New Delhi, Jan 12: Roll out of Tata's small car 'Nano' may lead to a 20 per cent reduction in prices of two-wheelers and a 35 per cent decline in prices of second-hand cars, industry chamber Assocham has said.

"About 20 per cent price cut is expected in two-wheeler segment with launch of Tata-Nano," the chamber said while releasing the finding of a quick survey of 250 CEOs.

Nano is expected to be launched close to Diwali.

Majority of CEOs said the Tatas are expected to give a stiff challenge to two-wheeler manufactures, who would be forced to go in for product and technology innovation.

The survey claimed that scooters and mopeds launched last year witnessed a poor response from buyers, adding that experts were sceptical about the higher engine-capacity motorcycles that entered the cost-sensitive Indian market.

About 25 per cent of the respondents felt that the two-wheeler market has already shrunk to about 15.50 lakh units by November last year compared to over 19 lakh units a year ago. "The segment would witness a further decline as there would be various options in the four-wheeler segment with bridging of price difference," the chamber said.

Eighty per cent of the respondents said with rising income, consumers are willing to spend more.

Nearly 70 per cent of them said that the Tata-Nano car should be able to capture the largest market size of over 50 per cent in the next 3-4 years while the current market size of budget car manufactures would witness a reversal in metros and large towns.

Also, there would be an increase of 25 per cent in bank loans to the four-wheeler buyers, the chamber said.

Nano to result in 65% rise in target households

Mumbai: The cheapest car in the world, Nano, unveiled by the Tatas, could translate into a 65 per cent increase in the number of families that can afford a car, as per the estimates by Crisil Research.

The agency, in an analysis said today the expected consumer price of the car would be around Rs 1.3 lakh.

"This brings down the cost of ownership of an entry level car in India by 30 per cent, making a new car affordable to families with income level of Rs 2 lakh", the agency said.

Crisil Research said this launch will prompt product developments in the mini car category by other players in the passenger vehicle segment over the next few years.

These launches will attract a section of existing two-wheeler owners, currently estimated at about 50 million, to upgrade to a car.

"Given the shape of the income distribution in India, the new price point translates into a 65 per cent increase in the number of families that can afford a car", it said.

While annual car sales in India have the potential to increase by 20 per cent, over the annual sales expected in 2007-08, it added.