With the launch of the Tata Nano in March 2009, it was obvious that the Nano would be the future of small cars in India. At a price of INR 1,00,000, Tata introduced the “People’s Car” with features like good fuel efficiency, rear engine, elegant and eco-friendly appearance, etc. The car received quick recognition from Indian families who previously could not afford a four-wheeler. As of May 2009, approximately 203,000 people had ordered a Nano. But in 2010, the sale of the car experienced a sequential decline. In July 2010, Tata Motors sold 9,000 units of the Nano, which dropped to 8,103 units in August, 5,520 units in September, and only 3,065 units in October. In November, which is a festive month and when it is considered auspicious to buy new and expensive items, Nano sales fell to just 509 units, even as the overall sales of the Indian auto sector increased by 45% in October 2010. This resulted in which Tata Motor’s total domestic sales in the passenger car segment fell 25% to 15,340 units from 20,706 units a year earlier. Even high-end cars like Mercedes sold more than 500 units in the holiday month.

The main reasons attributed to the steady drop in sales of Nano Cars are multiple fire incidents in India, rising car prices and difficulty in getting loans from banks. Since the release of the Nano, there have been several instances where the Nano has caught fire. The number of such incidents increased to six in August 2010. Experts attribute this to a faulty wiring system causing short circuits and smoke. In addition to the fire incidents, the lack of financing options available to Nano customers is also causing a drop in sales. Banks are unwilling to lend to low-income customers out of concern that they might default. According to statistics, nine out of ten Nano buyers apply for a loan. Also, the interest rate banks charge for Nano is around 20-22% compared to 13-14% for other cars. Tata also raised the price of Nano after which it is no longer a 1 Lakh Rupee car. Earlier this year, the company raised the price by Rs 5,000 due to BS IV emission standards and by Rs 30,000 after a few months due to rising input costs.

Having become aware of the problems that led to the decline in sales, TATA has taken various steps to rectify the situation. Considering the fire incidents, the company will provide free security updates. It is proposed to add additional safety features in the car’s exhaust and electrical system. The company has launched a trade-in scheme under which customers can trade in their two-wheeler for a Nano, paying the differential amount. The company is also taking the initiative to provide financing for Nano with the help of its financial arm Tata Motors Finance Ltd, by linking with nationalized and cooperative banks, etc. The company has improved interaction with customers and dealers to get their feedback in an effort to improve the product. There are several kiosks set up across the country to target the rural market, where people haven’t driven a car or visited a showroom. Steps have also been taken to reduce vehicle delivery time and change the perception that there are still long booking queues for Nano.

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