Costs rising for Tata's Nano

Posted by: Ian Rowley on July 18, 2008

With the October launch of Tata’s 100,000 rupee (about $2,400) Nano getting closer, expect the hype surrounding the world’s cheapest car to soon revisit January levels. Back then, the Nano’s debut in Delhi grabbed more headlines than any car at the North America International Auto Show in Detroit held the same month.

Still, one discussion Tata will probably want to avoid is how much the cheap car will cost to build. In recent weeks a slew of stories coming out of India suggest that costs are rising sharply. On July 7, Automotive News reported that Tata is (like all automakers) struggling with rising steel prices, which rose by about half in the last year. One possibility is that Tata Motors might receive discounts on the steel it buys from sibling company Tata Steel, although that sounds suspiciously like robbing Peter to pay Paul.

Meanwhile, in an interesting twist on cost cutting, on July 3, India’s Economic Times reported that India’s carmakers are cutting back on ad spends to offset rising input costs and warned that the Nano may be “launched without much fanfare.” Tata says that suggestions it is slashing the Nano ad budget are just speculation.

What isn’t speculation is that the new factory where the Nano will be built is costing more than hoped after flooding at the site during the rainy season. Tata managing director Ravi Kant told reporters on June 28 that the price of the plant had risen to 20 billion rupees ($470 million). That’s 18% higher than the projection back in January.

Here in Japan, where Suzuki (the biggest automaker in India) and Nissan (which is planning a cheap car of its own) are watching events carefully, local Japanese media also noted that trial runs at the plant are slated to begin either this month or next. That doesn’t leave much time to iron out any glitches ahead of an October launch. “At least half a year will be needed after the factory is completed (for production to get on track),” an anonymous official from one Japanese manufacturer told the Nihon Keizai newspaper.

Reader Comments

Optimist

July 19, 2008 11:26 AM

The interesting thing is that the Japanese are almost seen praying that NANO fails. This is the first time they have been rattled by a company in a developing country (not China), and in an industry where the Japanese rule.

Tata has done what Toyota couln't.

Nick

July 19, 2008 1:24 PM

Tata Nano is just a hoax.

Ram

July 20, 2008 9:18 AM

It's interesting to watch a person's(TATA) dream to provide a car at the lowest price. It looks like it is still a dream. The parameter is that he could have saif that he will procide the cheapest car. Rather than that he said that he can provide a car for a fixed price where every ingredient to that is raising. May be TATA might take a toll initially just to prove that they can do it but sustaining it may be a problem. Think when people at the lowest level can buy it where will they go for money to buy gas. The equation does not work out.

James Schenkel

July 20, 2008 5:47 PM

Tata Nano is more likely to be a stupendous success than a damp squib. Everybody is aware that rising inflation can take a toll, however it is unlikely to veer costs offtrack.

The car no doubt has rattled global auto industry, particulary Chinese manufacturers who are still busy copying GM designs.

Joseph Lanithottam

July 21, 2008 4:21 AM

Tata Nano is more than just the world's cheapest car. It is an inspiration to people all over the world over takeon the impossible.
Mr Tata has proved a One Lakh car is possible. Now, will one of the Automobile majors raise their hand and commit to a 100 MPG commercially viable car by 2010?

Shantanu Chatterjee

July 21, 2008 8:41 AM

more than the car just think of the distribution network tata will have when it begins exporting millions of these to other emerging markets which will come in handy when perhaps with the help of jlr engineers we finally get a refined tata lineup to go head to head with the hondas and toyotas of the world in around say 10 years.

shirish kokatay

July 21, 2008 10:32 AM

Tata is on the brink of achieving a major break through in the automotive industry based on innovation, discipline and the act of pushing themselves to the limit to wrench out costs out of their product.
Their relentless quest to breaking the barrier of possible efficienies in thier processes will propel them to great success, richly deserved.

Vin Bansal

July 21, 2008 11:49 AM

History says any innovation is met with skepticism. There is a good chance that Nano will be successful. In the end, even if this fails to deliver $2500 car, it may scare the Toyotas, Hondas, etc. enough that they will look for ways to provide less expensive cars with better gas mileage.

October is not that far away..let us wait and see...

Squeezebox

July 21, 2008 1:54 PM

The ad budget really doesn't matter. "If you build a better mousetrap, people will beat a path to your door." American proverb.

Interconnect

July 21, 2008 2:30 PM

Suzuki with accreditation from JD Power presence in the Indian market certainly watching the demise. The idigenuous Nano, is neither copycat of GM Korea, with everything original in compliance of IPR and dream not only of India but of the sub-continet of Indo-Pak, SAARC member countries. Mr Ravi Kant stay alert you have millions of friends, admirers, well wishers, and the legendary Mr. Ratan Tata your vision for prosperity of the region. An example of Tata's strength Ministry of Commerce, Government of Pakistan has cleared Tata CNG Buses a tax free entry for the transport sector of Pakistan, which was subject to punitive duties etc. Recent announcement says Tata CNG buses will allowed free of customs duty entry for transport sector of Pakistan shows the love people of Pakistan has for products and the vision of Ratan Tata. eMail haroon.rashid@akunet.org

Optimist

July 22, 2008 12:51 AM

The issue is not whether TATA is able to maintain the Rs. 100,000 ($ 2400) price tag.

The admirable thing is that Ratan Tata had the vision to think what Toyota, Suzuki, GM couldn't. This is frugal engineering at its best.

And it is heartnening to see all the supporters and well-wishers.

vig

July 28, 2008 1:51 PM

IMHO:

nano($2.5K) + $400 steel cage + $600 Airbags = a car that would survive US crash tests for less than $4K

nano($2.5K) + $400 steel cage + $600 Airbags + $1000 electric motor + $2000 latest lithium batteries =
a car that would survive US crash tests and run on wall current for IMHO:

nano($2.5K) + $400 steel cage + $600 Airbags = a car that would survive US crash tests for less than $4K

nano($2.5K) + $400 steel cage + $600 Airbags + $1000 electric motor + $2000 latest lithium batteries =
a car that would survive US crash tests and run on wall current for

hanuman

August 2, 2008 4:33 PM

Tata Nano is typical of everything thats comes from India, i.e. NOTHING BUT HYPE ON OVER-KILL

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