Price Hike for World's Cheapest Car

Sharp increase in input costs will drive up cost of Nano

The makers of the Nano said on July 15 that it was raising the price of the snub-nosed four-door vehicle as it announced plans to ramp up production. A spokesman for Tata Motors said the price for the Nano -- billed as the world's cheapest car -- would have to increase for new customers by three to four percent due to a "very sharp increase in input costs."

Launched in 2009 with a price tag as low as 123,000 rupees (US$2,629) by Tata Motors, the car has been pitched at India's aspiring middle classes, many of whom now travel on two-wheelers.

"It is a very nominal increase given the rise in raw material costs," the spokesman said.

Carmakers in India have been steadily increasing prices this year to offset higher raw material costs such as steel and rubber. However, Tata Motors said the company would keep the price unchanged for the first 100,000 Nano customers as promised when the car was first displayed in 2008.

As a result of production problems, Tata has so far delivered a less-than-expected 45,000 Nanos to customers. It was forced to shift production to India's western state of Gujarat after a violent land dispute in Singur in communist-ruled West Bengal obliged it to scrap in 2008 its virtually complete Nano plant.

Now, however, Tata said it expected to be able to bump up production of the Nano as its new Gujarat plant had become operational ahead of schedule.

"It is very good news for us, it has been completed in just 14 months," the spokesman said.

The company will also continue producing the Nano at a factory in the northern state of Uttarakhand to help clear the backlog of orders.

The Nano has sparked a race among global carmakers to create other low-cost cars for the Indian and other emerging markets.

Copyright Agence France-Presse, 2010

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