After a nosedive in sales of the Nano ‘people’s’ car, and with unsold models piling up, Tata Motors now faces a daunting challenge.

The Hindustan Times said as many as 7,000 cars are now parked in the open at the company's Sanand factory in Gujarat amid record low sales of just 509 cars in November.

The rise in inventory has forced Tata to slow down production and only a few dozen cars are being produced every day, factory sources told the newspaper.

Insiders say it will take more than six months to clear the stock despite a number of sales incentives introduced by the carmaker this month.

Suppliers said orders have been reduced and it was unlikely sales would match the projections of 20,000-25,000 units every month by March 2011 that Tata made when it inaugurated the Sanand factory in June this year.

Sanand itself had to be hastily arranged in a more receptive Indian state after farmers' land-grab protests halted construction and fit-out of the 95% facility which was subsequently abandoned. Nanos were assembled temporarily in other Tata factories while Sanand was built.

One supplier told the newspaper: “We are concerned about the slow production because we have seen cuts in orders for components that we supply to the company for the car. We were given a very high projection of production, but the demand has not met the expectation.”

Tata has allocated plots to 41 suppliers at the vendor park adjacent to the car plant spread over 375 acres. Of these, 25 have started construction and six plants are on the verge of commencing production.

Tata said the situation wasn't abnormal and in keeping with its plan "to keep inventory appropriate at the end of the year".

The company told the Hindustan Times: "Tata Motors has clear visibility and an action plan on the marketing, financing, sales and manufacturing of the Nano. Existing customers are happy with the car and as open sales are expanded the numbers will also increase."

Last week Tata Motors Finance launched a special scheme to boost Nano sales allowing customers to get a loan for the car within 48 hours with TMF providing up to 90% finance at competitive rates.

Sales of the Nano are now at their lowest level since its launch as the world's cheapest car. Concerns have arisen following a series of fires affecting the car, even though the maker is offering free safety upgrades. Sales have fallen for four straight months from a high of 9,000 cars in July this year.

The latest move on finance follows a number of other measures introduced by Tata including a free four-year/60,000km manufacturer’s warranty and extending this to all existing Nano owners. In addition, all new buyers have the option of a comprehensive maintenance contract at only INR99 per month (US$1.40).