The Tata Nano: An Immaterial Car

When Tata Motors launches its $2,000 car, the Nano on Monday, it will create a ton of hype, but not much money.

The company will build 35,000 Nanos this year and hopes to ramp that up to 250,000 annually evenutally. But even if it can sell 100,000 annually, sceptics doubt that the car will help its parent company very much.

In the Wall Street Journal John Bonnell, J. D. Power & Associates said, it’s “not a game changer” and the price will be difficult to maintain. Another analyst Ambrish Mishra, of Mumbai-based MF Global, said “it will be insignificant to the overall profit and revenue” for Tata.

And that’s a problem because Tata is facing tough times, just like most automakers:

The company plunged to its first quarterly net loss in seven years during the October-December 2008 quarter, and saw its debt cut by rating agencies.

More pressingly, Tata Motors faces a June deadline to repay $2 billion in loans related to its Jaguar-Land Rover acquisition last year.

Scrambling to raise money, it sold a 1.37% stake in group company Tata Steel Ltd. to Tata Sons Ltd., the parent of both Tata Motors and Tata Steel, for 3.59 billion rupees last year.

Tata Motors is also laying plans to sell small stakes in six profitable unlisted units, according to local media reports.

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