Ta ta, Nano?

ta ta nano

The Tata Nano was supposed to change both India and the way automakers develop low-cost cars. So why aren't people buying it?

The business titan whose idea it was saw it not as a new car but as a social mission. Western liberals got all misty-eyed about the democratization of motoring. The established automotive industry was taken aback that a regular car could be sold for so little, and environmentalists panicked at the thought of all those additional gas-burning engines.

But in the nearly three years the Nano has been on sale, the hard-headed Indian consumer has test-driven it, done the math, and mostly turned on his sandaled heel and ridden off on his motorbike. Tata planned to sell a quarter million of the world's cheapest cars each year but so far has shifted fewer than 150,000. So what went wrong? And has the Nano's slow start forever killed the idea of an ultra-low-cost car?

Part of it can be blamed on the Nano's traumatic birth. The factory had to be moved 1000 miles across India due to civil unrest by displaced farmers at the first manufacturing site. Then a series of car fires (even Ferrari has those) forced Tata to offer "safety upgrades" to the exhaust and electrical systems. And the Nano didn't meet its touted 100,000-rupee target; the least you'll pay to put one on the road is about 140,000 rupees, or $2700.

But Deepesh Rathore, head of automotive consultancy IHS India, says the car's simple failure to connect with its customers is more important. "There was a rush of customers at first," he says. "They were the same kind of people who queue overnight outside Apple stores, but the real customers, buyers trading up from a two-wheeler who are really stretching themselves financially, see something that costs four times as much to buy as a motorcycle and, more important, three times as much to fuel. And while it's a good concept, it is still compromised as a car. The top speed is inadequate on highways, and overtaking can be a challenge. If they're going to spend so much, they'd rather have a proper, proven car."

The Nano's failure in its home market has also delayed plans to export it. "There is still the desire to bring the car to the U.S. and Europe, but the time scales are a little different now and the emphasis is back on the home market," one Tata insider told Automobile Magazine. The Nano has just been given its first makeover, with power leaping by 3 hp, to 37 hp, and the addition of big-car features like a passenger-side mirror. This, and a new marketing push, might help to stabilize sales at a just-about-sustainable 10,000 each month; in November 2010, after the fire scares, only 509 were sold.

This flat response has prompted other carmakers who had planned to copy the Nano to radically rethink their plans. Hyundai and Maruti were thought to be considering Nano rivals but instead have stuck with conventional entry-level cars. Indian motorcycle maker Bajaj has also been developing an ultra-low-cost car with Nissan, but its launch has been delayed by at least three years (to 2015), and it will now learn from the Nano's errors by offering extreme fuel economy instead of a crazy-cheap sticker price. "The ultra-low-cost car is dead," says Rathore.

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