Demand for Tata Motors Slumps, Nano Stays in Neutral

Tata Motors (s TTM), India’s largest auto manufacturer and would-be maker of the ultra-cheap Nano and the electric Indica, shut down its factory in Jamshedpur today for the second time in less than a month. Set to last five days, the closure is an attempt to keep vehicles — and losses — from piling up as a global economic recession puts the brakes on demand.
This, along with production cuts announced last month, intense local opposition to placement of the Nano manufacturing plant, and growing troubles for its parent company, Tata Group, suggests the Nano’s once bright star is on the wane. Unveiled in January to buzz that electric versions might soon follow, the car was due to launch this quarter with a price tag of just $2,500. When steel prices increased earlier this year, that began to look like a surefire loss.

The launch has been pushed back to March, but for the Nano, there is a silver lining to the financial crisis now slamming Tata: collapsed steel prices could help limit production costs, and affordable cars never look better than in the midst of recession. Of course, winning the $10 million Automotive X Prize couldn’t hurt either (Tata will enter a smaller, all-electric version of the Nano, as well as a hybrid-electric four-seat version in this year’s competition).
Better still might be the scenario forecast last week by India’s finance minister: economic growth of up to 9 percent next year, driven by increased consumer spending on houses and cars. With the Think City car making a fast comeback in Norway, the Tata will have to move quickly — and avoid Nano-style delays — with the Indica EV to keep up.