For Tata Motors, a chunk of Nano sales is coming from employees

When Chrysler was in trouble in the late seventies, Lee Iaccoca, the legendary and maverick chairman of the company, peddled vehicles on television and breathed life back into what was a bankrupt company.

Closer home, Tata Motors, though not in as desperate a state as Chrysler, also seem to need a tug to revive sales of its people’s car — the Tata Nano — that had the world in raptures when it was launched in March 2009.

And at hand to revive sales seem to be employees of Tata Motors, who came in big numbers in December and January to buy the car.

Sales of Nano had nosedived from 9,000 units in July last year to a low 509 units in November, but rebounded strongly to 5,784 in December. In January, even this number was bettered as 6,703 Nanos were sold.

The groundswell of demand was possible due to the vast pool of employees that the Tata group rosters hold.

According to industry analysts and sources at banks, sales to employees have indeed added spunk to the otherwise lukewarm passenger car numbers.

Until December last year, Tata group employees could avail of loans at a rate of 2% per annum (for a four-year loan) as against the normal auto loan rates of 15%.

Under a revised scheme now, employees can get loans at 5% to buy the car by making a downpayment of Rs1,000.

Tata Motors alone has 24,000 employees and the scheme has been extended to staff at group companies and at the Fiat India joint venture.

Sources said even Tata Motors’ vendors can avail of the scheme.
In order to set an example to other employees, the senior management is also purchasing the car.

An official at Pandit Automotive, one of the largest dealers of Tata Motors in Pune, said in November-December, they sold around 2,000 Nanos of which 70% were to Tata employees.

Tata Motors has also tied up with 29 financiers (a mix of public and private sector banks and non-banking finance companies) across India, the largest of which is the State Bank of India, which is providing finance for Nano at 8% interest rate after subvention.

Jay Chandran, assistant general manager, (auto loans), SBI, said, “Normally for a Nano, we would have charged 9% interest rate for the first year; 10% for the second and third year and 11% fourth year onwards. But we are getting a subvention of 3% from Tata Motors to finance 85% of the on-road price of the Nano.”

In December, SBI financed around 500 Nanos across India, Chandran said.

Same is the case with HDFC Bank, which is also financing the car at 8% after subvention, while the market rate for auto loans is closer to 15%.

HDFC Bank sources, most of the financing is done by Tata Motors Finance, which, in December, funded close to 2,500 Nanos for the employees or 46% of the 5,784 sold in the month).

An analyst with a domestic research firm said that with such subvention, Tata Motors would be paying around Rs7,000 per Nano financed.

“This is a significant marketing support for the Nano, besides other initiatives like a four-year manufacturers warranty with the option of a comprehensive maintenance contract at Rs99 a month,” the analyst said.

C Ramakrishnan, chief financial officer of Tata Motors, declined to share details about the subvention given to the banks.

“It is our internal discussion with the banks,” he said.

The company did not disclose the additional expenditure incurred in extending the warranty period for the Nano either.

A company spokesperson did not respond when asked if similar schemes will be extended to shareholders as well, who have been demanding this for a while now.

On the ratio of sale to employees to sale to public, the spokesperson said, “Like other automobile companies, we do not declare retail numbers. To tell you how many colleagues have bought the Tata Nano will mean sharing with you retail sales.”