If you thought the impending launch of Tata Nano will lead to expansion in the overall passenger car market, think again. According to JD Power Asia Pacific, the demand for this car would remain modest at just about 35,000 units in 2009 and even next year - when Tata Motors' Sanand plant is expected to come on stream - demand would not breach the one lakh unit mark!
John Bonnell, J D Power's director of forecasting (Asia Pacific) says that though this forecast may well be proved wrong and many more Nanos may be sold, "but in that case competition will move in swiftly with new products to protect market share".
Already, auto companies such as Hyundai, Honda, Ford and General Motors and Nissan-Renault combine have announced plans to develop and launch low-cost cars in India over the next two-three years. These may not come as cheap as the Nano, but could well eat into the segment which Nano hopes to create thanks to its pricing.
Bonnell justifies the conservative forecast of demand for Nano by pointing out that the ability of a large number of two-wheeler owners to afford a car, which cost three-four times more to acquire and significantly more to operate, remains in doubt.
He also lists out concerns such as the ability of Tata Motors to keep the pricing at Rs one lakh levels. In fact, JD Power's latest full year India forecast for 2009 predicts a decline of about 7% in overall light passenger vehicle demand at just 1.37 million units against 1.47 million in calendar 2008. (Light passenger vehicles include cars, SUVs and MPVs). Bonnell says the Nano numbers are embedded in this forecast.
For 2016, the agency has forecast total light vehicle demand to touch 3.3 million units.
But unlike earlier predictions by the Society of Indian Automobile Manufacturers (SIAM) and others, the passenger car market looks set to miss the two million unit mark and may arrive at this figure only in 2011.
The conservative forecast for Nano is surprising since this car has generated global interest and was widely expected to bring back excitement in the somnolent passenger car market. The Nano is being launched on March 23 and initially, only limited numbers would be dispatched to dealers since full production would be possible only next year.
According to industry estimates, Tata Motors may be able to make only half of the projected demand of one lakh units this year.
Nano production is behind schedule by a few months because of relocation of the manufacturing plant to Gujarat. This car would be the world's cheapest yet and the base version is priced at Rs one lakh only (plus taxes).
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