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Touted as the world’s cheapest car, Tata Nano aims to cater to the desires of the audience, who lack the financial support to own a highly priced four wheeler. Apart from forcing other carmakers to re-visit their business strategies, Nano has already started hurting the business prospects of the second hand car (currently standing over a million units) dealers like Maruti’s True Value, M&M’s First Choice et al. The adverse impact is visible even before Nano has hit the Indian road, as players of the used car market have been forced to slash their price rates by 30% in the Delhi-NCR region. The prevailing economic condition notwithstanding, consumers are holding back their precious pennies and thus Nano becomes an apt choice for the cash strapped buyers. However, Ravi Subramannian, AGM (Sales), Maruti Suzuki True Value differs, “The launch of Nano will hardly impact our business prospects, for the prospective car buyers would rather believe in purchasing a second hand high-end model rather than going for a never-tested-before vehicle.” N. Wadhwa, MD, SKI Capital Limited disagrees with Subramannian, “Used cars raise a lot of doubts in the mind of the buyers. Thus people would prefer buying a new car available at a lower rate rather than going for a second hand car.” Moreover, small cars form nearly 70% of the second-hand cars sold in the country; thus Nano is more likely to cut a hole in the pockets of second hand car dealers. But the future business dynamics of Nano having a larger share of the market pie and further hurting the second hand car dealers would depend on the success or failure after it goes through the buyers’ litmus test once it is launched.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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