V R Sundaram was thrilled to bits when Tata Motors allotted him the Nano in June.
He had booked the car through the Pollachi branch of State Bank of India in Tamil Nadu.

But the 58-year-old businessman’s elation was shortlived because he was soon told the car would be delivered only by March 2011.

To boot, monthly instalments for the loan would start in July.

That’s because EMIs on the booking amount (between Rs 95,000 and Rs 140,000, depending on the model, and the interest paid thereon @10%-10.5%) start a month after allotment.

Tata Motors completed the allotment process for Nano in June.

In all 100,000 people received allotments and 55,000 were named ‘retainees’ whose booking amounts Tata Motors retained, promising to pay them interest @8.75%.

Sundaram promptly cancelled his booking. “Why should I pay interest now when I am getting the car only in 2011?” he asked.

Sundaram is one of the many who have been deterred by the huge gap between when the instalments start and when the car is actually delivered.

Banks say they are seeing increasing requests for cancellation of allotments. At some banks, close to half the allottees have cancelled.

Central Bank of India, for example, received around 9,200 applications for the Nano, of which 7,200 got allotments. However, 4,700 of these are to get the car only in 2011, and a majority of them have opted out, an official with the bank said.

“We have already received applications for 3,000 cancellations… the last date for
cancellation is August 20,” said the official.

P Nandkumaran, chief general manager, auto loans, at State Bank of India, said the group’s banks had warned Tata Motors about the possibility of cancellations.

“This was bound to happen. People would not be comfortable getting possession of the car later while having to pay the instalments much earlier,” he said.

He did not give an estimate of the cancellations as it was difficult for the public sector
behemoth to collate the data from its 12,000 branches across the country.

A Tata Motors spokesperson confirmed that the company is aware of the cancellations.
“Our first priority is to deliver the car to the one lakh allottees and then move on to the 55,000 retainees. Meanwhile, as people cancel, the queue moves up and the retainees will get their cars earlier than planned. Starting from July we have dispatched 2,475 cars and plan to complete delivery of the one lakh allotments by the last quarter of 2010.”

The story at Chennai-based Indian Bank is no different. It sold 3,200 forms of which 434 got allotments. Of these, 210 have been cancelled, said A K Dhar, general manager, retail loans.

“Since cancellations were coming in batches, we had to designate July 23 as the last date for it,” Dhar said.

More “than 60-65% of the 5,000 people” who applied for the car through Union Bank of India have either not got allotment or chosen not to take it.

“About 2,400 got allotments from our bank but we are still processing the data for cancellations,” a bank official said.

Bangalore-based Canara Bank got 1,818 applications for the car, of which 530 were rejected.

M Dohare, chief manager, marketing and new initiatives at Kolkata-based United Bank of India said 2,366 applicants out of 3,270 have been allotted the car. Of these 1500 deliveries will happen before 2010 and the rest in 2011.

“The majority of the cancellations are from those getting allotment in 2010-2011. But there are others also from the lucky 100,000 who are withdrawing. We cannot give an exact figure as our last date for cancellations is August 20,” Dohare said.

Not just banks, dealers are also facing cancellations because of the long waiting period.
Sudeep Chakravarty, manager (Nano) at Sanya Motors, Aurangabad, agreed high interest payments have forced many to give up.

“If people go for the finance option, they have to pay interest which amounts to an average of around Rs 25,000 a year till they get delivery. After delivery, they have to pay EMIs and the actual rate of interest, which is another Rs 25,000. People are not willing to spend Rs 50,000 for this,” Chakravarty said.

That apart, those who booked through ICICI Bank, the only private financer for the car, have faced another problem.

“The bank has placed a rider that it will finance only people who have Rs 5 lakh established annual income. This has led to many cancellations from ICICI,” Chakravarty said.

Online’s no different.
Tufail Khan, vice-president marketing at Carwale.com,  said his company sold 10,000 forms and of these, 2,000 got allotment. “We haven’t yet spoken to all the allottees, but our survey says around 20% will cancel as their allotment date is sometime around December 2010 and they do not want to wait that long.”

The Nano is currently being produced at the Pantnagar facility of Tata Motors, which has an annual capacity of 50,000 units, and once the Sanand plant in Gujarat goes on stream by the first quarter of 2010, the company will manufacture 350,000 units a year.