Small Car Nano a Loss-making Product in Highly Price-sensitive Market, says Tata Motors

As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down

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Tata Motors
Cyrus Pallonji Mistry. Flickr

Mumbai, November 04, 2016: Echoing Tata Sons’ ousted Chairman Cyrus P. Mistry, Tata Motors on Friday said its Nano small car has been “a loss-making product” in the highly price-sensitive market, coupled with low volumes.

Mistry had earlier stated that “as there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down.”

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“Considering the attention and excitement it created, project investments were set up for capacities for around 2,50,000 cars per annum. However, unfortunately, and due to combination of several factors, including project delays due to change in location of the factory, and the perception of being a ‘low priced’ car, the volumes initially anticipated did not materialise and utilisation of capacities are significantly lower,” said the car maker responding to clarifications sought by BSE.

In a highly price-sensitive segment of the market, coupled with low volumes, it has been a loss making product, it added.

Mistry had also alleged that the Nano product development concept called “for a car below Rs 1 lakh, but the costs were always above this”. “This product has consistently lost money, peaking at Rs 1,000 crore,” he said.

Tata Motors
A Nano car on display. Wikimedia

The company further said that a major part of the investments in the factory are “capable of being utilised for other products” as is “evident from the production of company’s Tiago cars” in the same factory.

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“As far as development cost and investments in Nano specific dies and toolings are concerned, these have significantly written off, in line with the accounting policies, over the last several years,” the filing said.

Mistry had also pointed out that challenge in shutting down Nano is that it would “stop the supply of the Nano gliders to an entity that makes electric cars and in which Mr. Tata has stake”.

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Responding to that, the company said, “We would like to clarify that the matter is in a preliminary exploratory stage and no arrangement for supply of gliders has been conducted.”

The car maker said that it got approval of the board for its future passenger vehicle product and business strategy, which envisages refocusing its strategy on growing and attractive segments of the passenger vehicle market in terms of volumes and profitability, and “aligning with the changing and enhanced expectations of the consumers regarding contents and features”.

The company also said that it would pursue the refocused long-term strategy. (IANS)

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