India's Tata Motors defends strategy for $1500 Nano car

[November 05, 2016]  MUMBAI (Reuters) - Tata Motors, part of India's Tata group, defended its strategy for producing the $1,500 Nano but shied away from commenting on the loss-making car's future, after the conglomerate's ousted chairman said there were emotional reasons for not shutting down production.

Tata Motors' issued the statement to the stock exchange late Friday after an internal letter by ousted chairman Cyrus Mistry said the cost of Nano's production was always higher than its 100,000 rupees ($1,497.33) price tag and the project needed to be shut down if the company wanted to remain profitable.

Mistry was sacked in a boardroom coup last week with group patriarch Ratan Tata taking over the reins as interim chair of Tata Sons. A bitter public feud has since erupted between the two sides, raising prospects of a legal battle.

The Nano's concept received global interest for its affordable pricing but a change in its manufacturing location and the perception of a cheap car hurt production and sales, Tata Motors said in the statement.

Mistry's leaked letter, addressed to the Tata Sons directors on Oct. 25, said emotional reasons were keeping Tata Motors away from shutting down the Nano's production.

Nano sales declined more than three-fifths to 4,459 cars in the in the six months of the fiscal year beginning April 2016.

The car maker had written off some costs associated with the Nano, it said.

Tata Motors also said investments in the Nano factory could be used for making other products and that the company would focus on "growing and attractive segments of the passenger vehicle market."

A showroom attendant cleans a Tata Nano car at their flagship showroom in Mumbai May 28, 2013. REUTERS/Vivek Prakash

The company denied Mistry's accusation of aggressive accounting for product development expenses and said it followed standard norms which present a fair and true picture of its financial health.

Tata Sons on Friday announced a new management team for the $100 billion steel-to-software group under interim chairman Ratan Tata.

While Mistry has been removed as chairman of Tata Sons, he is still chairman of some of the key listed group companies such as Indian Hotels Co <IHTL.NS>, Tata Motors <TAMO.NS>, Tata Consultancy Services Ltd <TCS.NS> and Tata Steel <TISC.NS>.

(Reporting by Sankalp Phartiyal and Aditi Shah; Editing Simon Cameron-Moore)

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