Is Tata Nano Booking Figure Anything To Crow About ?

10 05 2009

Tata Motors has announced the booking figures for Tata Nano which closed on April 25. The company has issued a press release that they received 2.03 lakh bookings. Since the company will issue allotment dates for 1.0 lakh cars only, it can be said that the oversubscription was more than two times.

However, given the hype surrounding the model and the media projecting it as a game-changer, the response received is rather lukewarm. Tata Motors had sold over 6 lakh forms through their various channels, yet only a third of the applications were submitted. Industry analysts had estimated that there will be at least 5 lakh bookings. Even BusinessWeek in a recent story titled “Why Indians are thrilled about Tata Nano” had estimated that the bookings will be over  3.5 lakh. The actual numbers turned out to be far less.

In terms of the models preferred, the most expensive LX model got 50%, 30% for the mid-priced CX model and only 20% for the lowest priced model. Readers may recall, it was the lowest priced model which came close to the Rs 1.0 lakh dream car of Mr. Tata.

Some of the reasons which may have led to the poor response as analysed by TOI is as follows:

It is believed that the high booking amount fixed for the Nano, as well as almost no chance for any customer to test-drive the car, could be among the reasons for this subdued response. Uncertainty among people on whether they would be selected in the draw of lots, considering that Tata Motors will deliver only around 50,000 units in the first year (starting from July) and that too on a scattered basis, could also act as a dampener. The fear associated with buying a new model, that has not yet proved its actual road worthiness, might be another reason.

In addition, to the above reasons, I would like to add the huge uncertianty surrounding the survival of Tata Motors because of its debt overhang may have been weighing in the minds of some of the buyers. Also, the fact that Tata was going to use the booking advance to build the Nano factory did not go down well with some buyers. Tata was acting like a typical real-estate developer, who shows a model flat, takes bookings before even starting construction and then using the booking amount to build the flats using the customer’s money. 

 

The premium LX version getting better response than the base version also indicates that the analysts and Tata himself expecting that millions of two-wheeler owners will aspire for a low-priced car like Nano seems to be a myth. Nano for the present is only snatching away market share from Maruti-800/ Omni and second-hand car buyers and not from the two-wheeler market.

 

When Nano comes on road and the factory starts producing to full-capacity, it will be interesting to watch the market dynamics.

 

– G. Mohan

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One response

15 05 2009
Amit Jain

Mohan,

Just wanted to let you know that I have been reading your “blog” and I like the variety. As for Nano, I am afraid that Indians are culturally more risk averse (rightly so) in most phases of our lives. Therefore, for many of the reasons you listed/quoted, they don’t want to take a chance with a “concept” version of the Tata dream. Add to that the uncertainty of the economic climate, and I am not surprised that bookings are lower than expected (but still 2x oversubscribed as you pointed out). I would wait until version 2.0 is rolled out before passing a verdict. I don’t know the current cost of a two-wheeler in India (with all its bells and whistles, if any); therefore, it is hard to draw a conclusion if Nano means the demise of the two-wheeler. Based on my recent visits to India, our infrastructure, laxity in enforcing traffic and safety laws, as well as the increasing cost of labor would keep the two-wheeler market quite alive. India is a country of young people and at least until one gets a job, I would think that the two-wheelers would be in high demand.

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