Sales slip for world's cheapest car

Sales of the world's cheapest car, the Tata Nano are slipping. Photo / Supplied

Tata plans to release a diesel version of its Nano, writes Siddharth Philip

Karl Slym, managing director of India's Tata Motors, is planning to build a diesel version of the world's cheapest car this year to revive vehicle sales, which have dropped for three straight quarters in India.

Tata Motors also plans a variant of the Nano, conceived by former chairman Ratan Tata, that will be fuelled by compressed natural gas, Slym said. The company last week reported profit, including that of unit Jaguar Land Rover, which missed analysts' estimates by 44 per cent. Slym is betting a 30 per cent difference between diesel and petrol prices will make the Nano a popular choice.

He is introducing new models of the US$2500 ($2937) Nano, which according to Ratan Tata has failed to reach its "full potential", and the Indica hatchback to help the company recover from the biggest loss in at least a decade at home. The poor performance in India will negate gains at the company's luxury unit unless chairman Cyrus Mistry revamps the local unit, said Mitul Shah, an analyst at Karvy Stock Broking.

"We had a quiet time and so now it's time to break out," Slym said in an interview in Mumbai. "You will see new products and an ongoing portfolio. The Nano has a lot going on with it right now."

"The India business is loss- making right now, which is unsustainable for the company," said Kapil Singh, an analyst with Nomura Holdings in Mumbai. "The Nano has not met expectations so models such as the diesel Nano will help, but we'll have to watch where they price it at."

Slym plans to "dramatically" change customer focus to revive demand for the Nano, whose sales plunged and never fully recovered after at least three caught fire in 2010.

Instead of seeking to sell to motorcycle owners looking to upgrade, the company will market the car to customers "aspiring" to buy the Nano, said Slym, who joined from GM's China unit.

Ratan Tata decided to develop the Nano after seeing a family riding on a scooter. After the fires, the company in December 2010 extended warranties to four years or 60,000 kilometres and started offering as much as 90 per cent financing through unit Tata Motors Finance.

Sales of the Nano plunged 81 per cent to 1504 units in January from a year earlier after peaking at 10,475 units in March 2012.

The company chose the first 100,000 customers for the Nano through a lottery following a deluge of orders in 2009.