Sales of India's Tata Nano car struggle

Sales of India's Tata Nano have fallen to their lowest level since its launch as the world's cheapest car battles for popularity among India's burgeoning middle class.

Only 509 cars were sold in November - a fall of 85 percent from the same period last year, according to data released by Tata Motors on Wednesday, despite the offer of free safety upgrades after a series of fires struck Nanos.

Sales of the snub-nosed, jelly bean-shaped car have now fallen for four straight months from a high of 9,000 cars in July this year.

Analysts attributed the decrease to concerns over safety, a lack of availability of financial loans and operational hiccups after production shifted to a new plant.

"Quality perception over safety of the car could be a concern," Mahantesh Sabarad, senior analyst with Fortune Equity Brokers, told AFP, adding that a continuing fall in sales could affect the brand.

The Nano has been pitched as the "people's car" for India's aspiring middle classes, many of whom currently use motorbikes but want to upgrade to four wheels.

Over 71,300 Nano cars have been sold since its launch in July 2009.

Tata Motors declined to comment on the reason for falling sales but said they were taking a series of measures to boost sales.

Nano cars are now being sold in 12 Indian states, including Kerala and Karnataka in the south, Maharashtra in the west, northern Uttar Pradesh state and West Bengal in the east of the country, the company said.

"We are working with financiers to ensure adequate funding at reasonable rates. Sales will increase, as we go on covering more states," Tata Motors said in emailed comments.

The company last month began offering free safety upgrades for the Nano, saying it wanted to assure the more than 70,000 owners in India that "there are no generic defects" in the car which retails for around 2,500 dollars.

The upgrade involves new safety features being added to the exhaust and electrical system.

The company maintains it was not "a recall" of Nano cars.

About half a dozen fires have been reported involving the four-door car but there have been no injuries.

The company said an investigation by a team of internal and international experts concluded the reasons for the fires were "specific to the cars which had such incidents" rather than being a general fault.

Deepak Jain of Mumbai-based brokerage Sharekhan said the car is suffering from a "migration effect", as production has shifted to the new plant in Sanand, in northwestern Gujarat state.

Production of the car is likely to improve in two months' time, he added.

Analysts estimate that Tata Motors will sell between 80,000 to 85,000 cars by the end of the fiscal year to March 2011 - below initial company predictions.

Tata Motors has twice put up the price of the Nano this year, blaming the rise on the increasing costs of raw materials like steel and rubber over the last two years.

The Nano has sparked a race among global carmakers to create other low-cost cars for the fast-growing Indian market.

Tata Motors has unveiled a European version of the Nano and is looking to sell the vehicle in the United States. Both models will have to be redesigned to meet higher safety standards.