Tata Nano, pet project of the chairman of the Tata Group Mr. Ratan Tata was a car which was expected to change the face of automobile sector in India. In the highly competitive small-car market of India, Tata Nano promised to set the bar so high that it would become extremely difficult for the competitors to match. The dream of owning a car for as little as Rupees 1 lakh (Rs.100,000 – roughly USD2500) was too tempting for millions of Indians who cannot afford even a small car. The kind of extensive media coverage Tata Nano received right from the day it was announced through the entire period until the first units were handed over to the owners was something that its competitors dreamed of. However, after two years of launch, the Tata Nano manufacturing plant at Sanand in Gujrat, India is running at around 20% utilization. People’s Car- It is a common sight in india to see an entire family of four travelling on a two-wheeler in heavy traffic and bad road conditions all through the year.
Car Ownership across countries – Present and Future
As can be seen from the IMF report above, car ownership in India is expected to grow exponentially in the coming decades.
India’s Growth in GDP Per Capita
Combining the predictions about car ownership in India with the growth in GDP per Capita in India, we can clearly see why the automobile sector, especially the small car market is one of the most competitive sectors in India at present. In a market like this, a car like Tata Nano had the potential to sell like hot cakes. But it didn’t. Let us now try and understand why Tata Nano was not able to meet industry expectations. Reasons for Setbacks
Tata Nano (Photo credit: Wikipedia)
Too Many Crises – Since its launch with great fanfare in 2009, the Nano has survived from one crisis to another. There was opposition to Tata’s original plans to site the factory in West Bengal, as discussed later, forcing a last-minute scramble to switch the site to Sanand. It opened last summer, but not enough cars came off the production line to fulfill the early orders. To make matter worse, a few cars catching fire on road, raising fears about the Nano’s safety. Price –Nano’s price, which was supposed to be its USP, is apparently one of the major reasons behind its low sales. For majority of Indians, owning a car is not about utility or mobility; it is a dream, ambition and status symbol; just like a house. So, the low price of Nano does not turn it into an asset. It becomes more like a commodity. Also, the initial marketing and promotion of Nano gave the average consumer the idea that owning a Nano would somehow be a confirmation of their poverty, and not a way to get out of it. Ironically, a big number of Nano’s buyers buy Nano as their second or third car after already owning another car. This segment is not the segment initially targeted by Tata. Resale-The re-sale car market gives stiff competition to the Nano. A 3-4 year old used car originally costing 3-4 lakh in on-road price (like Chevrolet Spark and Maruti Alto) can pose a stiff challenge to Nano given the relative price-parity that emerges when it comes to re-sale. For instance, Nano’s Mumbai on-road price for Std BSIII model pegged at 1.51 lakhs is a few walks away from the Rs.2 lakh plus used-car-version ‘Spark’. People, who may go for the advanced model Nano Cx BSIII, may consider opting for ‘Spark’ or ‘Alto’ given that the said Nano model costs around 1.82 lakh rupees. In fact, Nano seems to have failed to pose a challenge to the market players in this re-sale car niche segment. Needless to say, there is not much value extracted from a Nano upon resale either. Rescuing Nano – To improve Nano’s market performance, Tata motors is trying to expand to other regions searching new markets for Nano. Given its modular design, Nano can be assembled and manufactured in practically everywhere on the planet. Hence, Tata is...