NANO or No! No!

From the specs and the reviews that I have been reading and watching, Tata Nano appears to be a nice car (at the given pricing). I must say that I'm impressed, as are so many other Indians and people around the world. But if I see through the strategy of Tata Motors for selling the car (Nano), I'm a bit perturbed. The booking amount is not Rs.2,999/- but ranges from Rs.95,000/- to Rs.1,40,000/-. You pay Rs.2,999/- only when you want to get the vehicle financed (and the balance booking amount would be paid by the financing institution). Ever heard making 70% payment for booking a car? Other auto companies book a car for you for as low as Rs.1,000/-, then why is Tata Motors asking you to cough up such a huge advance payment?

We are all aware that Tata Motors is in a financial havoc. Thanks to its acquisition of JLR, the dwindling automobile demand globally, and a failed Rights Issue in the Indian Capital Markets to raise funds, Tata Motors is in desperate need of cash to meet its interest obligations and working capital requirements. Nano seems to be the last ray of hope for Tata Motors to raise cash in this recessionary global scenario. Tata Motors has decided to sell the Nano to randomly chosen 1 lakh customers, which implies raising anything ranging between Rs.950 million to Rs. 1400 million (this is only the amount raised from one lakh customers who would be getting the cars, the other who do not get the cars would get the refund after 120 days from the end of the booking period, so the interest free funds available for this period of 4 months would provide additional working capital). The amount raised fro the sale of application forms (Rs.300 each), assuming 2 lakh forms are sold, would add another 60 million to the kitty. This, Tata Motor assumes would solve all their impending problems.

But would this last ray of hope bring sunlight to Tata Motors? Is the Indian 'aam aadmi' willing to pay Rupees ONE LAKH as an advance booking amount? Would there be ONE LAKH such people? The date of delivery of the car is also uncertain - the deliveries would start from July 2009, but would be completed by the end of March 2010. Would the applicants be paid interest on the booking amount in case the cars are not delivered to them in July itself? The questions are yet to be answered by Tata Motors...

From my little understanding of how the Indian consumers behave, all that I can say is that they always prefer to make a low initial payment to own any asset. That, I believe, was the reason for the instant success of Reliance India Mobile (just Rs. 500 for a cell phone). Is the Rs.2,999 financing scheme trying to answer that? Would the Indian consumers be able to look through thsi gimmick? Would booking a Nano now be a rational decision? No idea! All that I can say is that we have behaved irrationally, sometime or the other in our lives! Lets wait and watch, how the 'aam aadmi' behaves this time!