AM Online

Going gets tough for Nano

Ratan Tata’s wholly admirable dream of using the Nano to replace the dangerous, smelly scooter as standard family transport in much of India is not going completely according to plan.

Tata says slow initial sales are down to a
variety of teething troubles: a local campaign against “capitalist exploitation” forced Tata to move its plant to a different state, an early recall dented confidence and buyers found finance hard to get.

Those problems are all potentially surmountable, but the second part of Tata’s strategy – exporting it to Europe – could be much tougher.

Superficially, the idea is attractive – a new four-seater car for between £4,000 and £5,000, frugally engineered to be a modern Citroën 2CV, has a lot of emotional appeal.

However, there are a number of problems.

Firstly, in India the much more basic Nano from around £2,000 is com-peting against scooters.

A European version at around twice the price (thanks to higher specifications and higher distribution and marketing costs), is up against a two-year old city car or a three-year old supermini.

The once-common perception that buyers should choose a brand-new car at all costs has faded, as cars are so much better built than they used to be.

Secondly, families on a budget can’t afford a small car.

They need one car that can do everything, not something only suited to pottering around town.

That is why every big selling economy car in Europe has been from the lower medium segment.

Here, city cars are generally bought by the young who want something small and funky as their first new car (e.g. the Toyota Aygo), or as second/third cars for families wanting a runabout.

The size of that second car market was demonstrated by the success of the scrappage scheme – most deals were with relatively affluent customers who had kept an old second car for years.

It is hard to see either the young or families taking to the Tata Nano – after all, if there was pent-up demand for minimalist Asian econoboxes, Perodua would sell more than 1,000 cars a year.

There will be some people who buy it for ideological reasons, but it seems doubtful that there are enough car-driving, sandal-wearing vegans to make a business case.

The fundamental question for any economy car is whether it makes more sense than a two-year old used car.

The key to the Dacia Logan’s success is that it does just that – a decent new family car for £7,000 is a compelling proposition.

An upmarket version of a scooter alternative for £5,000 has fewer obvious advantages.
 

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