The five-door hatchback that costs just Rs 100,000 ($2,500), making it the world’s cheapest, was unveiled in January this year at the Auto Expo here.

Nano would be among Tata Motors’ exhibits at the show, a company spokesperson said here.

Sales of Nano, nicknamed the people’s car for its affordable pricing that will make four-wheelers available to millions of middle-class people who hitherto rode two-wheelers, is expected to start in the second half of this year.

Although the car has its share of critics, it has undeniably put India on the global automotive map and has triggered a race among leading car makers to match the Nano price-point. Already, car manufacturers Renault and Nissan are eyeing a $3000 car.

The Nano, which Tata Motors has said meets all safety and emission norms, will share the limelight with top marques from around the world that are expected at the show. This year’s edition of the Geneva Motor Show will mark the 11th year of participation for Tata Motors.

The Nano has already driven these companies to look beyond the two-wheeler market, which has lately shown a huge slowdown.

Banking officials say that a sizeable segment of the 6.5 million (sales as of last financial year) strong motorcycle buyers are expected to shift to the Nano.

The comparable financing structure for a premium two-wheeler forces you to pay more every month through it is for a shorter period of time. For instance, a Bajaj Pulsar 220 is sold at Rs 92,675 with an equated monthly installment (EMI) of Rs 2200 for a period of three years.

Banks such as ICICI Bank, India’s largest auto financier, is charging an interest rate of 21-22 per cent on a two-wheeler loan with a down payment of 40 per cent of the total cost and 12.5 per cent on a car loan.

ICICI Bank is looking at unveiling a similar ‘consumer friendly’ financing scheme for the Nano. N R Narayanan, head-vehicle loans, ICICI Bank, said, “We will come out with special schemes for the Nano as huge volumes are involved. We are yet to make a proper financing package as it is still very early. But we will look to grow.”

Concurrently, an executive from the State Bank of India said, “There will be attractive schemes for the Nano once the booking starts in June. We will announce plans well before that date. Interest rates and tenures will be the selling points of our package.”

It goes without saying that the directive from Reserve Bank of India (RBI) will be crucial. “Although many banks would come out with attractive financing offers, a lot will depend on market situation and risks involved…but we are talking of huge volumes and many smaller banks will look to grab the opportunity to build a brand through attractive schemes”, said a banking executive.

According to experts, banks will provide packages especially in the non-metro regions where the car will become a hot buy.

The car may not be a good idea for the clogged urban roads of Mumbai, Bangalore or Delhi, but it is likely to become a hot seller in cities such as Kolhapur, Lucknow and Ahmedabad. An interest rate of Rs 1,199 can drive many probable two-wheeler buyers to consider the Nano,” said a Mumbai-based auto analyst.

Tata Motors’ own finance subsidiary, Tata Motors Finance, will also finance the car. The company is, however, discreet about its plans.

Tata Motors is looking at producing about 270,000 units annually to begin with and this will be hiked to 350,000 gradually. The car will be up for sale by October this year.

According to Dave Osborne, national secretary for the union, the “members’ long-term future is best served by Tata.” The Unite union represents about 12,000 workers at Land Rover and Jaguar factories.

Tata Motors, which had outbid Mahindra & Mahindra and One Equity with a $2 billion-plus offer, has assured the union officials that it will continue to source engines and other components manufactured at Ford’s British manufacturing facilities which are in south Wales and Dagenham in London and that there will be no layoffs.

“We do believe that Tata Motors, in the event of a sale…offers the best alternative for our people in the UK,” Osborne said. “It’s a cash-rich company. It’s got experience in manufacturing in the automotive industry. It’s got a substantial presence in other industries in the U.K.”

“They (Tata) totally ruled out offloading Jaguar or building Land Rovers in India,” Osborne said, adding that Tata has agreed to keep employment in the UK around the current 15,300.

According to Osborne, Tata has also agreed to stick with the Jaguar-Land Rover business plan through 2011. After that, the Indian automaker has expressed interest in growing the company and even adding workers in the UK, he said.

“The manufacturing footprint will remain unaltered,” he said. “The engineering and design studios will remain. There’s no plans outside of the business plan to source any more components from low-cost economies.”

Osborne said Tata is confident in the British automakers, despite challenges of meeting new carbon dioxide emissions standards in Europe. There is growth potential in emerging markets, he said.

“There seems to be a relative air of confidence from the company rather than talk about reductions in employment levels post-2012,” he said.

According to Roger Maddison, national officer of Unite, “the sooner everything goes through, the better,” as “the workforces are beginning to get anxious.”

Tata has agreed to meet the guarantees sought by the union workers, Maddison said.

The Indian automaker is also expected to take over the pension liabilities, he added.

“Everything seems fine as far as we are concerned; it’s just the lawyers working on it now,” Maddison said.

Meanwhile, sources close to the deal said Ford’s discussions with Tata was constructive and progressing forward and that a conclusive agreement is expected as soon as early March.

The announcement of the sale may come on the sidelines of the Geneva Motor Show which will commence on March 4, the sources said.

Ford, which competes with General Motors Corp. and Toyota Motor Corp., the world’s two largest automakers by sales volume, bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000, joining them with Aston Martin and Volvo to form its Premier Automotive Group.

However, the No.2 US automaker, Ford, which has struggled with declining US sales and falling market share for the past few years, has been exploring the sale of Jaguar and Land Rover since last June.

Last year Ford completed the sale of its controlling stake in Aston Martin for $931 million in cash and preferred stock.

Once Jaguar and Land Rover are sold, Ford’s only European luxury brand will be Sweden-based Volvo. Ford has said it wants to return that unit to profit.

In a separate development, Tata Motors has mandated several local and foreign banks to raise nearly $2.5 billion – mostly from overseas.

While most of the money raised will be used to fund the purchase of Jaguar and Land Rover from Ford, the remaining funds may be used to finance capital expenditure of Jaguar and Land Rover following the acquisition, and also on the production of Nano, the world’s cheapest car, which Tata Motors plans to commercially launch in October.

Tata Motors, India’s third largest maker of passenger vehicles and largest maker of commercial vehicles, is a part of India’s most respected business conglomerate, the Tata Group, which has business interests that include steel, automotive, technology, consumer products, energy, hospitality and beverages.

The Tata Group reported revenues in 2006-07 of $28.8 billion, about 3.2 percent of the country’s GDP, and a market capitalization of $66 billion. The group has 27 publicly listed enterprises and operates in more than 80 countries across six continents, employing over 300,000 people.

Nano has been priced at Rs 1 lakh after taking into consideration an excise duty of 16%. A 4% reduction will offer Tata Motors more headroom to hold on to the Rs 1 lakh price point in case of rise of inputs, like steel, aluminium and plastic parts.

However, Tata Motors company spokesperson said that it was too premature to comment whether Tata Motors will pass on the benefit of reduction in excise duty to buyers as it has done for other small cars in its stable. “This car is made to cost. The cost has been decided first and the design and engineering followed to fit to the price. Reduction in excise duty will enable the company to absorb price hikes of input materials and components through the margin that is now created as result of the reduction. Input costs for automobiles have in fact risen considerably in the past one year. For example, price of steel has risen by at least 15% over the last one year,” said an auto expert.

Interestingly, Tata Motors on Friday announced that it will reduce prices of its small cars and commercial vehicles, including buses, bus chassis and bus body, in view of the reduction of excise duties announced in the Union Budget.

This includes the Indica range of vehicles, except the Indica Zeta GLX and Indigo Compact sedan. According to the business roadmap prepared by the Tata Motors, the Singur plant will initially manufacture 2.5 lakh cars per year, which will be scaled up to 3.5 lakh units over a period of time. The company invested Rs 1,000 crore in the plant.

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Tata Nano – The promise accomplished  

Nissan plans to buy 50,000 A-Star compact cars from its rival Maruti Suzuki and export to markets in Europe. It is also learnt that Tata Motors is talking to dealers to launch its Nano, the ultra low-cost car, in the western markets. Car makers prefer sourcing cars from India since operations are wholly-owned compared to China, enabling low-cost production of components.

Korean car maker Hyundai exports 40% of its small car production, primarily i10 and Santro, which sells as Atos in 97 countries across the world. “Currently, India is a small car hub for Hyundai and we have a backlog of export orders too,” says Hyundai Motor India senior V-P Arvind Saxena. In a slow domestic market, the Korean car major can divert its small cars to western markets. The company is also expanding capacities at its Chennai plant.

The country’s largest car maker Maruti Suzuki currently exports Alto, M800, Omni, Wagon R and Zen Estilo to non-European markets such as Chile, UAE, Algeria and East Africa. The Japanese car maker which exported 53,000 units in 2007-08 will up it to 2-lakh units by 2010. “We had stopped exports to Europe and now we intend to start exporting the A-Star compact car to Europe by year-end,” a company official said.

Nissan too will make a small car in India and start exporting it to Latin American and African countries by 2010. Even while Tata Motors is receiving enquiries from other countries to set up Nano plants, the auto major is also understood to be sprucing up the low-cost car with fitments such as airbags, better interiors and engine options to market it in the overseas markets.

Tata Motors sources said the company might consider issuing licences to a particular car maker in offshore markets, who would manufacture Nano. While the near-term focus is India, international marketing will take place after a few years, company officials said. The Indian car market accounts for 71% of small cars while in China it accounts for 33%. In April-June, car exports were up 46% to 66,119 units.

The move by Tata, which bought the luxury carmaker earlier this year for $2.3 billion (1.5 billion pounds) from Ford, comes on top of “hundreds of millions” of working capital it has provided to the British firm, the paper said citing sources close to Tata.

Tata Motors, reached by Reuters in Mumbai, had no comment on the report, but analysts said pumping money into Jaguar Land Rover would strain Tata Motors’ finances.

Car makers around the globe have been hit by a collapse in demand as the economic slowdown spreads and access to credit is choked off by the financial crisis.

The Times newspaper reported on Monday that the prospect of British government assistance to help keep Jaguar Land Rover afloat had helped the company’s owners to secure last-minute funding from the banks.

It quoted senior figures in the British civil service as saying that British Prime Minister Gordon Brown, Chancellor (finance minister) Alastair Darling and Business Secretary Peter Mandelson had agreed that assistance for Jaguar would be necessary to prevent its collapse.

A spokesman for Britain’s Department for Business, Enterprise and Regulatory Reform told Reuters: “The government stands ready to help companies in the current difficult economic circumstances but does not have an open cheque book.

“The government has been in regular contact with Tata over Jaguar.”

Last week Mandelson confirmed that he had held talks with Jaguar Land Rover, which he said was under “particular strain”.

Brown said on Friday the government wanted to help the car industry through the economic downturn but the main responsibility lies with the carmakers’ owners.

Trades unions have called on the government to step in to save an industry employing tens of thousands directly and indirectly through suppliers.

The United States last week announced a $17.4 billion loan package to rescue its stricken auto makers.

The Canadian government put up an additional $3.3 billion in emergency loans a day later.

TATA STRAIN

Analysts said any injection of funds by the top Indian vehicle maker would strain its finances. Tata Motors has already struggled to pay off a $3 billion bridge loan it had taken to fund the Jaguar and Land Rover brands.

“Debt funding is not a good option as it has to service that debt and it already has a high debt to equity ratio,” said India Infoline’s auto analyst Jatin Chawla.

Funding options for the company include leveraging the loans it has given to dealers and buyers and also using the group’s assets to raise finance, analysts said.

Earlier this month Standards & Poor’s lowered the company’s corporate credit rating to BB- from BB and placed it on credit watch with negative implications.

Tata Motors is raising about $540 million through term deposits, which analysts expect would also be used to repay the loan. Last October the company’s founders had to come to the rescue of an $850 million rights equity issue which was inadequately subscribed by shareholders.

However, shares in Tata Motors were trading up 4.7 percent on expectations that falling interest rates could boost demand for its vehicles and also on hopes that the UK government would provide assistance to Jaguar Land Rover.

Tata Motors, which has a market value of about $1.5 billion, has dropped 74 percent so far this year while the main index is down more than half.

(Reporting by Janaki Krishnan and Kazunori Takada; Additional reporting by David Milliken in London; Editing by Ranjit Gangadharan and Lincoln Feast)

Dealers in Mumbai said prices had fallen by 15 to 20 percent, particularly for many smaller used cars like the Maruti 800, Maruti Alto and Hyundai Santro, according to the Business Standard newspaper.

The Nano — a sporty, jellybean-shaped car that has a price tag of just 100,000 rupees (2,000 dollars) for the basic model — is to be launched next Monday and is being marketed as the affordable car for millions of Indians.It will appear in car showrooms from April.

The director of one of Mumbai’s largest used-car dealers, Fazulbhoy Motors, was quoted as saying that the drop in demand began when Tata Motors announced the Nano’s launch date.

“People are postponing purchases and there has been a lull in the market ever since,” said Arif Fazulbhoy.

The financial daily said the a 2007-made Maruti 800, which previously retailed at 145,000 rupees, was now selling for 125,000 rupees while a 2007 Maruti Zen Estilo was now 40,000 rupees cheaper at 260,000 rupees.

But Shubhabrata Saha, chief executive of Mahindra First Choice Wheels, said the launch of the Nano would largely impact smaller dealerships, which make up 80 percent of the country’s second-hand vehicle sector.

Prices and demand were holding among larger dealerships, which tend to offer authentication, warranties and sales data on second-hand vehicles, he added.

Dealers in Mumbai said prices had fallen by 15 to 20 percent, particularly for many smaller used cars like the Maruti 800, Maruti Alto and Hyundai Santro, according to the Business Standard newspaper.

The Nano — a sporty, jellybean-shaped car that has a price tag of just 100,000 rupees (2,000 dollars) for the basic model — is to be launched next Monday and is being marketed as the affordable car for millions of Indians.It will appear in car showrooms from April.

The director of one of Mumbai’s largest used-car dealers, Fazulbhoy Motors, was quoted as saying that the drop in demand began when Tata Motors announced the Nano’s launch date.

“People are postponing purchases and there has been a lull in the market ever since,” said Arif Fazulbhoy.

The financial daily said the a 2007-made Maruti 800, which previously retailed at 145,000 rupees, was now selling for 125,000 rupees while a 2007 Maruti Zen Estilo was now 40,000 rupees cheaper at 260,000 rupees.

But Shubhabrata Saha, chief executive of Mahindra First Choice Wheels, said the launch of the Nano would largely impact smaller dealerships, which make up 80 percent of the country’s second-hand vehicle sector.

Prices and demand were holding among larger dealerships, which tend to offer authentication, warranties and sales data on second-hand vehicles, he added.

Tata Motors and Hyundai Motor India Ltd. are the two major auto manufacturers in India to take the initiative.

Retail Financing will help both Banking and Automobile sector to improve upon their businesses which in recent times have slowed down.

Hyundai and Canara Bank sign MOU for retail financing.

Hyundai Motor India Ltd, the second largest car manufacturer and the largest passenger car exporter, in a bid to enhance finance option for its customers, signed a memorandum of Understanding (MOU) with Canara Bank, a major public sector bank in Bengaluru. This partnership will prove helpful in augmenting the business at a time when the auto industry is facing a major slowdown.

With more than hundred years of its proud existence Canara Bank has a wide network of over 2700 branches and ATMs across the country. With its widely acclaimed customer centric approach it has built up a strong customer base of over 33 millions. This association with HMIL will help both the partners to reach out to wider market and make auto loans convenient and easy for prospective car owners.

Speaking on the occasion, Arvind Saxena, Sr. Vice President, Marketing & Sales, HMIL, said, “We are glad to partner with Canara Bank as we see it as value addition for our customers. In the current scenario, we consider it as a welcome move as there is a need for increased financing options and rationalized interest rates for the benefit of our customers.

The two partners will utilize and leverage each other’s strengths to cross sell Hyundai vehicles and the bank’s car loans and schemes. The bank will provide competitive interest rate and increased convenience and accessibility to their customers.

Hyundai Motor India Ltd, already enjoys a strong presence in both the metro and the mini-metro markets with a complete stable of products starting with compacts to premium luxury cars and SUV’s. Through this strategic tie-up with Canara Bank, the company seeks to further strengthen its position across all major markets and focus on a major retail expansion drive.

Tata Motors ties up with Indian Bank and Andhra Bank for retail finance.

“In order to provide an added facility of car finance to its customers, Tata Motors has entered into an understanding with Indian bank for financing its range of passenger vehicles,” the company said in a statement.

At present Indian Bank offers car loans up to 85 per cent of on-road price for tenure up to seven years at an interest rate of 11.5 per cent per annum.

As per the agreement, financing facilities would be available at 1,575 branches of the Indain Bank and 470 sales touch points of the auto major across the country,

Tata Motors has also singed up the MOU with Andhara Bank for financing their Vehicles.

Andhra Bank offers car loans up to 90 per cent of invoice for tenure ranging up to six years at an interest rate of 11.75 per cent. The bank also provides 0.5 per cent concession in interest rates to women customers.

As per the agreement, finance facilities would be available at the 1,430 branches of the lending bank as well as 470 sales touch points of Tata Moters.

Source: The Financial Express