Reuters
 
Sanand, Mar 18: What a difference a year makes. In early 2008, Tata Motors unveiled its Nano to a rapturous media reception as the snub-nosed, 4-seater with a Rs 100,000 ($1,945) price tag created a new category of super-cheap cars for the masses.

Just weeks later, Tata Motors acquired the Jaguar and Land Rover brands for $2.3 billion from Ford Motor Co in a blaze of glory, and the company revelled in the global spotlight.

But Tata, India's top vehicle maker, next week rolls out the Nano six months behind schedule, amid worries that an economic downturn and production constraints may spoil the success of the world's cheapest car.

Since the Nano was first shown, the main production plant had to be moved following land protests, Tata Motors posted a first loss in seven years as sales slumped, and its shares have dropped 75 percent. On top of that, Tata Motors' credit rating was downgraded as its debt-fuelled expansion binge left it exposed to the financial crisis.

"In the last 12 months, Tata has been hit by a perfect storm," said Ashvin Chotai, managing director at consultancy Intelligence Automotive Asia in London.

"At the time, it was unimaginable that the venerable Tata would have difficulty tapping credit markets. But its resources became stretched from venturing out on so many fronts, and the slump in sales and tighter credit worsened the situation."

A bridge loan of $2 billion is due in June, with Standard & Poors warning of another ratings downgrade because of the "extremely adverse" operating environment for Jaguar/Land Rover, Tata's ambitious capex plans and deteriorating cash flow.

The high fuel and commodity costs that made the Nano imperative a year ago have faded somewhat, but its place in the history books is still secure, with a popular following that could rival the Beetle, Mini and Fiat 500, analysts say.

"The Nano will still create a new segment, bridging the gap between motorbikes and entry-level cars, and it will still be the first of its kind," said Mohit Arora, a director at JD Power Asia-Pacific in Singapore. "Those fundamentals haven't changed."