Nano Worth Its Weight in Gold

Three years after launching the Nano as “the world’s cheapest car”, Ratan Tata, chairman of India’s second largest industrial group, presented what may be the world’s most-expensive automobile: the jewel encrusted GoldPlus Nano.

Punit Paranje | AFP | Getty Images

Covered in 80kg of 22 carat gold and 15kg of silver, and inlaid with 10,000 semi-precious stones and gems, the ‘bling’ version of the Nano is a one-off showpiece that will tour Tata-owned jewelry stores across the country.

What was originally marketed as the People’s Car, selling for about $2,500, has been transformed into a golden chariot, with an estimated value some $4.68 million higher, based on the current price of bullion.

The makeover highlights the paradoxes of one of the world’s fastest-growing economies, where billionaires live side-by-side with the severely impoverished.

The original Nano, which launched with a 100,000-customer waiting list in 2008 and was aimed at an emerging middle class, has seen sales plummet. In August the Mumbai-based group shipped just 1,202 units, down 88 percent from April’s 10,012 units.

Analysts blame the fall on safety issues, poor marketing and a misunderstanding of the Indian consumer.

“Really for the Nano project to make any sense, you need to sell between 15,000 to 20,000 cars every month … [for] a couple of years,” said Deepesh Rathore, managing director for India at IHS Automotive.

Tata made clear the new car was simply a promotion for its GoldPlus stores, but analysts said that could confuse consumers and failed to address the broader problems the People’s Car has had since its launch.

“They are not getting their brand and marketing strategy right and it’s confusing the buyers,” said Surjit Arora, auto analyst at Prabhudas Lilladher. “They need to have a better and more aggressive marketing [strategy].”

Analysts also blame the Nano’s poor safety record. Several incidents of the cars spontaneously erupting into flames were widely reported, pushing Tata to offer its existing 70,000 Nano customers a safety upgrade to its electrical system and exhaust.

However, a more fundamental issue, according to Mr Rathore is that the car has been marketed in the wrong way from the beginning. Indians, he said, generally do not want to be known as buyers of the world’s cheapest car.

The showcasing of the car comes as Tata Motors announced a new Jaguar Land Rover engine plant in the U.K. on Monday and only 11 days after Carl-Peter Forster, the chief executive of the group, stepped down for personal reasons.

After reporting deep losses during the financial crisis, JLR is now solidly profitable and the main driver of Tata’s growth. The U.K. unit reported net profit of £1.04 billion for the 2010-11 financial year.

Tata’s lower-end brands have been suffering a broader drop in sales in the small passenger vehicles segment, which has also affected its domestic competitors. India’s auto sales fell in July for the first time in nearly three years.

The Mumbai-based group has plans to combat low sales by opening exclusive Nano-only dealerships throughout rural India, the market for which the small car was originally intended. The move has worked with the more utilitarian Tata Ace mini-truck, but an analyst said operating and start-up costs would prevent many entrepreneurs from starting the dealerships.