Saturday, August 16, 2008

Some are Complaining the Nano Car Might Be Cheap, but not Cheap Enough at $2500?

In my quest to keep you updated on the latest innovations for eco friendly green cars, this weird tale of price rears its ugly head. The Nano might cost too much at $2500? Wow. According to the NY Times:

The wonderful era of the ultra cheap car — the People’s Car! — could be over before it’s begun. Introduced to great international fanfare in January at the New Delhi Auto Show, the Tata Nano was heralded as the great hope for the Indian middle class. A bare-bones sedan with a 623-cc engine, the Nano was promised to sell for only $2,500. It was going to get Indians off their scooters and into cars. But that was before prices for steel and other raw materials began to climb — and climb and climb.

From the Times of London: Ratan Tata, the chairman of Tata, has admitted that he faces a dilemma. “If we pass on all costs to the consumer, it will affect demand, and if we don’t, it will affect margins,” he told investors recently. The economics underpinning the Nano, which is due to go on sale this autumn, make it especially vulnerable to commodity market moves. Problems at the Nano factory in Singur, India, can’t be good for the bottom line, either. For potential buyers like Rajesh Malhotra, interviewed by Der Spiegel, even a $500 price increase would make him consider choosing a used car with a more powerful engine over the Nano, which doesn’t come with an air-conditioner. “My wife’s been forcing us to save for the Nano,” Mr. Malhotra said. “But it might be best to wait and see what others think first.”

Recently, Tata has seen its competitors back away from the ultra-cheap car market. In June, Hyundai scrapped plans for a $5,000 car for the Chinese market.
And for the company to make a profit off the Nano, it may be forced to adjust the parameters of the segment before the car appears.

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