The Tata Nano is now available at a down payment as less as INR 15,000: Will it change anything?

Tata Motors Limited simply cannot be faulted for not trying hard enough. To perk up Nano sales, Tata, through its motor finance division, Tata Motor Finance, has come out with a brand new offer. Now, a prospective Tata Nano customer can walk into a Tata dealership and walk out with a Nano after making a down payment as low as INR 15,000 for the base version of the Tata Nano.

The rest of the payment can be made through a five year loan term with equated monthly installments of INR 3,324 for the base version of the Tata Nano. Similarly, the Nano CX can be bought for a down payment of INR 22,000 and an EMI of INR 3,910 for 5 years while the Nano LX can be had for a down payment of  24,000 and an EMI of INR 4,493 over a five year repayment schedule.

Will this put the bang back into the flagging sales of the Tata Nano? Read on to find out!

Tata Nano Low Cost Small Car

Tata Nano Low Cost Small Car


First of all, the scheme that Tata Motors is offering through Tata Motors Finance and also through other banking institutions like State Bank of India and HDFC Bank isn’t new.  What it has done this time around is, it has reduced the down payment from a previous amount of INR 35,000 to INR 15,000. Tata has offered a similar scheme, with a zero down payment offer albeit for a limited period of time earlier this year.  During that period, the Nano registered a record monthly sales figure of close to 10,000 units in March, 2011, its highest ever yet.

However, a closer look at the sales charts indicated that a large chunk of the sales came through Tata Motors’ employees, many of whom in the upper management, our sources confirm, were exhorted to buy the Nano as their second car. Also, Tata offered a special loan scheme for Tata employees with relaxed terms of interest and repayment, leading to increased off take of the Nano in the early part of 2011. Since then though, things haven’t been just as rosy.

The Tata Nano story thus far 

Tata Nano Low Cost Small Car

Tata Nano Low Cost Small Car

Ratan Tata, the brainchild behind the revolutionary small car, the Tata Nano, conceived the brilliant little car to be a mode of transport for the hordes of Indians who otherwise had to make do with two wheelers that offered lesser safety and almost no weather protection. Thus, the low cost Nano was to be a safe, all weather option of basic transport for a small family in India and perhaps other developing nations.

The pioneering low cost car was successfully built after the Tata Motors team surmounted various engineering challenges with remarkable and highly effective engineering ingenuity. Silencing critics who said it couldn’t be done, a proud Ratan Tata announced the iconic price tag of INR 1 Lakh for the base version of the Tata Nano, to rapturous applause in India and around the world. It was one of the defining moments of Indian automotive history that will remain forever etched in our minds.

The Nano’s road has only gotten bumpier ever since. First, Mamata Bannerjee, the then West Bengal opposition part leader and the now Chief Minister spearheaded an agitation against Tata Motors’ Nano manufacturing plant in Singur West Bengal. The ensuing crisis forced Tata to shift the Nano’s production to its Pant Nagar plant in Uttarakhand even as it zeroed in on Sanand, Gujarat for the new Nano manufacturing plant.

The Sanand plant was inaugurated with much fervor with an annual capacity of 2,50,000 units or over 20,000 units every month. The capacity though has never peaked even though the Nano initially saw pre-bookings to the tune of a whopping 50,000 units. The Nano’s monthly sales have shown wild fluctuations between an all time low of 509 units last November to around 10,000 units in March, this year.

Last month though, the Nano managed to sell around 3,000 units, a far cry from the 20,000 units per month that Tata had originally envisaged the Nano to sell. A few stray incidents of Nano catching fires did the Tata Nano’s reputation no good even as Tata fought back with additional safety reinforcements and a slew of promotion offers ranging from television commercials, zero percent interest schemes, a 4 year/60,000 kilometer warranty to a INR 99 rupee/month all inclusive maintenance scheme.

Is the Nano a colossal marketing failure? 

Tata Nano Low Cost Small Car

Tata Nano Low Cost Small Car

While many fingers are quickly pointing to the Nano being an example of a colossal marketing failure, we choose to disagree. While the sheer aura surrounding the Nano’s 1 Lakh Rupee price tag did most of the marketing initially, Tata Motors, for its part has ensured that the Nano remains highly visible by tying up with the Future Group’s Big Bazaar chain of supermarkets.

Also, Special Nano Access Points(SNAP) have been set up across Indian towns and even villages to ensure that the Nano penetrates India’s hinterland. This aside, Tata also has utilized the distribution muscle of its commercial vehicle division to retail the Nano in virtually every part of the country along with coming up with dedicate Nano micro-dealerships. However one defining issue still remains unsolved.

For this, we need to take a look at the very idea behind the Nano. The Tata Nano was launched with the main aim of providing a safe, all weather, affordable, reliable and frugal means of transport to those who cannot afford other cars in the market. So, the target audience of the Nano was and is the commuter motorcycle buyers.

With the Nano’s new reduced down payment scheme, Tata has ensured that the Nano’s down payment is almost rivaling that of the two wheelers but a host of other issues remain for two wheeler users to upgrade to the Nano. A few of them have already been discussed in our previous analysis of the Tata Nano’s diesel variant, right here.

 On why the Nano’s fate hinges on financial inclusion, not marketing! 

Tata Nano Low Cost Small Car

Tata Nano Low Cost Small Car

Now, coming back to the demography of the Nano buyer, it has been observed that the Nano is being bought more by the upper middle class car buying populace who can easily afford bigger, costlier cars. The actual target audience of the Nano, the lower middle class car buyers however seems to be finding it difficult to secure finance to buy the Nano.

While that would sound quite perplexing for many given the fact that Tata is advertising down payment schemes as less as INR 15,000 with monthly EMIs being at an ultra affordable INR 3,000, the fact of the matter remains that most of the lower middle class populace in India do not meet the strict loan eligibility requirements of banking and other financial institutions.

For instance, many prospective Tata Nano buyers do not receive salary certificates not to mention many not even falling under the tax bracket of the Indian tax man. Therefore, the lack of a “proof” of steady income is what is preventing the financial institutions from lending to prospective Tata Nano buyers.

Viewing the new reduced down payment scheme by Tata Motors in this light, it isn’t difficult to fathom why Nano sales might not really pick up despite these offers that Tata motors is making. Now, India as a country has been very conservative through the years, especially when it came to the matters of easy access to credit.

Tata Nano Low Cost Small Car

Tata Nano Low Cost Small Car

In simplistic terms, on one hand it is this credit conservatism that has ensured that India doesn’t ever end up facing a sub prime loan crisis like the USA had faced a couple of years ago after many American banks were saddled with massive piles of non performing assets. On the other hand, this conservatism also means that consumer goods like cars are not as accessible to a wider cross section of the Indian populace, which they otherwise would have been.

Therefore, this brings us to square one. Of that of Tata Motors doing its very best to sell the Nano with attractive down payment and loan repayment offers, only for the scheme to be hardly accessible to a large number of prospective Nano buyers. Like someone said, the more things change, the more they remain the same.

An afterthought:

This situation presents a opportunity for financial institutions or even perhaps Tata Motors to tap into this huge latent customer base by devising a new credit worthiness structure based on, say a monthly analysis of a prospective customers’ various financial obligations and the financial discipline maintained by the said customers. However, on how this structure can be arrived at is something that we will leave for the financial institutions and manufacturer to ponder about. The key to Nano sales however is not aggressive marketing but financial inclusiveness.

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