Indian bloggers mania: sridhar kondoji


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Tata’s Nano boon or bane to Indian industry?

Tata’s nano dubbed as People’s car is the talk of the world. Almost all radio channels, newspapers are covering it breathlessly.
I was driving from Norwood, MA to Acton, MA for my work and turned on Radio FM channel 90.9 and to my surprise there was an ongoing discussion of People’s car. There were echos from people in Afghanistan, Europe etc wanting to buy this car. However, there were also people from Ghana who said big NO for this car as they have seen negative side of it due to cheap cars from Korea.

This is what analysts are saying: Tata’s Nano (alias JEH) could be a huge hit in India. This type of car may work in India in the present conditions of Road infra structure. There is a huge apetitie for such cheap car from Lower and middle class families, who would want to switch from 2 wheelers and also from first time car buyers. Especially families who wanted to buy 2 wheelers to carry their entire family of 3-5 would now switch to buy this cheap car instead of 2 wheelers from Bajaj, Hero Honda.
Youngsters will still prefer 2 wheelers though.

Tata’s car can push the whole auto indsutry into a tailspin. This is my view though.
A) Tata’s nano has the immediate effect of putting a price pressures on 2 wheelers, 3 wheelers and 4 wheelers and ultimately affecting their margins. This will negatively effect the top line and bottom line of all the auto majors. Utlimately Indian people will benefit as the prices will be drastically reduced by Tata’s competitors.
Net affect: 2 wheelers will become lot cheaper. 2-3 lacs car prices will come down and ultimately become attractive to the point that Tata’s nano buyers will start looking around for better options such as safety, design and status.
Tata’s nano can create class wars among car buyers.
B) Tata’s nano can aggravate our traffic jams and burden our creeking infratructure. Unless government does something immediately, 1-2 years from now, you will see traffic jams for hours.
However, contrary to this opinion, if Road infratructure improves inline with Western standards, Tata’s car may not be suitable for fast mobility as their engines are V3 standard and their max speed is much less compared to what it should be on good raods. Tata’s car wil again impede the fast mobility and again create bottlenecks.
C) India has to spend lot on importing OIL. Almost 2-3 times what it does now. Their will be huge pent up demand for petrol.
D) Safety issues will crop.

If i were you, this is what i will do.
Instead of spending 1 Lack rupees on tata’s nano, i will but Tata Motors stock in open market.
No doubt, tata motor stock will go up for next few quarters as their sales volume will pick up. Meanwhile, the car prices and the stock price of other auto majors will come down. I will book profits on tata motor stock and buy Maruti car or other brand with the profits in tata motor stock.



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