New car price point to result in 65 per cent increase in target households for the Nano: CRISIL

New Delhi: The unveiling of Tata's people's car, the Nano, which is the cheapest car in the world, triggers an important event in the car market. Given the shape of the income distribution pyramid in India, the new price point translates into a 65 per cent increase in the number of families that can afford a car, says CRISIL Research.

The research firm has estimated the expected consumer price of the car at around Rs1.3 lakh (approximately $3,000). This brings down the cost of ownership of an entry level car in India by 30 per cent, making a new car affordable to families with income
level of Rs2 lakh (approximately $5,000) per annum.

CRISIL Research believes that this launch will prompt product developments in the mini-car category by other players in the passenger vehicle segment, over the course of next few years.

In a press release, CRISIL Research said that these launches will attract a section of existing two-wheeler owners (currently nearly 50 million) to upgrade to a car. CRISIL Research has prepared these estimates by projecting the income demographic transition pattern in India and the cost of ownership of existing and new entry-level cars.

At the significantly redefined threshold for car ownership in India, annual car sales in India have the potential to increase by 20 per cent, over the annual sales expected in 2007-08.

For the impact analysis, click here.