DAIMLER PLANS SHARE SALE TO AABAR AS CASH FLOW WANES

 

: Daimler AG, the second-largest maker of luxury cars, will raise 1.95 billion ($2.66 billion) selling shares to Abu Dhabis Aabar Investments PJSC as the global recession stunts sales and cash flow dwindles.

 

Aabar will buy 96.4 million new Daimler shares at 20.27 apiece, the Stuttgart, Germany-based automaker said in a statement on Sunday. The price is a 5 per cent discount to the March 20 close of 21.34 and 55 per cent below the stocks value when Daimler announced a buyback plan in June.

 

The share sale leads to the conclusion that things are getting worse and will continue to get worse, said Mike Tyndall, automotive analyst at Nomura Securities in London. Daimler may also be taking the view that you dont want to be the last carmaker to stick your hand out.

 

The investment, amounting to a 9.1 per cent stake, buttresses Daimlers resources as the worst auto-industry crisis in decades forces the maker of Mercedes-Benz cars and trucks to cut hours for 54,000 German assembly-line workers and close two plants in North America. Moodys Investors Service said February 18 that it might downgrade Daimlers credit rating as the car-sales slump risks hurting the manufacturers financial flexibility.

Daimler rose as much as 1.76, or 8.3 per cent, to 23.10, the highest intraday price since February 17, and was up 2.7 per cent as of 11 am in Frankfurt trading. The gain pared the stocks decline this year to 18 per cent, valuing the carmaker at 21.2 billion.

Daimlers move suggests it needs capital more urgently than widely realised, Max Warburton, a London-based analyst at Sanford C Bernstein & Co, said on Monday in a research report.

 

The willingness to dilute existing shareholders to secure funds of 2 billion is hardly a confident management statement.

 

Car sales in Europe, Daimlers biggest market, fell 18 percent in February, extending a 10-month contraction. The company, also the worlds largest truckmaker, lost 1.53 billion euros in the fourth quarter, burdened by declining sales and expenses related to former U.S. arm Chrysler LLC. Cash flow from operations last year shrank 76 percent to 3.21 billion euros.

 

Abu Dhabis investment will help Daimler react to changing market conditions and give it greater flexibility to invest in innovative automotive technologies, the company said. It didnt say how the sale proceeds will be used.

 

Development-Spending Pledge
Daimler has vowed to maintain spending on research and development at 4.4 billion euros this year, even as it cuts expenses elsewhere, to gain an advantage on competitors through more fuel-efficient engines once demand picks up.

 

Without new products, an automaker is nothing, head of development Thomas Weber said in a March 3 interview.

 

Daimler will also ask shareholders at the annual meeting on April 8 to double the amount of cash it can raise. The company, whose A3 credit rating at Moodys is the fourth-lowest investment grade, has 6.91 billion euros in cash and faces more than 10 billion euros of debt maturing this year.

 

Contracts on Daimlers debt fell 39.5 basis points to 290 as of 9:10 a.m. in London, according to CMA Datavision prices.

 

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to debt agreements. A decline indicates an improvement in the perception of credit quality.

 

Buyer vs Seller
With the sale to Aabar, Daimler has gone from a buyer of its shares to a seller in the span of a few months. The automaker announced plans to buy 6 billion euros of its own stock on June 17. At the time, the shares traded at 45 euros. The company halted the program in October as the financial crisis began to stifle demand and the stock price sank.

Daimler has underperformed its nearest competitor, Bayerische Motoren Werke AG, the No. 1 maker of luxury vehicles. Daimlers share decline this year contrasts with a 5.3 percent gain for Munich-based BMW.

 

Aabar will overtake Kuwait, which owns 6.9 percent, as Daimlers largest shareholder, the carmaker said. Aabar initiated the talks with Daimler, which began in December, said Thomas Froehlich, a spokesman for the carmaker in Stuttgart.

 

IPICs Role
Abu Dhabis government-owned International Petroleum Investment Co. completed a 5.18 billion-dirham ($1.41 billion) purchase of bonds convertible to Aabar stock, part of a 6.68 billion-dirham capital increase that will eventually give IPIC a 71 percent stake in Aabar. The two funds agreed on the transaction in September to invest jointly in a range of industries, including energy. Aabar rose 4 percent to 1.83 dirhams in Abu Dhabi trading.

 

With 16 percent of Daimlers capital in the hands of long- term investors, the carmakers may be less vulnerable to an unwanted takeover attempt. Other German automakers, such as Porsche SE and BMW, have large stakes held by families that help secure their independence.

 

Its good for Daimler to raise cash and get a long-term investor, because the next two years will be very hard, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.

 

Daimler and Aabar intend to cooperate on the development of electric vehicles and new materials for auto production as well as establish a center to train Abu Dhabi youths for the auto industry.

 

Aabar agreed in December to pay 307 million Swiss francs ($273 million) and assume 100 million francs in debt to take over the Swiss-based private banking unit of American International Group Inc. Aabar was advised on the Daimler investment by Goldman Sachs & Co., spokesman Ben Burton said. Deutsche Bank AG advised Daimler.

A COLLECTIVE AFFAIR - THE NANO'S COMPONENT SUPPLIER STORY

 

Driving down the price of the Tata Nano couldn't have been done without the collective effort of the component suppliers. Some of the biggest and the best in the business were roped in, with scissors and ingenuity to bring out solutions within a specified cost structure.

 

Take Tata Johnson controls for instance who developed the seats for the small car. Tata Motors specified that the seats need to be light, yet offer good overall body support and meet all safety requirements. The end result were front seats based on a single brace structure instead of individual rails, a frame and the right amount of foam to ensure overall seat comfort wasn't lost. The basic variant in fact doesn't even offer seat back adjustments for the passenger, thus saving on crucial rupees.

 

Sister company Tata TACO worked on parts like interior injection mouldings, dashboard aggregates and door handles. It also entered into a JV with Ficosia International of Spain to supply cables and mirrors for the car that are being produced at the company's Hinjewadi, Pune facility. Tata TACO will supply over 20 per cent of all the parts being built for the Nano.

 

A surprise entrant into the proceedings turned out to be Kinetic Engineering. The company best known for its two-wheeler business became party to the supplier base just months after the car was showcased to the world. It will supply the transmission gears for the car, a crucial component in the drivetrain.

 

Bosch was asked to develop the engine management system (EMS) for the car. A relatively complicated and expensive component in general, Bosch imported the control unit, sensors and actuators for the car.

 

For the Nano, it created a blink mode that allows for the cars health to be detected even without a diagnostic tool. One can also know the fuel efficiency during the last five cycles. Despite trying to keep costs in check, Bosch also managed to have a limp-home mode in case some sensors on the EMS fail.

 

For a small car, a powerful air-conditioner that doesn't sap engine power was crucial. Behr, the German air-conditioning expert was roped in. The HVAC modules, manual control heads and condensors were developed by Behr, in association with Anand Automotive systems. A 60cc rotary compressor from Panasonic has been used - about 10cc larger than the one on the Maruti 800.

 

MRF became the exclusive partner in development of the tyres for the first lot of cars. Using tubeless tyres of different widths for the front and the rear, MRF's brief was three-pronged - low rolling resistance for better efficiency, good ride and tyre life characteristics and a tyre setup that dials out any traces of oversteer. The last part turned out to be the biggest challenge, and one of the reasons why a wider tyre for the rear was utilised.

 

Some of the other important suppliers included Sona Koyo for the steering assembly, Lumax for the lights and Caparo for the body panels. A rack and pinion steering developed by Sona uses a two-spoke variant for the base version and three-spoke variants for the CX and LX versions.

 

Additionally, the unit was developed to be easily collapsible for transportation and ease of maintenance reasons. Selective inner panels were developed by Caparo who also supply to Maruti, amongst others.

 

A whole host of other suppliers were also involved in the project who, despite supplying smaller number of components played their part.

 

At the end, despite steel price fluctuations, a tanking economy and component suppliers suffering from immense revenue pressures, the combined operations have helped Tata Motors achieve the magical Rs 1 lakh tag.

 

STEEL PRICE FALL TO LIFT NANO'S MARGINS

 

The softening of steel prices are likely to improve the wafer-thin margins of Nano, the world's cheapest car, which will be launched by Tata Motors on Monday.

Steel prices have fallen 60% in the past six months to $500 per tonne. Steel accounts for 60% of a car's weight and 65% of its total material costs. This means the input cost for Nano would come down substantially. Steel companies normally supply in bulk on long-term contacts. So, Tata Motors is expected to reap the benefits, when the new contracts would be signed. Most contracts for long-term supply of steel will be signed after April 1, said industry sources.

E&Y partner Kapil Arora said: "Any decrease in steel prices should help Nano's overall cost structure, as input costs decline. However, given the wafer-thin margins, any changes in the vehicle pricing are unlikely in the immediate short-term."

When asked about the possible impact of recent change in steel prices, Tata Motors in an e-mail reply said: "It is premature to make any comment on such speculation, as prices for Nano will be announced on March 23."

Meanwhile, many original equipment manufacturers (OEMs) are asking auto component manufacturers to pass on the benefits of falling steel prices to them. Society for Indian Automobile Manufacturers (SIAM) director general Dilip Chenoy said: "The weaker rupee has reduced the benefit of the falling steel prices in the automobile industry. But as the end-March is nearing, many OEMs would re-negotiate with auto component manufacturers."

A Tata Nano vendor said: "Negotiations for new contracts are happening and that is not just limited to Tata Motors or Nano."

DUNLOP WORKERS OPT FOR CONCILIATION

The Dunlop Factory Employees Union and the management are to go for a State Government-mediated conciliation to arrive at a final settlement.

According to the official spokesperson for the union, the leaders and office bearers of the DFEU representing the workers at Dunlop India Ltd Ambattur factory called off the indefinite fast demanding that the management expedite the final settlement.

 

The union withdrew the agitation after the management agreed for talks mediated by the Tamil Nadu Labour Department. This followed the intervention of the Labour Department officials who have asked the management and union to discuss the issues. The discussions are to start from the month-end.

 

The main point on the agenda would be the amount to be paid to the 734 workers as a final settlement to terminate their services and payment of statutory dues to the retired employees. The management is also expected to settle the issues relating to payment of interim wages due to the workers after the factory stopped production in October last year, the union leader said.

 

SMALL CARS GETTING BIGGER & BIGGER IN WHEEL DEALS

 

Call it a Nano stimulus package for the auto industry. But it might just be the spark to ignite a thousand ideas on wheels. Already, carmaker are feeling the tremors from the tiny chassis. While some are contemplating slashing prices of their cheapest models, others are just plain hurrying up to launch their own versions of Indias Tin Lizzie. In the meanwhile, the man on the street is just waiting to be served.

The platter is quite a mouthful though. It kicks off with Indias largest carmaker, Maruti Suzuki India reportedly working on plans to slash the price of its best selling model, the Alto. On the menu are other hot appetizers such as Hyundais new low-cost car and Bajajs ultra low-cost project with Nissan and Renault; both slated to be launched by 2011.

The buzz in the domestic and international automotive circles is that Hyundai is developing a four-seat mini car on the lines of Toyotas supermini iQ and Smart 2+2. Codenamed Green Baby, this featherweight is likely to run on a 1.0L four-cylinder engine or a more efficient three-cylinder 800cc mill. And a petrol-electric version is also supposedly on the cards for the international markets, hence the name Green Baby. But when contacted by SundayET this is what a Hyundai Motor India (HMIL) spokesman had to say: We have never heard of Green Baby so far. As of now we do not have any concrete details to share except that the new low-cost car will be positioned below the Santro and possibly make its debut by 2011-12.

Also, the grapevine has it that even Toyota is planning a foray into this niche segment with its Daihatsu Motor subsidiary. Then there is Fiat whose COO Silverio Bonfiglioli recently remarked that the Italian carmaker is interested in developing a low-cost car for India, which could debut by 2012. In fact, the list continues with both American contenders Ford and General Motors planning to launch affordable small cars in the next couple of years though not necessarily in the price band of the Tata Nano. Says Michael Boneham, MD, Ford India: The prototype of our car is almost ready. But we are not going to compete directly with the Nano. That price band doesnt fit our brand.

 

For the Nano the magic number is $2000 or approximately one lakh rupees in India. And its much lower than what industry estimates suggest that by 2012, the market for vehicles priced under $10,000 is going to touch about 18 million cars, or around one fifth of global car sales. And by the look of things it doesnt appear to be a far-fetched fantasy either. Sample this: Four years back when French carmaker Renault offered its modest no-nonsense Logan for around $7,000 in Europe, it was at least 40-50% cheaper than the sedans of its nearest rival.

Since then the Logan managed to rake in the numbers for Renault more than five lakh cars in around 50 countries. This made major carmakers such as Toyota, Volkswagen, Fiat and General Motors sit up and take notice. All of them promised to build Logan killers. And in 2012 when low cost cars such as the Nano Europa (estimated to retail at around 5000 in Britain) debuts in Europe it will be history repeating itself. The birth of a new segment is on the cards. Already, the Nano Europa has a few rivals.

There are only a handful of sub 6,000 cars in the market. For instance, in the UK, a Perodua Kelisa from Malaysia can be bought for around 4,500, a European-made, old-model Ford Ka for 5000 or a Kia Picanto from South Korea for less than 6,000. Other carmakers too are already sharpening their Nano killers. Says Arvind Saxena, senior V-P, marketing, Hyundai Motor India: We see an opportunity in the launch of the Nano.

It will get a huge chunk of first-time car buyers from the two-wheeler market and open up the segment. And by that time we will be ready with our low-cost car. And there will be no dearth of buyers because countries such as China, India, Russia and Brazil promise hundreds and millions of middle class potential customers. And anyways, a recent industry report already suggests that for the first time in history, more than half the world is already middle-class.

 

A TURNING POINT FOR THE CAR INDUSTRY

 

One man did not join the sceptics when Mr Ratan Tata made public his intention to manufacture a peoples car costing Rs 1-lakh. Mr Carlos Ghosn, Chief Executive Officer of Renault and Nissan, sat up and took notice even while the likes of Mr Osamu Suzuki, the patriarch of Suzuki Motor Corporation, scoffed at the initiative.

Nissan turnaround tycoon realised that Mr Tata meant business and that this car had the potential to succeed across key parts of the world. He also knew that Indians were second to none when it came to his now famously-coined term frugal engineering.

 

The Renault CEO realised there was little time to be lost. It was important for his company to think on similar lines and bring to India a car costing $2,500 the dollar ballpark for a Rs 1 lakh vehicle. The Indian partner had to be someone who shared a similar vision and with a track record in cost-control.

 

This is what eventually led to the meeting with Mr Rajiv Bajaj, Managing Director of Bajaj Auto, and the formation of a three-way alliance among the two-wheeler company, and Renault and Nissan for the ULC (ultra low cost) car project.

 

The ultra low cost car

Quite unlike Tata Motors, with domain expertise in cars and commercial vehicles, Bajaj Auto is mainly a motorcycle manufacturer with a profitable three-wheeler business. It has evolved a competitive cost-structure at its plants, which to Mr Ghosn meant the ULC car battle was already half won. With their global competence in car manufacturing, Renault and Nissan would be the ideal pillars of support for this project. The car is scheduled to be launched in 2011 by which time the Nano will have completed a two-year run on Indian roads. What will the ULC car offer that the Nano will not by then, experts ask.

 

Mileage, The Key

Bajaj Auto and its allies believe that mileage will be the most important factor in determining the relevance, and possibly success, of its offering. Initial tests have been encouraging with reports of over 30 km to a litre. And if the price tag is kept at around Rs 1.5 lakh (on-road) for the basic version, sources say this combination of mileage and price will be enough to draw customers.

 

It is clear, therefore, that Indias automobile landscape will change dramatically with the Nano and the ULC car that will follow. Little wonder, therefore, that the low-cost car mantra is now being chanted like never before. Almost every carmaker wants in, though most insist that it would be impossible to match the price level set by Tata Motors and challenged by Bajaj Auto. Suzuki is the worlds most prominent name when it comes to small cars and its Indian arm, Maruti Suzuki, is the clear leader in the compact car segment here. The company has maintained that it is not going to do a Nano in terms of price. But not too many people are buying the story.

 

Maruti will gauge market reaction to the Nano and see if it is going to eat into some of its products, largely the 800 and the Alto. Should that happen, the company will offer a stripped-down version of either model to retain its position, a top automobile executive, who did not wish to be named, told Business Line.

 

Hyundai Motor India has gone on record that it is looking at a low-cost car but at a price point above the Nano. Much is reportedly happening at the companys R&D centre in Hyderabad for this vehicle tipped to be launched in 2011-12. Sources say Hyundai can manufacture a car under Rs 2 lakh considering the competitive cost structure it has achieved at the Chennai plant. The global hub for the Atos Prime shifted from Korea to India over four years ago and now the Click (Getz) line is to follow suit. This is all because of cost efficiencies in Chennai; they are more than adequate to roll out a low-cost car, they add.

 

Other car makers such as Toyota, Honda and Volkswagen with operations in India are developing their own low-cost cars in the price range of Rs 3.5 lakh and above.

Hondas next car in India, after the Jazz, is a world small car that will also have production bases in Thailand and Brazil. However, the company has not indicated that this will be a low-cost model, in line with its premium carmaker image. Honda will position this car in the Rs 3.5-lakh price range where there will be an appreciable gap with the Jazz and, going upwards, the City, ancillary suppliers say.

 

Similarly, its compatriot, Toyota is gearing up for the 2010-11 launch of the 800 L global small car in India. This model will also be made in Brazil, China and Russia given the growing prominence of the BRIC economies. Toyota is categorical about steering clear of the low-cost space and the 800 L could be priced upwards of Rs 5 lakh.

 

Volkswagen too

According to sources, Volkswagen and its group company, Skoda, could also spring a surprise or two with low-cost cars that will roll out of a common platform towards end-2011. However, these will not be in the Nano or the ULC car price range but more towards Rs 3 lakh, they said.

 

Even before its debut the Nano has heralded the low-cost car revolution across the globe. It is a tribute to Tata Motors for showing the rest of the world what cost-efficiencies are all about. And this is even more creditable for a company that has been making cars for just over a decade, a top official of an automotive company said.

 

NANO TANKS UP FOR ROAD TEST CHALLENGE

 

Capping a journey full of admiration but not bereft of controversies, the Tata Nano is all set to steer India into automotive history. The small yet innovative carrevered for its tag of being the worlds cheapest is ready to fuel up, promising an affordable and comfortable vehicle to millions of Indians for whom a car was far out of reach.

The evolution of the snub-nosed, 4-seater 623cc rear engine car an idea and dream project of Tata group chairman Ratan Tata is considered as revolutionary as Fords Model T, Volkswagens Beetle and the British Motor Corps Mini, all of whom went on to rewrite automotive history. But as it gears up for its much-awaited launch on Monday, the car also stares at one of its stiffest challengesdelivering on promises.

With Nano, Tata redefined frugal engineering for global automakers when it promised to bring out the car for as low as Rs 1 lakh, below $2,000 at current exchange rates. Many automakers, though dumbfounded by Tatas budget price, questioned the veracity of the project and said it would not be able to meet the stiff safety and emission norms. But at its unveiling at the Auto Expo last year, Tata proved them wrong, reiterating that the Nano would not only meet the safety and emission norms prescribed in India but also in other developed countries, where it would be sold in the coming years.

But the journey to Nanos launch which has been delayed by at least six monthshas not been an easy one neither for Tata Motors nor for Ratan Tata. The project got mired in a political controversy in West Bengal, where Mamata Banerjee-led Trinamul Congress spearheaded an agitation against the land given for the cars factory at Singur. After lingering for long, the issue reached a flashpoint and saw the Tatas withdrawing from the state late last year, only to head to Sanand in Gujarat, where production will take at least one year to start.

Tata Motors will now launch the Nano, but with limited production capacity that is believed to be only around 50,000-60,000 units in the first year (from makeshift assembly lines at its existing plants). This will make it a slow beginning for a blockbuster product where demand far outstrips supply. The Gujarat plant will see the company go full-out in production as it will churn out 2.5 lakh units annually.

Controversies apart, the Nano is also seen as a lifeline for the ailing Tata Motors, which saw its first loss in seven years in the December 08 quarter. Hit hard by a slowdown in demand for commercial vehicles and its

cars, the company is in deep financial trouble. This comes at a time when the company has to refinance the remaining $2 billion of a $3 billion loan it took to buy the Jaguar and Land Rover brands from Ford Motor Co in June last year. Thus, performance of the Nanoand its success or failure would be crucial for the financial health of Tata Motors.

Domestic market apart, Tata Motors also plans to take the car global as it recently unveiled the Nano Europa in Geneva, which is a slightly more robust version of the Indian model, and would be on sale in Europe in 2011.

A DIFFICULT BIRTH FOR TATAS NANO

 

Tata Motors Ltd launches the Nano on Monday, amid tentative signs of a recovery for the auto industry. Volume growth, which had crashed in the last quarter, has shown a smart recovery in January and February. Year to date, the Bombay Stock Exchanges Auto Index is up 15.7%, while the benchmark index, the Sensex, has declined by 7.7%.

 

Thats a remarkable outperformance, built on hopes that the interest rate cuts will lower financing costs and banks are going to slightly loosen their purse strings.

 

Yet a closer look at the stocks that make up the Auto Index show wide divergence. The Bajaj Auto Ltd stock, for instance, is up 42% year-to-date, while Ashok Leyland Ltds gain has been a modest 10%. But the Auto Indexs performance has been dragged down by the Tata Motors scrip, which has gained just 1.2% year-to-date.

 

There are several reasons for the divergence. First and foremost, although theyre all part of the catch-all Auto Index, were comparing not just apples and oranges but apples and orangutans here. The demand for Ashok Leylands and Tata Motors commercial vehicles depends upon a completely different set of factors than the two-wheelers manufactured by Bajaj Auto or Hero Honda Motors Ltd.  Demand for motorcycles, for instance, has remained robust because of the strength of rural demand, Hero Honda being the obvious gainer because 55% of its sales come from rural areas. Analysts believe the demand for Maruti Suzuki India Ltd cars has been buoyedby demand from government employees spending their gains from the Sixth Pay Commission.

 

On the other hand, while commercial vehicle volumes too, have shown a sharp increase in February compared with the previous month, they remain very depressed on a year-on-year basis. As a report by First Global points out: The decline in truck sales in February 2009 was despite the excise duty cut of 6%, a reduction of 2% in lending rates and a depreciation allowance of 50%. The report says that around 28,000 heavy vehicles have been repossessed by auto finance companies and banks, which will affect demand for new vehicles. It also says that automobile dealers and manufacturers are presently holding four weeks inventory, as against the two weeks inventory they generally hold in the last quarter of the fiscal year. Its going to be a long, heavy slog before commercial vehicle demand stabilizes.

 

But there is one aspect of all these companies that is indeed comparable, and that is the balance sheet. These days, thats increasingly becoming all-important. Hero Honda, Bajaj Auto and Maruti Suzuki are all net cash positive. But both Tata Motors and Ashok Leyland are highly geared.

 

A Citigroup Inc. report estimates debt/Ebitda (earnings before interest, taxes, depreciation and amortization) at the end of the current fiscal year to be 0.4 for Maruti, 2.3 for Ashok Leyland and 7.1 for Tata Motors (stand-alone).

 

The Ebitda/interest ratio for fiscal 2010 is estimated at an extremely comfortable 41.1 for Maruti, 4.8 for Ashok Leyland and a very worrying 1.6 for Tata Motors.

Tata Motors debt/equity is forecast to escalate to 1.8-1.9 over fiscal 2010/2011 (assuming that the JaguarLand Rover [JLR] debt is refinanced through Tata Motors books). The report also points out, Tata Motors has to refinance almost 43% of its overall debt over FY10 (essentially the short-term loans for the JLR acquisition).

Excluding this debt, Tata Motorss foreign currency convertible bond are due for repayment toward end-FY11, early-FY12 and mid-FY13. From a cash flow perspective, Tata Motors is the only company where debt refinancing appears critical, primarily on account of the JLR related debt. The recent depreciation of the rupee too is not good news for its dollar-denominated debt.

 

Profits from the Nano, if any, are unlikely to have any impact on Tata Motors financial condition in the foreseeable future. The revolutionary new car is being launched at a time of unprecedented stress for the company. Small wonder the stock trades at a price to book well below its peers.

 

NANO BUYERS HAVE TO PAY ENTIRE PRICE ON BOOKING

 

A Nano wont come cheap and easy for the masses waiting for their first car. In an effort to limit the demand for the much-hyped peoples car, Tata Motors would insist on 100% (Rs 1 lakh) down payment for the Nano on booking. This, according to dealers, is an attempt to restrict the bookings since the company is severely constrained on the supply side of Nano. Typically, a customer pays 20%-30% of the on-road price of a car as down payment at the time of booking.

 

The Nano will be sold through a lottery system and the booking forms would be available over the week with all its dealers, select State Bank of India (SBI) branches and all Tata group retail ventures, including Croma, Westside, Trent and Star Bazaar. The form is expected to cost around Rs 200-300.

 

The booking will be open for 14 days, after that the draw of lots will be conducted. The first car would be delivered to the lucky customer in two-and-a-half months, said a dealer.  Ajit Joshi, chief executive officer & managing director, Croma, told FE, Booking forms for the Nano car would be made available from Monday across all Croma stores in India. But we have certain restrictions on revealing information about the prices at which the booking forms would be made available. Croma stores have received many enquiries for forms before the formal launch of the car.

 

Banks are happy with the higher down payment for the Nano, as that allays their fears about potential credit risks that a high demand and long waiting period for the car poses. Essentially, banks will be interested in financing up to 70% of the cars basic cost, said another dealer.  A senior official of the State Bank of India (SBI) told FE that bank is offering auto loans at a concessional interest rate for a limited period. We are already having a special lending scheme for auto loans, under which we are charging an interest rate of 10% from any borrower approaching us until May 31, 2009. Once the deadline was over, we will be charging a regular interest rate of 11.5-12% depending upon the loan amount and the tenure of repayment for any customers approaching us.

 

Westside officials confirmed, on condition of anonymity, that All Westside stores in India will start selling car booking forms for the Nano car from the fourth week of March.  Tata Motors is in the process... of setting up the Nanos motherplant at Sanand in Gujarat. Till that plant comes on stream, the company is relying on the make-shift plant facility at its existing plants in Pune and Pantnagar to roll out the Nano. The two plants would produce around 40,000-50,000 Nano cars this year.

 

Tata Motors has been badly affected by the economic slowdown and is reportedly hard-pressed for cash to pay the $2-billion debt loan it took for the Jaguar and Land Rover buy last year. The company declared a loss of Rs 263 crore for the December quarter....

 

SANAND PEOPLE AMUSED BY NANO LAUNCH

 

People of Sanand and neighbouring villages want employment and work in the Nano project which is being implemented on Sanand-Viramgam Highway, after the Tata group decided to shift it from Singur, 30 km from here.

 

They are amused by the fact that the Tata Motor Ltd (TML) is set to launch the car, often described as the world's cheapest car, in the market on Monday.  But they wish that the government had not given exemption to TML from hiring 85 per cent local people, which is the policy of the state government.

 

However, with the launch of much-awaited car, they hope that Sanand project will become functional soon and they will find some work either in the Nano project or in the auto component units which are likely to be set up adjacent to the plant.

 

"I read in the paper that Nano will be launched on Monday. Its good to know this because eventually the car will be manufactured from Sanand," said Bhikhabhai Patel, a Sanand-based farmer.  When asked whether people are hopeful of getting employment in the Nano project, Patel said that people are hopeful of getting employment but this may not be on large scale.

NANO LAUNCH: AUTO INDUSTRY ON VERGE OF NEW DAWN

 

History will be created in Mumbai tomorrow when Tata Motors launches the world's least expensive car, Nano -- a car that can redefine personal transportation in modern India.

 

Described as "People's Car" by Tata Group Chairman Ratan Tata, Nano's commercial launch will mark a milestone in a journey, which was replete with controversies, hurdles and criticism from competitors. As far as customers are concerned, they can expect to own a car coming at a price between Rs 1.20 lakh and Rs 1.30 lakh, depending on the version of Nano, although bookings will start only in April second week.

 

According to dealer sources, if the company keeps the ex-factory price at Rs 1 lakh, as promised by Tata, then the base model could easily have an on-road price of Rs 1.20 lakh after adding taxes such as excise duty, education cess and road tax, along with transportation cost, local taxes, insurance and registration fees and a lifetime parking fees (wherever applicable). Last month, Tata Motors had appointed public sector lender State Bank of India as the sole booking agent for the world's least expensive car from the stable of Tatas. The booking amount is reportedly fixed at Rs 70,000.

 

NOW, PERMANENT NANO FACILITY AT PANTNAGAR

 

A day before the launch of the Nano, the Uttarakhand government said Tata Motors had agreed to set up a permanent satellite plant at its Pantnagar facility for producing the small car.

 

Tata Motors has given us a commitment that it will set up a permanent satellite facility at Pantnagar for producing Nanos, Chief Secretary Indu Kumar Pande told Business Standard.

 

From the Pantnagar industrial unit, from where the company would launch its first car, Tata Motors is planning to produce a total of 50,000 units per year, Pande said.

Tata Motors was given over 1,000 acres at Pantnagar by the state government for setting up its manufacturing facility.

 

Besides, the auto major has also agreed to distribute all its Nano cars from Pantnagar through its new subsidiary, Tata Motors Distribution Co Ltd.

NANO MAY FETCH RESALE PREMIUM OF RS 30,000

 

Tata Motors dealers say the company would have to supply between 250,000 and 500,000 cars to meet initial demand, assuming 0.5 to 1 per cent of the over 50 million people who sent enquiries to the various official websites book the car.

 

Supply, they said, would be between 40,000 and 50,000 cars, with 100,000 being the most optimistic estimate. This would mean customers may have to wait for up to two years to get delivery of the car if all the bookings are accepted.

 

The premium on the Nano is limited by the fact that there are cheap small cars available like the Maruti 800, which has an ex-showroom price of around Rs 1.9 lakh in Mumbai and about Rs 2.15 lakh on the road. In comparison, the on-road price of the Nano would be Rs 1.2 lakh.

 

The initial demand-supply mismatch is principally because the Gujarat mother plant, which is expected to come on steam by October, has an initial annual capacity of 250,000 cars, rising to 500,000 later. The plant is already delayed, having been relocated to Gujarat following political problems with land acquisition in West Bengal, where it was initially to be located. Till the Gujarat plant goes on steam, the car will be assembled at other Tata Motors locations in Pune and Pantnagar (Uttarakhand).

 

The scene will be a bit like the Maruti 800 days. Those who are lucky enough to be allotted cars this year can resell it immediately at a premium of Rs 30,000 due to the anticipated shortage, an executive of a Delhi-based Tata Motors dealer said.

 

Tata Motors is not ready to discuss details, but dealers said customers would have to pay 70 per cent of the showroom price of the car (over Rs 70,000 for the entry- level model ) upfront as the booking fee, which would be fully financed by the State Bank of India (SBI) with which Tata Motors has tied up.

 

Customers have to book the car in any of the SBI-stipulated banks and fill the booking documents. Dealers will only deliver the car and have no role to play in raising finance for buyers. The winners will be chosen though a random computer-generated sample. Although the cars will arrive at the dealers registered in the name of the buyer, there is nothing to stop customers re-selling it.

 

TATAS TO ROLL OUT NANO

 

History will be created in Mumbai tomorrow when Tata Motors launches the world's least expensive car, Nano a car that can redefine personal transportation in modern India.

 

Described as "People's Car" by Tata Group chairman Ratan Tata, Nano's commercial launch will mark a milestone in a journey, which was replete with controversies, hurdles and criticism from competitors.

 

As far as customers are concerned, they can expect to own a car coming at a price between Rs 1.20 lakh and Rs 1.30 lakh, depending on the version of Nano, although bookings will start only in April second week.

 

According to dealer sources, if the company keeps the ex-factory price at Rs 1 lakh, as promised by Tata, then the base model could easily have an on-road price of Rs 1.20 lakh after adding taxes such as excise duty, education cess and road tax, along with transportation cost, local taxes, insurance and registration fees and a lifetime parking fees (wherever applicable).

 

Last month, Tata Motors had appointed public sector lender State Bank of India as the sole booking agent for the world's least expensive car from the stable of Tatas. The booking amount is reportedly fixed at Rs 70,000. Till the time the Sanand facility in Gujarat is ready by 2010, Nano will be produced from Tata Motors' factories at Pantnagar in Uttarakhand and Pune in Maharashtra in limited numbers.

 

After the launch in Mumbai, Nano would be displayed at the company's dealerships from the first week of April, while the bookings would start from the following week. The booking process and other details of the Rs 1 lakh car would be announced on the day of launch.

 

NANO TO RIDE ON INNOVATIVE MARKETING

 

The Tata Nano will ride on a clutch of innovative marketing ideas when it rolls into showrooms across the country. The Rs 1 Lakh car, which broke new ground in design, engineering and production processes, will opt for cost-effective and innovative use of media, say people with knowledge of the Nano marketing strategy.

To make the car more easily accessible to people, the Tata Motors team will sell the Nano not just through Tata car dealerships across the country, but also through conventional retail outlets like Westside and Croma.

Westside is a lifestyle retail brand and Croma is an electronic megastore. Both are owned by the Tata group. Westside and Croma outlets will display the Nano and also take bookings. Also available will be a whole range of Nano merchandise like baseball caps, T-shirts and key chains, among others.

Carrying forward its vendor partnership production strategy, Tata Motors will share promotion of the Nano brand with its multiple PSU bank partners. These PSU financiers will promote the Nano brand during booking jointly with Tata Motors and on their own. 
 

The Nanos overall marketing strategy will use conventional media in an unconventional manner. Unlike most small cars, Nano wont be big on advertising. There will be no TV campaign, only innovative use of print, radio and other media, particularly the web. The Tata team is working on Nano news in papers, Nano breaks on radio, Nano appearing in the form of messages or ticker news on TV, online Nano games, Nano chatrooms on the Net, Nano pop-ups on major websites and Nano conversation on Facebook, Orkut and blogspaces.

According to people in the ad industry with direct knowledge of the Nanos marketing strategy, the campaign will be cost-effective and innovative so that Nano becomes synonymous with anything small, cute and brief. The idea is to make the Nano part of our everyday lingo like see you after a nano, its a totally word-of-mouth campaign, said a person familiar with the Nano marketing strategy.

Tata Motors has appointed Rediffusion for creative content in the Nano campaign. Lodestar will handle media buying for the Rs 1 lakh car. The Nano is a huge brand and one of the most interesting accounts in the automobile business, said the COO of a top ad agency based in Delhi. However, it is still not clear just how big the account will be.

TATA MOTORS SMALL CAR MAKES IT BIG ON WEB

 

Tata Motors small car is making a big web in the online space. For, 19,50,000 entries is what you get if you do a Google search for Nano. And it throws up 18,10,000 image entries in just 0.08 seconds. In the blogosphere too, there is frenzied activity. In the past week alone, there have been 1,414 blog postings that have sprung up and 1,37,759 new blogs have been created on Nano.

 

While Ratan Tatas Peoples Car is breaking new ground in the brick and mortar world, it could also be navigating new frontiers in the virtual world. The company too is pushing Nano on the Web. There is an Orkut community and a Facebook profile, a Tata Nano Forum and company administered blogs. Senior Tata Motor officials have been interacting with potential buyers and Nano fans in their attempt to catch the pulse of customers and car lovers.

 

Social networking is a new tool that Tata Motors has put to use for selling Nano. The Nano campaign, few hours before its release, has been intensified through its extension to networking sites such as Facebook and Orkut, making the worlds cheapest car known to a larger mass.

 

The official Tata Nano Orkut Community has 51,300 members and Orkut on its own has 378 communities. On Facebook there are 44 groups that keep discussing Nano. The official Tata Nano Facebook profile says good, bad and ugly, all comments are welcome. The Tata Motors Forum has 22,763 users who have till now covered 31 subjects related to Nano.

 

Interestingly, several Nano fans have responded from across the globe and were keen to see the car in their countryfrom Australia to Serbiabut the company has responded saying there were no immediate plans for exports.

 

On its own website, Tatas marketers also discuss sales strategies. There have been several queries for online buying and the company has responded stating that this would be difficult at this stage. Buyers have expressed their desire to buy the car on-line and are even willing to transfer funds pronto. Instead, the company has offered options ranging from contests to building your own Nano on the Web.

1,000 NANOS MAY ROLL OUT FROM PANTNAGAR BY APRIL-END

 

The first batch of thousand Nano cars may hit the roads in April, according to a spokesman for a Tata Motors vendor.

 

Nearly 1000 Nanos may roll out of the Pantnagar factory of Tata Motors by the end of April, a top official of a component manufacturing company said on condition of anonymity. Tata Motors, according to him, is currently assembling nearly 40 cars a day at Pantnagar. The assembling is being done in a makeshift arrangement at the mini-truck making unit.

 

The assembling rate would be ramped up to 100 cars a day from April, he said adding that production at the proposed factory at Sanand in Gujatrat would begin by the end of 2009. Construction at Sanand is proceeding very fast and the shades in the factory have been completed in just three months, he said.

 

NANO, ONE MAN'S GAIN AND ANOTHERS LOSS

  As Tata Motors is all set to launch Nano, the world's cheapest car, on Monday, residents in Sanand, where Tata's new Nano plant is being set up, are upbeat at the prospects. Residents were excited, looking forward to the jobs it would create.

"The direct benefit of the project is the employment that it will create, but there are several indirect benefits. It will create opportunities for the transport business, hotel industry and all other small businesses will get a fillip," said Ravubha Vaghela, a businessman.

But there were others for whom the wait seemed to be getting longer.

"The project has definitely put Sanand on the world map, but I don't think the workers and farmers will be much benefited out of it," said Bahadurbhai, another resident.

Back in Singur, the mood is sombre despite the fact that the opponents of the project achieved their goal by driving out the Tata Motors project.

"It is shocking and very sad. So many boys and girls took training and were dreaming of jobs. There were proposals for huge development. Singur residents have been deprived of all that," said Srikanto Chatterjee, a resident.

Tata Motors Ltd moved in its ultra low-cost Nano car to Sanand in Gujarat following violent protests at Singur in West Bengal.

The plant to be built at Sanand, near Ahmedabad, is located on about 1,100 acres, and will have an initial capacity of 250,000 units, which can be expanded to up to 500,000 cars per year

NANO SALE PLAN WILL HELP CASH-STARVED TATA MOTORS

 

While revolutionizing the Indian car market with its breakthrough budget pricing, the mad rush for the Nano is likely to result in a windfall for cash-starved Tata Motors that is likely to adopt a direct sale model for the car with a unique distribution plan.

According to sources, Tata Motors will not adopt the conventional retail model for the sale of the Nano wherein dealers buy the cars from the company and then sell them to customers through their retail outlets. Tata Motors is believed to have gone for a different strategy for the Nano, considering that the model will receive mind-boggling response from people that would be much higher than the estimated 50,000-60 ,000 units it would sell in the first year, or at least till the companys Nano-dedicated plant in Gujarat comes up, sources said.

As per the Nano plan, Tata Motors will accept direct bookings for the model, through branches of State Bank of India as well as the companys dealerships. The company is likely to ask for a cash down of Rs 70000 with each booking and even the booking forms would come for a price, believed to be Rs 500. All the deposits would therefore be available with Tata Motors for a few months, at least till the time the company decides on who gets the cars, the sources said.

This means that even if the company accepts bookings from at least 1 lakh customers to begin with, it will get access to Rs 700 crore cash. Dealer sources though said that the amount that Tata Motors would collect through this process could be in excess of Rs 1000 crore as it would accept bookings from over 1 lakh people . It is believed that the company will adopt a lottery system to decide the winners of the first lot of Nanos as the demand will be much more than the cars it produces, the sources said. The deliveries would be staggered for the coming months.