Tata Nano Buyers Like Luxury Options, Too

May 25, 2009

Many have praised Ratan Tata, chairman of Tata, for doing what seemed the impossible; designing, engineering, and building the world’s cheapest car. In a process that took nearly four years and involved the efforts of more than 500 engineers, Tata managed to bring to market its Nano minicar with a starting price of only $2,600.

To do so, Tata needed to scrimp on almost every design element of the car, including refining the entire manufacturing process, utilizing cheaper raw materials and seeking new design approaches from suppliers. In the end, however, these tireless efforts could be considered a waste.

You see, only about 20% of the 203,000 Nanos already sold have been the base model. It appears the majority of Indian consumers have opted for ‘luxury’ options, such as air-conditioning and cup holders, which can push the price of the car up significantly. Furthermore, roughly half of all the Nano orders have been for the range-topping model, which costs almost 40% more than the base.

This is good news for Tata, which stands to make more money from the higher profit margins of the additional extras than with the basic package alone. It also means that Tata will stand a better chance against rivals like Maruti Suzuki, Toyota and Renault, all of which are preparing similar budget minicars for the Indian market.

Despite all the engineering that went into the car, there’s no hiding the fact that the Nano is largely unsuitable for most Western markets. However, the experience gained from the tight cost constraints will likely have a flow-on effect to future models, from Tata and rival firms, which can only be described as a positive step for both automakers and consumers alike.


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