Tata Abandons Plan for Diesel-Powered Nano

Tata Motors Ltd. has suspended plans to introduce a diesel option for its ultra-low-priced Nano minicar, India's Economic Times reports.

Tata has struggled to achieve target sales for the Nano, which is priced between 1.4 lakh and 2.6 lakh ($2,300-$4,300). The company once anticipated annual volume of some 300,000 units. But Tata has sold only about 250,300 Nanos since the car debuted nearly five years ago.

Cost is a major hurdle for a diesel-powered variant. The planned 800-cc, 2-cylinder diesel would deliver significantly better fuel economy than the car's standard 624-cc gasoline engine. But The Economic Times says the engine also would push the Nano's price above 3 lakh ($5,000) about the same as the larger and fancier Chevrolet Spark and Hyundai Eon minicars.

At the same time, diesel fuel prices in India have risen four times as fast as gasoline since mid-2012, thus negating the benefit of greater fuel efficiency, according to the newspaper.

Analysts say Tata is focusing instead on giving the Nano more content and value. They tell the newspaper that consumer behavior and expectations in India have undergone "drastic" change in recent years, leaving the carmaker scrambling to improve the Nano's "poor man's car" image.