Tata's Nano Goes on Sale in Mid-April

India's highly anticipated $2,000 "People's Car" nears its debut amid factory headaches and a seriously slumping domestic auto market

By Mehul Srivastava

After battling thousands of angry protestors, a cross-country move for a nearly completed car factory, a skeptical car industry, and a nosedive in its share price, Tata Motors (TTM) finally has a launch date for its People's Car, the Nano. With a sticker price of around $2,000, the Nano will be by far the cheapest car in the world—and the most widely anticipated car in India. On Feb. 26 the company announced the Nano will go on display Mar. 23 and on sale in mid-April.

As challenging as it has been for Tata to first develop and then produce the Nano, the automaker's biggest challenge may still lie ahead: With the Indian economy sagging, the country's auto market is in the dumps. Automobile sales in India, once the second-fastest growing car market in the world, have dropped significantly on a month-by-month basis since October. Total automobile sales—including commercial vehicles, two-wheelers, and passenger cars—dropped 13% in October, 18% in November, and 15% in December. This year, the downward trend is continuing, with sales dropping another 7% in January, according to data maintained by the Society of Indian Automobile Manufacturers.

Nano Web Site: 30 Million Visits

But if any car could buck that trend, say auto analysts, it could be the Nano. Without a doubt, it has captured India's imagination. When it was unveiled in January 2008 at the Delhi Auto Show, the car made headlines the world over. It was surprisingly good looking, and with an array of technological advances, it had delivered Tata Group Chairman Ratan Tata's promise of producing a quality car for 100,000 rupees. (In India, the car was nicknamed the One Lakh car before it launched, since a lakh is the Hindi word for 100,000.) For many Indians, the car became a symbol of national pride, coming on the heels of nearly a decade of breakneck economic growth and India's ascent in the global economy.

Since then, says Tata Motors, nearly 30 million people have visited the Web site for the Nano. And even though the car project got mired in controversy when protestors in the eastern state of West Bengal ringed its production site, complaining about the way the Bengal government had acquired land before leasing it to Tata Motors, the Nano remained popular in other parts of the country. "I would have bought one in October, if the car was ready," says Raghuvir Pandey, 33, a textbook salesman from Faridabad, a suburb of New Delhi, who said he had been saving money for the car for months. "If it was possible, I would have been the first person in line for it."

The success of the Nano is pivotal for Tata Motors, which is loaded with debt from a $2.3 billion purchase of Jaguar and Land Rover from Ford (F) nearly a year ago. Tata Motors' share price had dropped to nearly half of the company's book value, before recovering to about 80% of its book value of 4.61 per share, as estimated by Macquarie Research (MQG.AX). Its shares have fallen 10% so far this year; that's on top of a 78% plunge last year, versus a 52% drop in 2008 for the benchmark Sensex index. Analysts estimate earnings for the fiscal year ending in March will be approximately $351 million, on revenues of $5.6 billion.

Released at the Right Time?

The poor stock performance reflected investor unease not just about the Nano and the Jaguar-Land Rover deal but also the sorry state of the Indian auto market. Yet some observers are hopeful that there's room for a turnaround.