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.
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].
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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.
News Highlights - Week of 5 - 9 September 2011
Consumer price inflation in the People's Republic of China (PRC) stood at 6.2% year-on-year (y-o-y) in August, compared with 6.5% in July, as the increase in food prices slowed. In Indonesia, consumer price inflation rose to 4.8% y-o-y in August from 4.6% in July as food prices climbed at a faster annual pace amid the Idul Fitri celebration. In the Philippines, the 2006-based consumer price index rose 4.7% y-o-y in August, compared with 5.1% in July, mainly due to an easing in food price inflation. Meanwhile, producer prices in the Republic of Korea rose 6.6% y-o-y in August, the highest annual increase in 4 months.
*Policy interest rates were held steady last week in Indonesia, Japan, the Republic of Korea, Malaysia, and the Philippines.
*The PRC's trade surplus dropped to USD17.8 billion in August from USD31.5 billion in July, as imports surged 30.2% y-o-y, while Indonesia's trade surplus fell to USD1.4 billion in July from USD3.3 billion in the previous month. In contrast, Malaysia's trade surplus widened to MYR9.5 billion in July from MYR7.9 billion in June.
*The Republic of Korea revised its quarterly real gross domestic product (GDP) growth for 2Q11 to 0.9% quarter-on-quarter (q-o-q). Malaysia's industrial production index declined 0.6% y-o-y in July. The Purchasing Managers' Index (PMI) for Hong Kong, China fell to 47.8 in August from 51.4 in July, while it rose slightly in Singapore to 49.4 in August from 49.3 in the previous month.
*Net foreign investment into the Republic of Korea's LCY bond market fell to KRW134 billion in August from KRW2.9 trillion in July. Meanwhile, Thailand launched its initial offering of 3-year retail government bonds totaling THB50 billion on 12 September and intends to raise THB540 billion from planned bond sales in the next fiscal year, beginning in October.
*Last week, Korea Eximbank announced a USD1 billion 10-year global bond sale; Energy firm BP priced a CNH700 million 3-year bond and French gas producer Air Liquide priced a CNH1.75 billion 5-year bond in Hong Kong, China; and Henderson Land priced a SGD200 million 7-year note with a 4.0% coupon.
*In the PRC, China Datang Corporation Renewable Power Company plans to issue CNY2 billion worth of 1-year commercial paper, while Guangdong Development Bank aims to sell CNY2 billion of 10-year subordinated debt. In Hong Kong, China, BSH Bosch Und Siemens Hausgauraete plans to issue CNH-denominated bonds.
*Foreign reserves in Hong Kong, China rose 0.2% month-on-month (m-o-m) to USD279.4 billion in August. Accumulated foreign reserves also increased in August in Japan and the Philippines to USD1.2 trillion and USD75.6 billion, respectively.
*Several commercial banks in Viet Nam began lowering their lending rates last week to between 17% and 19%. The State Bank of Viet Nam released a circular last week presenting the conditions for credit institutions and foreign bank branches to purchase corporate bonds.
*Government bond yields fell for all tenors in Indonesia, the Republic of Korea, and the Philippines, and for most tenors in the PRC; Hong Kong, China; Malaysia; Singapore; and Viet Nam. Yields rose for most tenors in Thailand. Yield spreads between 2- and 10-year tenors widened in Malaysia, the Philippines, and Thailand, while spreads narrowed in most other emerging East Asian markets.
IMF Agrees To Shove Head Deep In Sand, Will Lower Eurobank Capital Needs
When all else fails, change the rules, and shove your head even deeper in the sand:
IMF has agreed to substantially lower initially estimate for European bank sector capital needs according to Eurozone sources• Private sector expected to meet bank recapitalisation needs, according to Eurozone sources• Eurozone has no plans for public support for banks over and above money in bailouts for Greece, Ireland and Portugal according to Eurozone sources• "We have discussed this with the IMF in detail and the IMF has agreed that this initial figure will be revised downwards and the revision will be quite substantial," a euro zone official participating in the talks said.
Of course, this won't change anything about the fact that Eurobanks are insolvent, that the ECB is undercapitalized, that the Greek bailout is falling apart. But what matters is that the IMF, or the world's former bailout, and now completely irrelevant, organization courtesy of China, will allow banks to proceed far further undercapitalized than prudent, until it has to bail out not one, but all, and at the same time. As a reminder, the IMF expected a need of $200 billion, which the eurocrats say is goign to be far lower... Even as Goldman's report, first released on Zero Hedge, said that the full amount will be 5 times bigger, or $1 trillion. As much as Goldman is blasted left and right, they at least know how to use that HP12C. Which is far more than we can say about the idiots from Luxembourg.
More from Reuters:
Euro zone governments have no plans to inject any further capital into banks over and above the money earmarked for the financial sector in the emergency loan programmes to Greece, Ireland and Portugal, sources said.
Euro zone officials discussed the issue of banking sector recapitalisation on Monday and Tuesday as part of the preparations for the informal meeting of European Union finance ministers in Poland on Sept. 16.
The issue has returned to the table after the IMF called for additional capital to boost the European banking sector, estimating the extra need at 200 billion euros in a draft version of an unpublished report leaked to the press.
"We have discussed this with the IMF in detail and the IMF has agreed that this initial figure will be revised downwards and the revision will be quite substantial," a euro zone official participating in the talks said."
There is a need for additional capital in the European banking system but the magnitude of the required recapitalisation is nowhere near the initial number of the IMF," the official said.
Euro zone officials estimate banks have in total already raised some 50 billion euros in additional capital in the run up to the European bank stress tests in July and now had between six and nine months to further increase it where necessary."
In all likelihood it will be private capital that will be raised. For public money, we have no plans of a large scale or any banking recapitalisation programme over and above the contingency reserve for the financial sector in the three programmes that we are currently running," the official said.
The capital needs could also be solved through mergers and acquisitions. Only at the end of the six to nine months, if the identified banks will have failed to have sufficient capital, would governments step in with public money, a second euro zone official said.
The euro zone has earmarked 10 billion euros to help banks in Greece, 35 billion for Ireland and 12 billion for Portugal under the euro zone bailout programs
