With the launch of Tata Motors’ Nano, the dynamics of India’s auto industry are likely to undergo major changes as wide spectrum of auto manufactures ranging from two-wheelers to cars will come under intense pressure to minimize prices as much as possible.

The segment of the auto industry, which is likely to face immediate heat, is the two wheeler manufacturers, analysts feel as “Nano” will seek to lure two-wheeler riders into buying the car.

Though most two wheeler manufactures, who together roll out around eight million bikes in the country annually, internally feel that ‘Nano’ is going to make some impact on their market, however they are trying to put a brave face. 

“We are not worried about the Rs 1 lakh car. Price, of course, is a factor, which influences purchasing decisions.

The more crucial factor is the ownership cost”, says Rajiv Bajaj, Managing Director, Bajaj Auto. What he means is that Nano will give 20 km a litre while a bike can easily run for 80 km with same amount of fuel. Plus the maintanance cost of a car is higher than bike.

Since the untapped market for bike is still huge, Hero Honda feels opportunities are plenty in rural areas. “We have the advantage of much lower maintenance and operating costs. But we need to make some changes and upgrade the vehicles to serve the customers still better”, Pawan Munjal, Managing Director, Hero Honda says. 

Impact on car market

The next major impact of Nano will be on country’s largest manufacturer Maruti Suzuki. Its Maruti 800, now cheapest in the country will be 40 per cent more expensive than Nano.

Industry experts believe that intoduction of Nano will lead to a sharp drop in prices of used car and in turn will stretch the budget of a new car buyer looking for exchanging old car.

This aspect will afftect sales of all small cars like Wagon R, Zen Estillo, Santro, Indica, Hyundai ‘i10’  and Spark.