Tata Nano likely to lose its Rs 1,00,000 price tag

At its launch at the Auto Expo 2008, the Tata Nano attracted so much attention because of what it gave for so little money. The 100,000 Rupee vehicle ($2,200) is in danger of losing its low price tag thanks to spiraling costs of raw materials and increased taxes. Although Ratan Tata would insist on keeping the vehicle at the promised price at its launch, he is likely to lose this battle. There is some respite though, Tata Motors has guaranteed that the first 100,000 cars will be delivered “price protected” to owners, which means they get the vehicle at the promised price, regardless of rising costs.

Considered as the “People’s car”, the Nano is aimed at the middle-class who travel three and four-up on two wheelers. “The Nano is Ratan Tata’s dream project. But as costs rise, the Nano will not remain a 100,000-rupee car,” said Vaishali Jajoo, from Mumbai-based Angel Broking. Tata is going through the same problems that all the other automobile manufacturers face right now. Leading makers Maruti Suzuki and Hyundai have announced hikes on their vehicles already.

The biggest contributor to the price rise has been the increase in price of all forms of steel by about 25% since April 2009. As demands for copper, aluminium, plastics and rubber picks-up post recession, the prices of automobile accessories and tyres has also seen a considerable rise. Tata has sold over 26,400 Nano’s since its launch in July 2009 with the base model priced at just Rs 1,00,000 as it leaves the factory floor. The rest of the lineup costs almost 1,75,000 to 1,85,000 and the cost of the LX is expected to hit 2,00,000 when the next rounds of bookings open by the end of this year.

“What happens in the future is difficult to say,” a company spokesman said. Tata admitted that it  faced challenges from the rising cost of raw materials, withdrawal of government stimulus and a possible hike in interest rates.

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