Categories: Auto

Tata Nano gets costlier – Is the Price hike Justified? Yes, of course!!

Tata Nano denies remaining out of buzz! The people’s car was recently in news on account rumors of going topless – however, there is no confirmatory news from the management about any such conversion-led models.

But, most of the times the little Nano has remained strangled in the negative news – be it roadblocks on account of agitating Trinamool Congress chief Mamta Banerjee-led Singur row or the small car getting drubbed by a couple of unfortunate fire incidents when it actually hit the roads.

Even this time around it’s not so conducive news from the manufacturer of Nano – Tata Motors – which created a history in early 2008 while it unveiled the world’s cheapest car at the 9th Auto Expo in New Delhi. In a latest, Tata Motors has said that Nano cars will be priced 3-4% higher due to steep increase in input costs.

However, the company will not raise the prices for the first 1 lakh bookings as per their promise during the launch. The reputed Tatas had promised the lowest ranged Nano model to be sold at Rs.1.23 lakh for ex-showroom price at Delhi.

As many as 45000 units of the people’s car were sold over the last one year. The sales are expected to pick up as the company’s factory at Sanand in Gujarat, which has the capacity to produce a minimum of 2, 50,000 units annually, has been operational since a couple of months now. The delivery from the Sanand outlet had reached more than 7000 cars in June 2010.

Now, coming to the point – have input costs really surged? Yes, currently, the raw material prices of base metals are way higher than the one that prevailed during the Nano’s launch – although they seem to have cooled down a bit during the last 1 month.

In fact, most of the domestic carmakers – which sell their cars at much higher margins than that of Tata’s Nano – have raised the 4-wheeler prices at least TWICE this year.

One such hike in the car prices has been effective immediately after the Union Budget 2010 on account of 2% increase in excise duties. The other one has been effective from the month of April, on account of up-gradation costs involved in conforming to the stricter emission norms for the vehicles.

Thus, all this while, Tatas have loyally stuck to its promise to allot cars, at the promised tags, to its first 1 lakh valued customers. In my opinion, a potential hike of 3-4% is not a big issue and a clear testimony to the fact that the reputed company is no mood to claim unfair benefit of a steep price hike to cash-in from its robust order book position for Nano.

What’s your take on this?

Viral Dholakia :Viral Dholakia is a Freelance writer for financial magazines & is passionate about blogging and Capital Markets. Stay in touch with him at bull4bears-at-yahoo.co.in or on Twitter at @viralsss