Tata Motors to launch diesel Nano car by end of March

By Matthias Williams

NEW DELHI (Reuters) - Tata Motors will launch a diesel-powered version of its ultra-cheap Nano by the end of March 2014, its managing director said, hoping to kick-start demand for the model after years of disappointing sales.

Launched to great fanfare in 2009 as the world's cheapest car, the Nano has been dogged by poor sales, which slumped 27 percent in the company's financial year that ended on March 31.

Asked when the diesel-powered Nano would go on sale, Karl Slym told Reuters on Wednesday: "The diesel Nano is still (going) ahead, but not launched yet... This financial year".

The Nano contributed about a quarter of the company's sales volumes in the last financial year.

Tata Motors has grown increasingly reliant on its luxury Jaguar Land Rover unit's overseas sales to offset weak demand at home. It also needs a new hit car in India to regain its share of the local passenger vehicle market.

The company, India's largest automaker by revenue, has been adding features to the Nano, including a remote keyless entry, as it tries to revive demand. It is also trying to make it more appealing to younger drivers.

A Nano that runs on diesel - a popular fuel in India thanks to government subsidies - may also help sales.

Rising fuel prices and interest rates and a slowing economy have hurt India's automobile market, with car sales falling for nine straight months to July, forcing some automakers to curtail production and reduce labour costs.

A sliding rupee is also compounding their problems by increasing costs and prompting some foreign manufacturers, such as General Motors Co and BMW , to raise prices.

Slym said Tata was now employing fewer temporary staff.

But he said the weak rupee, which has fallen by almost 18 percent against the dollar this year, was mostly neutral for Tata Motors, thanks to its localisation efforts and exports.

"As far as we're concerned, then it's a fairly even game. So therefore, it's not a painful blow to us, but it's also not a benefit."

(Writing by Aradhana Aravindan; editing by Tom Pfeiffer)