Tata Motors slashes Nano production, signals mega slowdown

Mar 05 2013, 14:40 IST
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SummaryAfter scaling back production of other vehicles, Tata Motors has now slashed output of Nano.

Tata slashes production at Sanand plant by 80%

After scaling back production of commercial vehicles and passenger cars, Tata Motors has now slashed production of the Nano. Production of the small car at the Sanand plant in Gujarat has been cut by over 80% to around 1,500 units a month to align with lower demand amid rising inventories. As a result, the company is now operating the plant four days per week on a single shift from a six-day work week earlier.

“Tata Motors has over 14,000 unsold Nano cars in stock in the factory, pipeline and dealers, while the total inventory of passenger cars stand at around 45,000 units,” a person aware of the matter told FE. Tata Motors sold sold 1,504 units of the Nano in January this year and 2,202 units in December last year, which is significantly lower than the monthly average of 6,500 units seen between April and November last year.

Asked about the development, a Tata Motors spokesperson said, “We are producing as per demand in the market, there is no use making more cars than that. I believe these are temporary phases and production will increase again.”

While the Nano has received accolades globally for its frugal engineering, sales at home has at best been erratic and far lower than the capacity of 2.5 lakh units a year at the Sanand plant (24,000 units per month). Tata Motors has tried multiple strategies to push sales of the Nano, such as attractive finance deals and a dedicated network of around 150 outlets in small towns, but the car has seen sales peak at only about 10,475 units in March last year, while the lowest point was 509 units in November 2010.

Low volumes for a car like the Nano is not good news for the company as such products make sense if volumes are high. The car, which was born on the plank that large masses driving two-wheelers would switch over to it, starts at a price point of R1.43 lakh.

Tata Motors’ problems do not end with the Nano.

Lower demand and increasing competition have led to production cuts of 20-30% across its utility vehicle, passenger car and medium & heavy commercial vehicle plants across the country. In fact, in mid-February Tata Motors and subsidiary TML Drivelines benched around 75% of its 5,500-odd temporary workers at the Jamshedpur plant after already witnessing five block closures this fiscal.

The company’s

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