Ratan Tata says he is still determined to keep the price of his firm’s radical Nano down to the promised £1250, despite the rising costs of raw materials.
The Nano has been designed to be the cheapest car in the world, but keeping the microcar’s unit price down to the stated goal of 100,000 rupees (£1250) is looking like an increasingly difficult challenge.
In an exclusive interview with Autocar India, Tata admitted, “The rise in steel and rubber prices are affecting our margins, but I would still like to keep to our promise on the base unit price.”
Experts say that this resolve will mean that Tata incurs losses on every vehicle when it goes on sale later this year.
It is estimated that raw materials account for a massive 23 per cent of the total factory cost of the Nano; in contrast, raw materials account for just seven per cent of the cost of a typical western car.
Plans by Renault, Nissan and Indian motorbike manufacturer Bajaj to build a Nano rival retailing for £1300 now look increasingly under threat, while Hyundai/Kia thinks that its own £1850 ‘Ultra Low Cost’ car is the realistic base price for any manufacturer.
Financial sources now estimate that Tata will need to produce 400,000 Nanos per year to make the project work; that’s 150,000 more than Tata originally calculated.
Even so, the Nano has a huge potential market. There are as many as 100 million households in developing countries able to afford a car under £3000 and demand for the Nano has already exceeded the original annual production figure of 250,000 units.