Tata Nano

  Indian car industry is really going through the toughest time in last one decade owing to a net  increase in petrol prices By Rs 5/L. Although there are chances that today petrol prices may come down by Rs 2/L .However another news came day before yesterday that oil ministry has advised finance minister to put up an excise duty of Rs 1,70,000 on small diesel cars and Rs 2,50,000 on sedans and SUVs. However, The amount is too big but justified considering that diesel consumption has increased because of these Big SUVs. If this thing is implemented Petrol cars whose sales were down will again be back in competition.

One petrol car which i want to discuss today is Tata nano,the world's cheapest car.  Ratan Tata  surprised everybody when He announced 7-8 years back that his company tata motors will launch a car with a price tag of Rs 1 lac.Many big automakers thought this as unachievable and It is not possible to make a car with a price tag of Rs 1 Lac supporting Bharat 4 norms. But january 2008, tata nano was launched in delhi auto expo and automobile journalists from all over the world were in delhi to cover the event.Although the car was launched on the 100th anniversary of Model T car( to know about T car follow this wiki link henry ford's T-CAR), just like T-car created a storm in American market in 1908 catering to middle class population of America , the same ratan tata had expected form NANO.

Tata nano did not have a good start, It was supposed to be made in singur,west bengal  but protests from mamta banerjee forced tata motors to shift its factory to Sanand, Gujrat, The car which was supposed to be lauched in oct 2008 was then lauched in march 2009. Few months into the launch the car was available only through bookings and initially few cars(only few,not more than 4-5) were burnt while being on roads and this did not go well with Indian consumers and many people cancelled their bookings.This was the first impact which lead to low sales of tata nano over the years. However, i think there could be more reasons which were responsible for low sales of Tata nano..

1. Indian economy had undergone a sea change from 2003 to 2009( till the time Car was officially launched) , Per capita income had increased by more than twice the amount. M800 was no more the largest selling car and it was replaced with Alto which was priced 30k higher( and also it was revealed that alto VX priced almost 2.9 Lacs was the largest selling model within ALTO). Now with the car like Nano existing car owners did not show keen interest in it.

2. The car initially was marketed in such a way that its a car for low middle class income people which did not go well with the indian consumers who always feel pride in buying whatever they buy.People started calling it as Poor man's car.

3. The increase in price of petrol was also a big reason why people did not buy this car as the main target group of this car were those people who were most price sensitive towards petrol.

however the company has launched its revamped model Nano 2012 and also changed its marketing strategy with their new ad campaign involving youngsters, Before this they also had an advertisement in which they highlighted the problems faced by two-wheelers,that was a very good campaign.Hope tata Nano receives good response  in future and its sales in last few months have been good too( considering that all petrol car sales are declining, but nano sales are constant ).

Indian Automobile industry

Indian automobile industry has gone major rapid changes in the last 14 years. I would be discussing only cars here because i love discussing about Cars.Before 1983 there were only 2 cars manufacturers in India ambassador(Hindustan motors) n Fiat, both cars were big in size and also expensive( and also not attractive,although some may argue on it.) Then in 1983, a joint venture between govt of india and suzuki motor corporation took place to produce small cars in india. Then came maruti 800. This car was  highly successful  and was largest selling car in India till suzuki Alto replaced it.

1998 was a great year for indian car industry as three new models(small cars) were introduced by three different manufacturers( namely hyundai santro, daewoo matiz and tata Indica). Out of three SANTRO become the most successful and was second largest selling car in india till 2008. In the last 4-5 years many new models have been launched in different segments and many car manufactures have come and set-up shops in India and selling all types of cars( hatchbacks, sedans,MUVs, SUVs). Nissan n Renault are the latest to join the list and Peugeot will also start  manufacturing cars in India by 2014. car industry was witnessing a good growth in India (neglecting the slump in 2009 because of recession) till  mid-2011. High inflation made RBI hike interest rates  and this took a toll on sales (In india ,75% of the cars sold are sold on credit.) People started shifting their demands and the manufacturers had to look for other options to sell a car. some had a tie up with financial institutions to sell a car at an interest rate below the bank rate (Hyundai did this thing to lure customers.)

Now, car manufacturers have another problem in hand, the problem of fuel price hike. people are re-thinking whether they should buy a car or not since petrol prices have crossed 70 mark in delhi. As a matter of fact Suzuki Alto had a 40% reduction in its demand as its sales fall  from 32k to 17k and was replaced by suzuki swift as the largest selling car in the month of April 2012. Swift sales are increasing because of its diesel  model. Diesel car sales are at an all time high because of their fuel efficiency and also huge subsidy provided by govt on diesel, perhaps this is the only thing which is saving car manufacturers at the moment. Subsidized diesel is for poor people but as of now SUV owners  and luxury car owners are making good use of it. Running cost of a  diesel car is Rs 2.5/km whereas  on petrol Its Rs 6.5. With increased VAT by delhi govt, Running cost of a CNG car is Rs 2 and considering the time one has to wait  for his turn at CNG gas station, Its better to go for a diesel car then a CNG one( Govt attempts to go green fall flat.. :D  ).

 

MAY 2012  sales figures

Now the car manufacturers have a problem in hand , how to sell their petrol cars( they have spent huge amount of money in setting up engine plant and getting other things in order). Perhaps giving Huge discounts is the most they can do now. Govt of india is thinking of putting a diesel tax( to recover part of subsidy on diesel) on vehicles, If this thing is approved this will be another blow on car manufacturers.Even if govt do impose diesel tax on vehicles then its nothing wrong as majority of private diesel cars are above  Rs 5 lacs and are owned by upper middle class and high class people who drive their cars daily to go to their workplace and do not use public transport. Subsidy is not for them, it is for poor.Putting tax on diesel vehicles will reduce demand of diesel cars and increase sales of petrol cars.It will also result in less consumption of subsidized diesel.Another solution can be dual pricing of diesel for commercial and private cars  but this can cause black marketing and corruption.

 So car makers who enjoyed golden period from 2005-2011 are in for a tough task here. What will be interesting to see is their marketing strategy to sell petrol cars and also increase their production of diesel vehicles( and with no clear policy on diesel, they may not go for big investments in diesel cars.)