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Tough Times for the Tata Nano
New York Times, 26 December '08
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The Tata Nano, with a projected price of about $2,500, was hailed as the world's cheapest car when it was introduced in January, but nearly a year later there is still no factory to build it.

Farmers have filed a case against the Indian government and Tata Motors, demanding better compensation for land sold to support the latest Nano factory in Gujarat, India. Sales of the Nano in India - originally scheduled for October of this year - will not begin until next spring.

This is the second time that Tata has faced off against angry farmers and politicians. A similar series of protests erupted this summer, at a factory purpose-built for the Nano in the town of Singur, in the state of West Bengal. Protesters (led by a handful of local political leaders) alleged that Tata forced farmers from their land or paid a fraction of the land's true value.

By October, the Singur protests had grown in size and intensity. Highways surrounding the factory were at a standstill, and workers were being threatened. Tata finally abandoned the Singur factory, in which it had invested $350 million, according to the BBC at the time.

"There is no way this plant could operate efficiently unless the environment became congenial and supportive of the project," a Tata spokesman said.

Plans to build a new factory in Gujarat seemed to put the Nano back on track. But another land dispute has sparked a sense of déjà vu for Tata.

"The land dispute is real," said Paul Blokland, managing director of Segment Y Automotive Intelligence, an automotive consulting firm based in Goa, India. "The locals say that the lease on the land has run out, and that it therefore reverts to them, while the government says it bought off the original landowners in the 1920s."

Once again, Tata has been forced to find a quick solution. Automotive News reported recently that Nano production will now begin at Tata's existing factory in Pantnagar in the northern state of Uttarakhand. And according the Economic Times on Friday, Tata has received an allotment of land from the Uttarakhand government to expand the Pantnagar factory for Nano production.

Even with a rapid expansion of the Pantnagar factory, sales of the Nano will (at least initially) fall well short of Tata's original expectations, Mr. Blokland said.

"The plant in Gujarat will not start serious manufacture until late 2009," he said, adding that the Nano will be produced in small numbers, between 3,000 and 4,000, in Pantnagar, calling it a "soft launch."

This is far from the 100,000 annual sales Tata envisioned when the Nano made its debut at the New Delhi Auto Expo in January.