and it will not be an immediate money-spinner.

"Nano's sales will be production-led, not demand-led," said Mahantesh Sabarad, an analyst at Mumbai's Centrum Broking, ahead of the car's unveiling on Monday and its appearance in car showrooms next month.

Just 30,000 to 50,000 of the four-door Nanos are likely to be sold in the first year because of limited production capacity -- a fraction of the company's original planned target, auto sector experts said.

And they say the sporty, jellybean-shaped car which has attracted world headlines thanks to its price tag of just 100,000 rupees (2,000 dollars) -- cheaper than some laptop computers -- will not contribute much immediately in the way of profits to troubled Tata Motors due to its small volumes.

Last October, Tata Motors, part of the sprawling tea-to-steel Tata Group, pulled the Nano car project out of West Bengal state in east India, even though the plant was 90 per cent completed.

The retreat followed months of violent demonstrations by activists and farmers evicted from their land that raised fears about India's attractiveness for foreign investors.

The Nano now is being rolled out from two existing Tata manufacturing plants in what Tata Group chief Ratan Tata has described as a "makeshift kind of operation."

Tata Motors' new Nano plant in the western state of Gujarat is not expected to be ready until the end of 2009.

In the second year, Nano sales could jump by over 200 per cent to 150,000 cars, said Vaishali Jajoo, an analyst at Angel Broking, as production ramps up at the Gujarat plant.

The launch comes as Tata Motors is going through a rough patch with an economic slowdown and tight credit hitting sales. The company, which has seen vehicle sales plummet, recently reported its first quarterly loss in seven years.

Tata Motors was feted last year as an Indian corporate success story with its 2.3-billion-dollar purchase of British luxury car marques Jaguar and Land Rover.

But with the global downturn, the purchase has become a millstone as sales of prestige cars have tumbled and the group has been struggling to refinance a three-billion-dollar bridge loan used to purchase Jaguar and Land Rover.

Tata Group chairman Ratan Tata conceived of the ultra-cheap Nano to get poorer Indians off unsafe motorcycles and into safer cars.

New Delhi resident Ganesh Khand, 38, says he can't wait to buy a Nano and abandon his motorbike on which he has been transporting his wife and two daughters.

"The Nano is so cheap and also from the safety point of view it's better. The whole family can travel anywhere together," he said.

"I just hope Mr Tata quickly delivers this car to everyone," he said.

But the more affluent are eyeing the mini-car too.

"This is a value-for-money car. In a bearish stock market, I would think twice about spending money for another car but not for this one," says 39-year-old Hasmukh Kakadia, an investment analyst.

Dealers in Mumbai said second-hand car prices had fallen by 15 to 20 per cent, particularly for many smaller used cars.

"People would prefer a new contemporary look, and not spend more for a used car," VK Viswanathan, managing director of Bosch India, a supplier of Nano components.

Ratan Tata, known for his reclusive disposition, will launch the Nano on Monday evening at a "revolutionary, high-tech" audio-visual presentation, a company spokesman said.

Earlier this month, he unveiled a European version of the Nano sporting airbags and leather trim which is being engineered to meet safety and emissions standards.

The European version of the Nano will hit the market in 2010-11 but will be priced much higher than in India, due to added features, he said.

Once the Nano is seen performing on choked Indian city streets, analysts will assess whether it can make a significant dent in Japanese-owned Maruti Suzuki's dominance of the Indian passenger car market.

"We have so far seen the poster boy Nano. I want to see the commercial face of the Nano," said analyst Sabarad.