Tata Motors is supposed in fail to fulfil sales forecast

Despite the offer of free safety upgrades after a series of fires affected the minicars only 509 cars were sold in November, 2010 - a fall of 85% from the same period in 2009, according to the Tata Motors data released on Wednesday. Sales of the car have fallen over a period of four months from a 9000 units in July, 2010.

Analysts associate the decrease with questions to safety, lack of financial loans and operational hiccups after production shifted to a new plant.

"Quality perception about the safety of the car could be a concern," Mahantesh Sabarad, senior analyst with Fortune Equity Brokers, told AFP, adding that a long-lasting fall in sales could affect the brand.

The Nano has been meant as "the people's car" for India's aspiring rising middle class, many of whom currently use a motorcycle but want to upgrade to four wheels. Since Nano’s launch in July 2009 more than 71 300 units have been sold.

Tata Motors declined to comment on the reason for falling sales but said it was taking a series of measures to boost up sales.

The Nano is now being sold in 12 Indian states, including Kerala and Karnataka in the south, Maharashtra in the west, northern Uttar Pradesh state and West Bengal in the east of the country, the company said.

"We are working with financiers to ensure adequate funding at reasonable rates. Sales will increase, as we go on covering more states," they admitted.

The company last month began offering free safety upgrades for the Nano, saying it wanted to assure the more than 70 000 owners in India that "there are no generic defects" in the car which retails for around $2500. The upgrade involves the exhaust and electrical system.

The company asserts it was not "a recall" though half-dozen fires have been reported. There have been no injuries.

The company said that an investigation provided by a team of internal and international experts concluded the reasons for the fires were "specific to the cars which had such incidents" rather than being a general fault.

Deepak Jain of Mumbai-based brokerage Sharekhan said the car was suffering from a "migration effect", as production has moved to the new plant in Sanand, in north-western Gujarat state. Production was expected to improve in two months, he added.

Analysts guess that Tata Motors will sell between 80 000 and 85 000 cars by the end of the fiscal year to March 2011; it is below initial company predictions.

Tata Motors has twice put up the price of the Nano this year, justified the increasing costs of raw materials such as steel and rubber over the last two years.

The entrance of the Nano launched a battle among global carmakers in creating other low-cost cars for the fast-growing Indian market and for now Tata has unveiled a version of the car intended for sale in Europe and America, redesigned to meet higher safety standards.