10 per cent of two-wheeler customers could shift to Tata Nano: Anand Rathi

Mumbai: Speaking to CNBC-TV18, automobile and transportation analyst Deepak Jain at Anand Rathi said that he would expect as much as 10 per cent of the two-wheeler market to shift to Tata's new Rs 1 lakh car, the Nano.

Jain said that, "With a Rs 30,000 down payment, you can take a loan of around Rs 1 lakh for which the EMI works out to around Rs 3,716 per month. With just Rs 3,700 per month as EMI, I believe anybody can afford this product. As far as the shift is concerned, our initial estimates are around 10 per cent of the two-wheeler market can actually shift towards the small car."

Jain estimates the car's on-road price, factoring in the dealer margin, VAT, and registration charge, to be around Rs 130,000 for the base version. He estimated the car to be "a big demand puller", evaluating the demand scenarios, and the kind of numbers the car is capable of doing. According to Jain, the car addresses different segments, including the second-car market, and the second-hand car market, which he expects the car to be capable of crashing in terms of pricing.

Jain said that the direct impact of this launch would be felt in the demand for Maruti's Alto and the bread-winner, Maruti 800.

Echoing Tata Group chairman Ratan Tata's statement, Jain estimates that specifically for this project, Tata Motors would aim at around 15 per cent return on capital employed (ROCE). That would mean the company should be able to make an EBITDA margin of at least 10.5 per cent on the project, which he said would take at least 2-3 years. Accordingly, gains would accrue only on a long-term basis.