The demand and supply equation for the Nano

By BankBazaar.com | May 21, 2009

Now here is the big issue. Despite the company having received such a large number of bookings, the company’s current production is only 50,000 units. However this number is slated to increase once the company’s slated plant at Sanand (Gujarat) starts functioning. In the initial round, while 50,000 people would be allotted the car, the remaining 50,000 people have of the option of retaining their deposits with the company and get the car as soon as it is produced. If they don’t get a car within a year of booking, their deposit fetches them an interest of 8.5% and 8.75% afterwards.

The year 2009 has been a watershed year for the Indian automobile industry. This has been due to launch of Tata Nano, the country’s first 1 lakh car, considered to be the cheapest in the world. Due to the unprecedented hype surrounding it, this car has been eagerly awaited by both the Indians and foreigners alike. In order to make this car available to all the interested parties, Tata Motors, the manufacturer of the car has tied up with 15 leading banks and financial institutions to provide loans. Are you interested in opting for a loan for Nano? Want to know how to go about it? Then read on to know to more about the loans for Nano.

Loan details: If you want to book a Tata Nano, you need to purchase the application form available at one of the 15 banks by paying a fee of Rs 300. The banks involved in offering the loan for Nano purchase include ICICI Bank, Axis Bank, SBI, Tata Motor Finance, State Bank of Patiala, State Bank of Travancore, State Bank of Mysore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Indore, Punjab National Bank, Federal Bank, Corporation Bank, Indian Bank and Central Bank. While submitting the application form, you had to make an upfront payment of Rs 2,999. The bookings were open from 9th April to 25th April. After 60 days of closure of the booking, the company will process and allot the 100,000 cars in the initial stage of delivery. This allotment procedure would be undertaken through the random selection process conducted by computer. The best part is that all these cars would be price protected, meaning they would not cost more than Rs. 1 lakh, which includes insurance and registration. The interest rates offered by the banksfor these loans vary amongst the banks. While some banks offer fixed rate interest, others provide floating rate interest on these loans. The delivery for these cars would commence from July 2009.

Analysts’ views on Nano bookings: The Nano could successfully achieve only 2.03 lakh bookings as compared to the expected 5 lakh bookings estimated by the industry analysts. This they say is the dampener on the country’s most ambitious car project. This they attribute to the high threshold of booking amount fixed by the company, lack of availability of test-driving the car, doubt amongst the prospects if they would be chosen to get the car and the reluctance to be associated with a car having no history.

Number of people opting for the loan: While there are no confirmed media reports about the number of people availing of the loans to buy Nano, Tata Motors’ website claims that out of the 2.03 lakh applications received, around 70% of them were financed through loans.

Company’s capability to meet demand: Now here is the big issue. Despite the company having received such a large number of bookings, the company’s current production is only 50,000 units. However this number is slated to increase once the company’s slated plant at Sanand (Gujarat) starts functioning. In the initial round, while 50,000 people would be allotted the car, the remaining 50,000 people have of the option of retaining their deposits with the company and get the car as soon as it is produced. If they don’t get a car within a year of booking, their deposit fetches them an interest of 8.5% and 8.75% afterwards.

Future of Nano: While Nano is Ratan Tata’s most ambitious project, it remains to be seen if it will be successful in the long run. This has been evident from the number of bookings which were far lesser than expected. Also if the prices of used cars fall, this market can prove to be very competitive for Nano. Also the company may not be able to meet its production commitments, thereby letting its potential rivals poach its customers.

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2 thoughts on “The demand and supply equation for the Nano

  1. jayhiri

    While the scepticism of most of the people is granted, I have personally gone through the making of the world's smallest marvel. As an Indian, I hope and pray that
    this beauty does well. I can understand the disappointment surrounding the low booking levels of the car, as also the customers inability to undetake the test
    drive. The responsibility rests on the young team of engineers who have thus far worked so hard in a highly motivated environment. Through this means I would
    request the entire nation to give this product thumbs up and work for its success.

    Reply

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