Despite developing the Nano as the world’s cheapest car, Tata Motors said only 20% of the initial 203,000 orders for the car are for the no-frills US$2,600 model while half of buyers have opted for the top-end model, which costs $3,600.
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Tata is to start deliveries of the Nano in July, choosing the first customers through a lottery. In contrast to the entry-level model, the mid and top end cars feature amenities such as air conditioning, fabric seats, central locking, front power windows and cup holders.
That is good news for the company, however, as analysts point out that sales of more expensive versions with extras such as air conditioning mean bigger margins for Tata and less chance of a profit-sapping price war with rival manufacturers such as Maruti Suzuki India.
Mahantesh Sabarad, a Mumbai-based analyst at Centrum Broking, told Bloomberg News there was little demand for the basic model. He added: “Based on this experience, it does give other automakers room for pricing their products higher. They don’t have to be drawn down to a pricing war.”
Toyota and Renault are also planning low-cost cars for India and analysts say they may be able to charge more for their models in future while Maruti Suzuki, maker of half the cars sold in India, said it did not intend to reduce the price of its $3,923 Maruti 800 to compete with the Nano.
Toyota plans to introduce a small car in India in 2010, with an initial annual production target of 70,000 units, Renault and Nissan are together developing a $2,500 car with Bajaj Auto.
