Sceptics have questioned the feasibility of the Nano almost from the start – they feel that the announced price of Rs1 lakh (just under $2000) is simply too low to make a car of acceptable quality.
However, the very fact of its ultra-low price has stirred and shaken the auto community internationally; and demonstrations at auto shows have proved that it is not just a glorified two-wheeler. Competitors like Maruti Suzuki and Hyundai Motors have been forced to take notice.
The delay in the launch of Nano may have come as a blessing in disguise for Tata Motors, because petroleum prices have shrunk in recent months along with the prices of raw materials, especially rubber and steel.
As the Nano hits the road, the reaction of Maruti Suzuki, India's biggest seller in the 'entry level' car segment, will be the most keenly watched. Its two hot-selling models, the Alto and the venerable M-800, both cost over Rs2 lakh.
Recent reports suggest that Maruti could rework its largest selling model the Alto. Given a facelift and a price tag under Rs2 lakh, it could make potential Nano buyers think twice – particularly as Maruti has an excellent track record, while the Nano remains untested on the Indian roads.
Hyundai, the second-biggest seller in the market with its Santro, has announced that it plans to come out with a small car for India and China priced at around $3,500 (Rs1.77 lakh), while two-wheeler major Bajaj Auto has said that its ultra small car project is on track for the scheduled rollout in 2011.
The huge taxi market seems out of reach for the Nano, as cab operators say it is too small and does not have enough luggage space to be viable for their purpose. However, it Nano may be appealing the myriad of potential two-wheeler customers in an upwardly mobile market.
Although it would cost more than twice as much as a standard 100cc-150cc bike, buyers may prefer the more expensive family vehicle. Industry research organisation CRISIL has said in a report that the Nano may increase the number families who can now afford a car by 65 per cent (See: Nano reinforces India as small car hub: CRISIL).
Dealers seem divided in their opinion – some say that the maintenance, fuel and spare parts costs are a bigger determinant of choice than the initial price, while others maintain that it could revolutionise the auto market by catering to the bulk of the real middle income families.
Car dealers have already begun to hedge their bets, with reports that automobile prices across the major cities have come down by more 25-35 per cent in recent weeks in anticipation of the arrival of the Nano.
With the slowdown in the economy, demand for used cars has also plunged, with dealers ready to clear inventories at reduced prices.