Tata Motors Gets 203,000 Orders for Nano, World’s Cheapest Car

By Vipin V. Nair

May 4 (Bloomberg) -- Tata Motors Ltd., the Indian truckmaker that owns Jaguar and Land Rover, received 203,000 orders for its Nano, the world’s cheapest car, more than double the initial sales plan.

The bookings amount to almost 25 billion rupees ($501 million), Mumbai-based Tata Motors said in a statement today. Deliveries will start in July and are expected to be completed in the last quarter of 2010, the company said.

Tata Motors will choose the first 100,000 customers for the $2,500 Nano by a lottery, leaving the company with at least a year of production as backlog. Surging demand from first-time buyers and motorcyclists in India contrast with plunging automobile sales in the U.S. and Europe where job losses and economic recession have kept consumers away from showrooms.

“The Nano has the potential to become a game-changer for Tata in the long run,” said Gaurav Lohia, an analyst at K.R. Choksey Shares & Securities Pvt. in Mumbai. “Once you generate the volumes, you are the king.”

The bookings represent about 17 percent of the 1.22 million passenger cars sold in India, Asia’s fourth-largest automobile market, in the fiscal year ended March. Maruti Suzuki India Ltd., maker of half the cars sold in the country, sold 636,707 units while Hyundai Motor Co. sold 244,030 and Tata Motors sold 160,446, the Society of Indian Automobile Manufacturers said.

Tata Motors shares rose 6 percent to 258.35 rupees in Mumbai today. The shares have gained 62 percent this year.

Pantnagar Rollout

The first Nanos will now roll out from a plant at Pantnagar in northern India, which can produce 60,000 units a year. Annual output will increase by a further 350,000 when a facility at Sanand in western India is completed at the end of this year.

Six analysts surveyed by Bloomberg last month had estimated Tata Motors would get between 120,000 and 500,000 orders for the Nano. The company accepted the bookings between April 9 and April 25 for the egg-shaped model.

Demand for the Nano may help the company, which slumped into its first loss in seven years in the quarter ended Dec. 31, to negotiate better rates with its suppliers and cut production costs for its local range of trucks, buses and sport-utility vehicles, Lohia said.

“You have a huge amount of bargaining power with your suppliers and that will help reduce costs,” Lohia said.

Tata Motors had a 2.6 billion rupee loss in the three months ended Dec. 31. The numbers don’t include financials of Jaguar and Land Rover, which Tata bought from Ford Motor Co. for $2.4 billion in June.

Volkswagen, Honda

Surging demand in India has attracted a combined $6 billion of investment by Volkswagen AG, Honda Motor Co., Toyota Motor Corp. and other carmakers in the country. Car sales in India may triple to 3 million units annually by 2015, according to the Indian government forecast.

That contrasts with plunging demand in Japan, U.S. and Europe. Japan’s auto sales, excluding minicars, fell 32 percent to the lowest level in 35 years in March as economic recession, rising unemployment and falling wages hurt demand. In Europe, sales have slumped for 11 consecutive months through March, while U.S. sales dropped 37 percent in the month.

The first Nanos will sell for as little as 123,360 rupees in New Delhi for the basic model, without reclining seats, air- conditioning or a radio. Buyers were asked to pay 95,000 rupees as down payment for the cheapest model. The most expensive model comes with an air conditioner, central locking and metallic paint.

Dispute, Delay

Sales of the two-cylinder, 624 cc Nano was delayed by at least six months after a land dispute forced Tata Motors to shutter a purpose-built factory in the east of the country.

Most customers who failed to make it to the initial list of buyers may cancel their orders, considering the long wait, said said Deepesh Rathore, Indian automotive analyst at IHS Global Insight Inc.

“As soon as Tata announces the winners of the first 100,000 Nanos, I expect a majority of remaining bookings to be eventually canceled,” said Rathore. “A section of the people would wait with their bookings and have a look at the first few cars on the roads and then decide.”

To contact the reporter on this story:Vnair12@bloomberg.net