Tata Motors may charge the losses on its small car Nano, the world's cheapest car at Rs 1 lakh, against the profit it earns from selling trucks, according to industry analysts.
Chairman Ratan Tata has pledged to sell Nano, touted as the common man's car, at Rs 1,00,000 even though the cost of making and selling the car is expected to be higher because of rising steel, battery and other input prices. Tata Motors has formed a team to evolve a plan to keep the costs closer to the sale price.
"The challenge for Tata Motors is not to sell the car at Rs 1 lakh but to produce the car substantially below the Rs 1 lakh barrier so as to be profitable. With the recent skyrocketing increase in prices of raw materials it is next to impossible to maintain that limit. The company will look to counterbalance the heavy initial loss on Nano by margin gain on the commercial vehicle segment. The production numbers (of the Nano) will be considerably lower in the initial quarters", said a Mumbai-based auto analyst from one of the leading brokerage firm.
The car, which may be sold starting October, is expected to turn to profit in four years, automobile analysts who declined to be identified said. The car will be built at Tata Motor's plant in Singur, West Bengal.
The company intends to produce about 250,000 units of Nano's per annum in Phase I of expansion with a gradual increase to 350,000 units per annum in Phase II.
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