Dealers of Tata Motors' [Get Quote] small car, the Nano, said they would have to sell large volumes to make money on the car. This is because the dealer margins on the car are expected to be 2-2.5 per cent, much lower than what they get on other cars. The typical dealer margin on passenger cars and utility vehicles is between 3 and 3.5 per cent on the value of the bill.

"We expect that since the manufacturer gets wafer-thin margins in selling the Nano, dealers selling the model will be expected to make do, too. However, it's too early to comment," said SP Shah, president of the Federation of Automobile Dealers Associations, which represents around 2,000 dealers across the country. Tata Motors' spokesperson refused to comment.

Tata Motors' dealers said they expected 2-2.5 per cent margin on the base model, the Nano Std BS 2, priced at Rs 1,12,000 (ex-showroom Pantnagar), which translated into about Rs 2,250 for the dealer. "We expect this low margin to be applicable across two variants, while the top-end version, priced at Rs 1,70,000, will command the usual margin of about 3 per cent," said a dealer based in Mumbai.

Mumbai-based dealers have said that they have to sell 250 to 300 cars a month to make the dealership viable. "Ultimately, for car dealers, the Nano will be a numbers game. While the numbers will be small in the first year, the huge increase (in units sold) expected later will help dealers find the business viable, even if the margins are low," says Shah.

Typically, about 70 per cent of a car dealer's revenue comes from businesses like servicing, arranging finance, sale of spare parts and accessories, insurance renewals, offering driving lessons, etc.

A New Delhi-based dealer said even those ancillary services might not fetch them the margins they earn from servicing other models of Tata Motors like Indica and Indigo.

Typically, Tata Motors' dealers earn 1-1.5 per cent on the loan amount from financiers, about 15 per cent from the insurance cover, and around 5-6 per cent on sales of spare parts. This, dealers say, will go down with the Nano.