Tata may beat Hyundai in India with world's cheapest car

A Tata Motors Ltd. factory opening this month in western India to assemble the $2,500 Nano, the world's cheapest car, may help the company surpass Hyundai Motor Co. this year as the nation's second-largest automaker.

The plant in Sanand will start producing the Nano by April 30 and make up to 250,000 a year, said Debasis Ray, a spokesman for the Mumbai-based company. That's about 80 percent of Hyundai's India sales last fiscal year, based on industry data.

Tata now is filling 100,000 advance orders for the Nano. Those sales plus new output may help the truckmaker regain second place after five years in third, said Jatin Chawla, an analyst at India Infoline Ltd. in Mumbai. The boost comes as Renault SA and Nissan Motor Co. plan a rival ultra-low cost car and market leader Suzuki Motor Corp. and Toyota Motor Corp. raise production to target motorcycle owners.

"Profit from the Nano project will come only if volumes are significant," said Deepesh Rathore, an analyst at IHS Global Insight Inc. in New Delhi. "The new factory is key to boosting volumes and the sooner it comes, the better for Tata."

Chairman Ratan Tata, 72, also has to find out why two Nanos caught fire within a month. The model that ignited April 7 belonged to the company and had no design flaw, Ray said in a statement.

'Damage Control'

Another Nano burned last month while being driven home from the dealership. No one was injured in either incident.

"There is no doubt that Nano's design is sound, but they need to do a damage-control exercise as the world's attention is on this car," said Mahantesh Sabarad, a Mumbai-based analyst at Fortune Equity Brokers India Ltd. "Tata has to get its act together and identify the cause."

Indians may buy as many as 1 million low-cost cars a year by 2016, according to CSM Worldwide Inc. Tata, India's largest truckmaker and owner of the Jaguar Land Rover luxury brands, sold 30,350 Nanos from July through March.

Hyundai, South Korea's biggest carmaker, sells six bigger models in India and can produce 600,000 vehicles a year, including exports, at its Chennai factory.

"We have no intention of getting into the Nano segment at all," said Arvind Saxena, a director of Hyundai's India unit.