Delivery of the first Nanos by Tata Motors is set to commence this month. However, auto parts suppliers are still undecided on whether they will set up a manufacturing base in Sanand in Gujarat, where the Nano mother plant is being set up. The plant is expected to begin production of the first cars by year-end.
Many vendors who had lost their investment in Singur, West Bengal, after being forced to abort production there, are yet to decide on relocating to Sanand.
Most of these suppliers will address the demand for components from their existing plant locations to meet this year's Nano production needs.
Due to production constraints, Tata Motors will be making just 50,000 units of the Nano this year, with the balance of the committed and booked 100,000 Nanos next year. Deliveries are expected to conclude by the final quarter of 2010.
Sulajja Firodia Motwani, Director, Kinetic Engineering, says: "We are supplying parts to the Nano from our Maharashtra plant for the time being at the moment. We haven't taken a call yet on Sanand. But we are with Tata Motors since the very start of this project and we believe the product has a long-term potential." Kinetic Engineering supplies transmission gears to the Nano.
Tata Motors have also told its vendors to make a limited number of components for the time being. Koshy Varghese, V-P (marketing), MRF, says: "We are currently supplying around 10,000 tyres per month to the Nano. It would continue at this level till such time Tata Motors ramps up its production."
Others hope volumes will go up and so will margins. "There is great excitement now that the real thing will be delivered to customers. For suppliers like us, it is a wait and watch situation, since the prices that we have agreed to is fixed for the first one lakh units of the Nano. So from now until next year, should prices of raw materials go up, then we take a hit on our margins. Once volumes pick up, only then can we reap the benefits of economies of scale", said a New Delhi-based component supplier.
Production at the Sanand plant can be ramped up to 500,000 units from 250,000 units annually once demand picks up. Tata Motors has also set up an additional 50,000 unit capacity at Uttarakhand for the Nano.
