Lower growth in India could sell more Nanos for Tata Motors

Auto sales in India fell last month, according to a recent article in the Times of India. But when economies sputter, consumers turn to cheaper cars, and lower growth in India could give Tata Motors (TTMquote) the same help Toyota Motors (TMquote) and Volkswagon (VLKAYquote) got in other markets.

While India grew by 8.5% last year, not all are optimistic about the future.  The IMF recently cut its forecast of India’s growth to 7%.  Moody’s has downgraded the Indian banking sector to “negative” due to increasing bad loans and the poor quality of lending institutions’ assets.

The stagflation of the 1970s and early 1980s sparked the rise of Toyota and Volkswagon in the United States. The same kind of low growth, high inflation and rising fuel costs could drive sales of the Nano, a no-frills car built for those ascending from “two wheels to four wheels.” 

Nano sales have been unimpressive during India’s good times. But now that that good times are ending, Indians may be more willing to be seen driving the cheapest car on the road.

TTM trades well in the U.S., but investors may also be interested in the First Trust ISE Chindia Index Fund (FNIquote), which covers many leading Chinese and Indian stocks and devotes 4.28% of its holdings to Tata Motors.

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