Mike Stevens | May 27, 2009

INTERESTING AND UNEXPECTED news from Tata that around 80 percent of Tata Nano orders are for the top-end model.

With 203,000 orders on the books so far, the majority of buyers have opted for the top-end model's features, such as air conditioning, central locking and front power windows, despite the 40 percent premium they'll pay on top of the base model's AU$3305 price tag.

The numbers will no doubt be pleasing to Tata Motors, with greater sales of the top-spec model meaning bigger margins and less chance of a price war between the new carmaker and its more established rivals, such as Maruti Suzuki India.

According to Mahantesh Sabarad, an analyst for Centrum Broking in Mumbai, there is less demand in India for a bare-bones car than expected, with the average income in the booming Indian economy doubling in the last eight years.

“Based on this experience, it does give other automakers room for pricing their products higher. They don’t have to be drawn down to a pricing war," Sabarad told Bloomberg.

Unlike the Chinese market where price wars and discounts have restricted profits, the Indian market offers manufacturers such as Toyota and Renault the opportunity to charge more for their low-cost models, thanks to the high demand for feature-rich cars.

Chairman of the Tata Group, Ratan Tata comes out of the new Tata "Nano" car in New Delhi, 10 January 2008. India's giant Tata Group unveiled a USD 2,500 car it bills as the world's cheapest amid predictions the compact, no-frills vehicle could revolutionise how the nation of 1.1 billion people travels. AFP PHOTO/ MANAN VATSYAYANA (Photo credit should read MANAN VATSYAYANA/AFP/Getty Images)

The cheapest Nano sells for 123,360 Indian rupees, while the top-end model model goes for 172,360 rupees, or about $4624 Australian dollars.

“Higher versions of all cars have better margins,” said Debasis Ray, a Tata Motors spokesman.

“It isn’t that the cheapest car sells the largest,” Mr. Pareek said. “There is a clear shift, and customers are not just buying the cheapest car. They are willing to spend a bit more.”

The Tata Nano may have even more company next year, with Toyota planning to introduce a small car into the Indian market, possibly based on the diminutive IQ. No details have been made available yet, but according to outgoing Toyota president Katsuaki Watanabe, the company has an early prototype in development.

Renault and Nissan are getting in on the game as well, with the two partners working together Indian motorcycle manufacturer Bajaj Auto on a small car.

Honda, Volkswagen, GM and Ford are all taking up their own places in the Indian market as well, ensuring an intense battle for sales in the future.

The Tata Nano is due for delivery to owners in July, with a lottery set to determine just who those first owners will be.

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