Tata Nano initial production may be from Pantnagar plant

The Singur stalemate may force Tata to move production of its Tata Nano to its Pantnagar plant in Uttaranchal. Even as Orissa, Maharashtra, Haryana and Andhra Pradesh jostle to get Tata Motors to manufacture the Tata Nano in their states, Uttaranchal has the best chance because of the existing Tata plant in Pantnagar.

Tata’s Pantnagar plant manufactures the mini-truck Ace, with a capacity to manufacture 2.5 lakh Ace trucks. Apart from that, the Pantnagar plant would have a capacity to manufacture 40,000 Nanos. The fact that the Tata Ace and the Tata Nano have the same vendor base and the same production team, would weigh in Pantnagar’s favour. Also, Tata’s Pantnagar plant has 1,000 acres, the same size as Tata’s Singur plant.

Besides, Uttaranchal enjoys many subsidies, tax sops, and special privileges from the Central government, which would benefit Tata Motors.

The move to Pantnagar Tata Motors plant, though, would mean the relocation of 55 vendors and an increase in transportation costs. Tata has already made an investment of Rs 1500 crore in the Singur plant and the prices of raw steel are also on the rise, which would be a hit that the company would have to absorb, if it does not want to tinker with the USP of Tata Nano as a people’s car with a cheap price tag of Rs 1 lakh.

While the costs of shifting production to another plant will be high, depending on the amount of transfer of movable assets, it could be mitigated somewhat by the existing vendors in Pantnagar. Many vendors in Singur are also open to shift shop should Tata move out.

After Mr. Ratan Tata announced that the Tatas would not hesitate to pull out of Singur, vendors whose plants are near completion in Singur, and who would provide the crucial components for the Tata Nano, would have to move to be near the parent plant. Suppliers have said that they have the capacity in existing plants to be part of the Tata Nano launch, if the Tata plant moves to Pantnagar, or even Pune. Other suppliers are willing to stay put and use their sheds as warehouses to store the components.

In the event that Tata does move out of Singur to Pantnagar, the initial launch of the Tata Nano is likely be delayed by a month. The Tata Nano was expected to be launched in October 2008. Tata had initially planned to manufacture 96,000 Tata Nanos, which has been brought down to 50,000. If Plan B is put into practice, after the inital roll-out, production would be scaled up at the Pantnagar plant, which would take another six months. In that case, Tata is expected to manufacture only 35,000 Tata Nanos in 2008-2009, and maybe scale up to 2 lakhs by 2010.

Even as the Tata Nano project is near completion, Tata has not yet announced where the components, made by the original equipment manufacturers (OEMs), will be delivered, which has also led to the speculation that it will be the Pantnagar or Pune plant that is likely to manufacture the Tata Nanos.