Are Tatas walking their talk with respect to Nano booking?

I don’t think so. Here is my reasoning for the same.

Tatas have stated that they are taking such a high amount of booking amount because they want to encourage onlt serious buyers to apply for the car and to avoid the so called “premium earners,” that is people who book cars to earn a premium. If this is the case, then why are Tatas and its associates advertising so much? In the next two years, Tatas are expected to deliver (God willing) 2.5 – 3.0 lakh cars. They would get booking for this many cars without any publicity as Nano booking is getting a lot of free publicity. So, what is the reason behind the advertisement campaign?

I saw a half page advertisement in HT – Delhi released by CROMA, the electronic store of Tatas. First, the advertisement would cost in lakhs in just Delhi edition. On top of this, Croma is also offering discount. If you buy a registration form from them, they will offer free a Rs. 300 discount on their products. Central Bank of India (CBI) has also released an advertisement in Times of India. Similarly, Westside, another retail venture of Tatas released a half page advertisement in the Times of India costing lakhs just in Delhi. Westside is also offering a lucky draw of Rs 100000 at every Westside when you book a Nano with them.

Now why are these guys advertising so heavily when Tatas could have 3 lakh bookings equivalent to their 2 year expected production without spending any money? Let me tell you what I think. There are two reasons for Tatas to do what they are doing which are as follows:

(a) Tatas want to make the money from the hype that has been created. In my earlier blog on the subject, I have calculated the rough amount of money that Tatas will make from just selloing the registration forms.

(b) Tatas want to collect as much money as they can as they need it. Tatas are short of cash with their expensive acquisitions of companies like Corus and Jaguar.

(c) They will save interest on the huge amount of money collected.

(c) It is obvious that they are not sure that the hype about the car will last very long and as such they want to take advantage of the hype as much as they can.

Let talk about the money involved. It was reported in the press that every person who books the Nano car would stand to lose about Rs. 3500 approx. With 10 lakhs booking expected, customers would lose Rs. 350 crores which would be divided among Tata, the booking banks and Tatas associate companies. In addition Tatas with get Rs. 8000-9000 crores of funds to use in their business.

No wonder Tatas are advertising as well as making their associates advertise. The above is by no means in the interest of the customer.

Now let me give you a solution. Lets not book the car. You will save Rs. 3500 that the booking will cost you. The probability that you will get the car in the first 50,000 vehicles in the first 6-7 months is just 5%. So even after spending Rs. 3500 you may not get the car. And if you still need the car, you will lets say have to pay a premium which initially could be Rs. 10-15,000. So if you so desperate for the car, why not just pay the premium. Also, you will get to know about the quality and operation of the car.

In addition, those of you who are using your own money to book ther Nano car, beware that it is not easy for you to get your money back. Companies are always reluctant to return the money immediately. They always take their own time and find all kinds of excuses to not return the money fast. In addition, one doesn’t know what the financial position of Tatas will be after 5-6 months. We also do not know if Nano is going to be a success or not. In case Tatas have trouble selling the car, I am doubtful if you will be able to get your money back fast and that too easily without them making you go around in circles. My advise to such people is that you might as well go through the bank and take a loan to book the car. This way you will at least end up limiting your losses.

It is evident that Tatas are not trying to avoid “premium earners” by fixing huge booking amount but are trying to not only collect huge amount of interest free money but also make profit by selling forms and processing charges.

So, beware while booking the Nano car!

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