A Case Study on TATAs Big Idea of a Small car

nano The Peoples car of India

BY Dr. Surabhi Goyal, Associate Professor, IILM Institue for Higher Education 3, Lodhi Road, New Delhi. Email Id: surabhi.goyal@iilm.edu

TATAs Big Idea of small car

nano With changing customer profile

The Peoples car of India

and high disposable income, India becomes a land of

opportunity for all auto giants of the world and of India . Many auto players are already working on their strategy desks to lure the middle class buyer, with their best business model of small cars. Since the small car market is yet to unfold, it is difficult to say whether there would be something for everyone or only few will survive. However, the first mover is Ratan Tata who conceived and promised a small cheap car to every Indian . The Case Study, brings out the stages of development of the concept called Tatas Low Cost Car NANO. It traces its history from the announcement by Ratan Tata, about its plans to manufacture a low cost car at a price of $2500, on March 23, 2003 at Geneva Motor Show, its launch on 10th January 2008 at Delhi and various issues emerging from entry of a product like a low cost small car in India. This study, based on extensive research of relevant records, highlights the indigenous model of Innovative Designing and Frugal manufacturing on one hand and Value marketing on the other. It attempts to bring out the features in the car that would attract the bottom of the pyramid. It also analyses the potential domestic and international clientele for Nano and Tatas future concerns with respect to holding the price point, widespread after sales service, durability, low maintenance cost and environment and safety issues. The study is aimed to provide the students of management, a deep insight into the marketing and production management related issues and sharpen their knowledge and skills. Keywords : Nano, frugal manufacturing, value marketing, no frill, collaborative engineering, Nanolution, Nanomania

The Car nival Jan 10, 2008 11:30 am- New Delhi, Pragati maidan Hall No.11: There was a nip in the air and the moment of reckoning came when a voice wished gathering. It was like a suspense thriller and finally when curtains were out we were left spell bound. He was none other than the man who was in the news all these days. There was apt silence and then the dreamer nee achiever spoke and the world listened. Every sentence, this man spoke was cheered by one and all with occasional flashes from the photographers wanting to capture every mood of the man because this man had made history of sorts. This was an extract from a reporters diary that celebrated the advent of Indias Peoples car that left the world spell bound and made every Indian proud. For Ratan tata it was the second time. Way back in 1999, he touched the hearts of millions of Indians with Indica-Indias first indigenous passenger car that became a great success story. Once again he did it. This time he felt the pulse of an hungry audience waiting at the bottom of the pyramid and brought out the worlds cheapest car The Nano. Curiously enough this was exactly after 100 years when world got its first affordable car- Tin Lizzie in 1908. 1908 - Detroit, USA Fords Tin Lizzie 2008 - Delhi, India Tatas Nano

100 years on the other side of globe

The Great Revelation History repeats itself For any country with the increasing population on decreasing space, it made perfect sense to make a small car but it wasnt arithmetics alone that prompted Ratan Tata to get the big idea of small car, it was typically a social cause that moved him to make a peoples car. It was on an August night in 2003, Ratan Tata was
3

driving back home from his office. It was raining heavily in Mumbai, when he saw a young couple riding on a scooter with two children all drenched. He was moved by the risk this family was taking on a wet road. In his missionary zeal, absolutely unaware that he was operating from the highest level of value hierarchy, he thought of giving back to society by making a all weather four-wheeler. Over the next few days, he doodled with sketches of two wheelers having a bar around it and some weather proofing but all ran in conflict with his promise. He then decided to change his track and called upon his team to design a four wheeler which can be called a complete car. This memorable moment has gone down in the history of Tata Motors and Indian automobile industry as the Great Revelation. In fact, unfolding the history of worlds most popular cars, whats common to all of them is that each of the peoples cars had a visionary, a father figure, who was driven by a social cause and made it happen. In 1908, Sir Henry Ford, the greatest man in Auto industry, had put America on wheels with his black affordable car and proudly said to the world, "I have built a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for at a cost of $ 850. Adolf Hitler in 1938 sketched out his idea of a Peoples car, based on which Dr Ferdinand Porsche engineered into the Worlds number One - the Volkswagens Beetle. He said to his countrymen, Five Marks a week you must put aside If in your own car you want to ride." Following close on heels, was Citroen 2 CV designed by Joules Boulanger who replaced the tedious horse cart for the farmers of France. In 1957, yet another carmaker though of giving mobility to the Italian masses by manufacturing FIAT 500. Now it was Ratan Tata who resolved to give India and the world its cheapest peoples car. Since then there was no looking back and on March 23, 2003, at the Geneva Motor Show, Ratan Tata made an announcement that Tata motors will make the worlds cheapest car at a price of $ 2500.

Taking a snap shot of the milestones, of changing a big idea into a small car, one marvels how Ratan Tata made an impossible dream possible.
Milestones in Nano Journey

March 2003

August 2005

May 2006

January 2008

March 2008

October 2008

March 2009

March 2009

April 2009

July 2009

Ratan Tata announce to make a $ 2500 small car

Girish Wagh takes over as head of small car project after completion of the highly successful Ace mini Truck project

Tata Motors started its Manufacturi ng unit in Singhur (WB)

Nano unveiled at the 9th Auto Expo in New Delhi

Europe gets to see a Nano at the Geneva Motor show

Gujarat welcomes Tata and strikes a deal to set up Nano factory in Sanand

Nano Europa showcased at the Geneva Motor show

Nano staged in Mumbai

Nano Bookings begin

First Nano delivered on 17th July, 2009

Nano a credible complete car Tatas Ultra Low Cost Model

A very successful manufacturer is one who cuts a path for himself where no one has travelled Therefore, while all car manufacturers were busy with big cars full of luxury and technology, Ratan Tata was thinking of a small car with bare essentials. He chose to call it a Nano car because in his Gujarati lingo it means Small. The word Nano is a recession word so much relevant to the current scenario. Association with smallness became the prime concern for Ratan Tata and his Nano team. Working on Small is beautiful, costs were cut down at every possible corner of the Nano project right from conceiving the car to the launching of Nano car.

The value delivery process at Tata motors revolved around three key ideologies which were Innovation, Collaboration and Creativity that manifested as follows:

Functionality Tenet1: Style InnovativeDesigning Safety

Hightech Tenet2: LowCost FrugalManufacturing Car CollaborativeEngineering Nofrills

Acceptability Tenet3: ValueMarketing Affordability Accessibility Awareness

UltraLowCostBusinessModelofNanoCar

1.

Tenet 1 : Innovative Designing

The most critical aspect of the business model was designing a car having no precedence in the auto industry. Concretizing an idea was the most difficult task and was therefore, passed onto a group of young engineers, as an advanced engineering project. They were given a fluid brief that they were to develop a four wheeler that is nothing less than complete car, at a price point of not more than $2500. Finally, after years of hard work they managed to develop an intra-city car with a rear mounted two cylinder of 623 cc
6

engine with 33 horsepower that runs at a moderate speed of 70km/ hr giving a fuel efficiency of 23.6 km/liter. Tatas made sure that Nano has all important features namely functionality, safety and at the same time modern looks. It runs as an all weather protection car with dimension of 3.1 m long, 1.5 m wide and 1.6 m high that comfortably seats four passengers. Drawing a comparison between Nano and Indias first entry level car Maruti 800, Nano is 8 per cent shorter but 21 per cent larger in its interiors. While the vital statistics of Nano is evident of the fact that designers intend to make it small, yet all efforts were made to give it a young and a sporty look by taking inputs from the Institute of Development in Automotive Engineering, Italy. Differently shaped headlights were designed to give Nano, a young face with big eyes and the nose was made a little longer to increase the length of the car as well as internal volume. Finally the loud colours and bean shaped exterior made it a look alike of Daimler Chryslers, Smart Car. While they shrunk the size of the car, used smaller engine and lesser material, they did not try to compromise safety features. It is claimed by Tatas that Nano passed the full frontal crash tests as well as side impact tests. One important device which was introduced in the car to make it more safe was Engine Management System (EMS) provided by Bosch, a German based automotive company. It controls speed of the car both in reverse gear as well as the top speed fourth gear. This device on a very high speed cuts off the engine automatically and sounds a buzzer which stops the car instantly. Yet another device to meet Indias current emission standards a catalytic converter was introduced by BASF Catalysts. In an aggressive move to protect the brand against imitation in the ultra-competitive car industry, Tata Motors had applied for patent protection for over 37 inventions and innovations linked to its mass production of Nano.

Tenet 2: Frugal Manufacturing: Second important aspect of business was generating value by lowering costs. This required frugal manufacturing which means manufacturing processes that avoid frills and save resources. They became the decisive factor of cutting costs at all corners and consciously remove frills or fabric decoration to deliver a No-frill car with following essentials: Used one- box architecture made of sheet metal

and plastic replacing all steel welded body. Used a conventional looking seat with a structure

made of metal and the headrest integrated with the seat was used to save on costs.

 Used one rear-view mirror and one windshield wiper rather than customary two. Used similar handles and mechanisms for left and right side doors. Minimized features in the Instrumentation panel consisting of only analogue speedometer, odometer and fuel gauge. Used regular bulbs in place of long life bulbs. Removed grill on the front as it has a rear mounted engine and used a belt driven continuous variable transmission which is a less costly alternative to manual or automatic. Avoided frills like radio, power steering, power windows, remote locks, airbags and antilock brakes.

While Tata Motors achieved low cost by minimizing frills, they also generated value by way of collaborative engineering with their long time suppliers. As a collective affair, Tata motors teamed up with its trusted vendors and outsourced the manufacturing of crucial parts of the car.

To convince the vendors, a prototype was developed to make them realize that there is a strong vision behind the product. Also it prompted them to design products matching requirements both in terms of pricing and quality. For instance the Rane Group set up a dedicated facility to supply steering gears, columns and seat belts at Singur and tried hard to meet project specifications which was a path-breaking practice for them. Nirmal Minda of NK Minda Group supplied electric switches for the car by streamlining the components manufacturing process and bringing in standardization. MRF became an exclusive partner in development of tubeless tyres having low rolling resistance for better efficiency, good ride and tyre life. A surprise entry was made by Kinetic Engineering; the company best known for its two wheeler business joined in with its transmission gears a crucial drive train component. Many more followed the path of tata motors to make Nano a sum of its parts.

Tenet 3. Value Marketing: Another crucial aspect of the business model was Value delivery As propounded by Eminent Professor in Marketing, Prof Jagdish Sheth, Tata Motors strived to nurture intimacy with its target customers by a four-pillar market objective of maximizing awareness with its variant models acceptable to all, at an affordable price available on all accessible channels.

By Maximizing Awareness to establish an emotional connect between Nano and India, Tata Motors unveiled the car in the IX Auto Exhibition on January 10, 2008 at Pragati Maidan. The media reports that followed made it a talk of the city, country and the world. Auto experts from world over got curious to know more about this ground breaking product. Nano was able to gather lot off publicity from its admirers as well as critics. The Saturation coverage in the media saved Tata Motors a fairly big sum on ad spend giving stronger impact than conventional methods of advertising. Nano car was known to the world and India much before it was launched. Unlike many auto giants, Tata consciously refrained from Television advertising instead deployed unusual tools like Nano news in papers, Nano breaks on radio, Nano online games to make people familiar with the word Nano. Yet another cost effective marketing tool was creating a social network on www.tatanano.com where senior members of Tatas management team, started putting out their views on the Nano site, posted pictures and without prompting online chatting followed between management team and youngsters of 25- 35 years. This had a great catchment area amongst this generation because thats the age group that used the sites such as Face book or Orkut. For Tatas blogging was an inexpensive way to let people know about the car, get publicity and engage target buyers from all over the world. Still more on March 23, 2009 at the time of the official launch all web search engines were booked to serve pop-up ads, encouraging internet users to book the car. Some other initiatives included merchandise and accessories like Nano branded T-shirts, key chains, teddy bears and watches which were put on display at Geneva. Also Tata Motors preferred financiers went all out to share advertising cost which became mutually beneficial.

By Increasing Accessibility
Can you book Nano around the corner? Now you can. We wouldnt want you going out of your way to get yourself a Nano. Thats why we made sure you dont have to go far to book one. Just till any SBI or our preferred financiers branch, Westside, Croma or any Tata motor car dealerships and get yourself booking form for Rs 300.

You could also walk in to any World of Titan store, Tata green Battery outlet or exclusive Tata indicom outlets and avail of some exciting offers for them and Tata sky on booking. Submit the forms at any 1350 SBI branches across 850 cities. Or any Westside Croma or Tata motors Car Dealerships. But even if you find this too much of a bother, just log on to www.tatanano.com and book yourself one. And no matter where you choose to book your Nano from you have the choice of paying the amount in full or getting it financed through any of the preferred financiers. It is just another example of world possibilities that a Nano opens up for you. Bookings open today.

The copy of the advertisement is evident of the fact that Nano was made very accessible to the common man. Bookings were opened from April 9, 2009 April 25, 2009 and application forms were bought for Rs 300 each from any of the elaborate network of over 30,000 outlets which included all Tata Motors dealerships, Westside, Croma, Titan, and Tata Indicom outlets. The Tata Nano could also be booked from the Tata Nano website, which offered bookings via net banking. Tata Motors also tied up with 34 banks including the most popular Indian bank The State Bank of India. For those who wanted to loan the car, there were 15 preferred financiers also mentioned by Tatas.

Opening of a wide network proved to be very lucrative for Tatas as they could get 2.03 lakh fully paid bookings amounting to nearly Rs.2,500 crores and the website recorded an unprecedented 3 crore hits during the booking period. 70% of the 2.03 lakh bookings received were financed, while 30% of the applicants booked in cash by paying fully. What was unexpected was that 70 per cent of the total bookings came from metro and urban cities and only 30% came from Tier II and Tier III towns. The reason for the lackluster demand for Nano in smaller towns may be attributed to higher-than-anticipated price point, lack of adequate infrastructure in the Tier II & III towns and the time lag between the booking and actual possession of the car. However Nano has commenced its delivery from Pantnagar factory and the first one lakh car will be delivered by way of lottery.

10

By Promising Affordability An enormous amount of buzz was created around the emotional price point of $2,500 (Rs 100,000) which later became so powerful proposition that the car was popularly called Lakhtakiya car by the middle class. Undoubtedly, for a price sensitive market like India , low cost product become more luring than high end innovations. As the writing on the website of the Times, London by Ash ling O Connor says, Nano was set to transform the concept of travel for the masses in India and in the poorer parts of the world. This is the peoples car the worlds cheapest car at a starting price of Rs 1, 00,000 ($2,500) or the equivalent of a DVD player in a Lexus. In fact taking a snapshot of some of the worlds cheapest cars in India and China, Nano truly is the cheapest best on the India first time car buyers.
Model Peoples car QQ3 M800 Merrie Star S- RV Mini Company Tata Motors Chery automobiles Suzuki Maruti Geely Automobile Geely Price $2500 $5000 $5200 $5500 $5780 Manufactured India China India China China

Source: Reuters, Business Standard Motoring (India)

11

In the domestic market too, Tatas

. Cars/ Two wheelers Tata Nano Maruti 800 Maruti Alto Santro Zing Maruti Zen 624cc 796cc 796cc 1061 cc 1086cc Engine Power Ex showroom Price Rs 1.34- 1.85, Rs 1.97- 2.34 Rs 2.36-2.86 Rs 2.92-4.00 Rs 3.13-3.95 Tata Motors Maruti Maruti Hyundai Maruti Company

has parked itself between two wheelers and Maruti 800 very comfortably, with a price little higher than the highest model of two wheeler and a little lower than the base model of four wheeler.

However, the narrow price gap between the ultra low cost car Nano and the next small car available in India - Maruti 800, may not give the customer enough rationale to buy a Nano in place of Maruti car having 25 years of proven track record. Also the much flaunted price of Rs one lakh may have to be compromised in the wake of inflationary trends in inputs costs coupled with the global economic slowdown. The base variant of the Nano which carries a price tag of Rs 1 Lakh is said to cost now Rs 1.35 Lakh, on road. With an additional cost of insurance of Rs 6,000 and high maintenance cost, the lure of Rs one lakh may not hold the market too long. After all what is important to the middle class customer is long term fuel efficiency,low maintenance cost and durability , the parameters on which Maruti 800 has proven track record for last many years.

By Ensuring Acceptability Tata Motors has also strived to render high degree of acceptability amongst the different layers of the middle class. The targeted middle class in India is a huge segment of 50 million people and is broadly subdivided into upper-middle class, middle -middle class and the lower-middle class. Each sub class exhibits lot of difference in income levels and psychographics. It is observed that at the lowest layer of the middle class, price is the biggest driver while everything else pales. While on the upper stratum of the middle class, it is looks, style coupled with driving experience that becomes important criteria while price takes a back seat. Since Nano means different to different people, Tata motors makes it acceptable to all by offering three trim variants namely --Tata Nano, the base model is priced at Rs 1, 29,960 (ex-factory). It is the standard version and will be available in three colour options with single-tone seats and a fold-down rear seat. --Tata Nano CX, the deluxe model is mid-priced at Rs 1, 48,725. This variant will be offered in five colors, with heating and air-conditioning (HVAC), two-tone seats, parcel shelf, booster-assisted brakes and a fold-down rear seat with nap rest;
12

--Tata Nano LX , the luxury model, is priced Rs 1, 70,335. This has the same features of CX. Additionally, it has fabric seats, central locking, front power windows, body colored exteriors in three premium colours, fog lamps, electronic trip meter, cup holder in front console, mobile charger point, and rear spoiler. Many of these features are not available on current entry-level small cars in the country. As per the reports the three variants of the car of the 2.03 bookings, 20% bookings are for the Nano Standard, 30% for the Nano CX and the remaining 50% for the top-end Nano LX. This trend clearly indicates that in the ultra low cost segment too, price has taken a back seat over frills like AC and more comfortable interiors. Thus, the six year journey was full of high and lows but what cheered the Tata group was as on today, Nano becomes the most politically correct car on the roads. The real genius is building it to Indian requirements, which means Tatas shaved costs but still delivered value for money. It's a perfect car for the age where millions of customers are still aspiring for a four wheeler.

Nanos Future in India Tatas Prospective customers Car ownership in India is considered to be a symbol of economic progress and is therefore very
HOUSEHOLD PLANNING TO BUY A CAR Year Within 3 years Not decided Second hand car owners 2.9 lakhs 32 lakhs Two wheelers owners 55 lakhs 1.6 crores

high on a consumers aspirational list of products. Considering the sizable

population of middle class which as per the McKinsey reports is expected to

Source: status of Indian Car market, Maruti udyog NCAER 2006

dramatically expand from 50 million to 583 million people by 2025, Nano will find a huge market waiting. As the seismic wave of income growth rolls across Indian society, the character of consumption seems to change dramatically over the next 20 years. A huge shift is underway from spending on necessities such as food and clothing to choice-based spending on categories such as household appliances and restaurants. With the VI pay commission being released,this class may further increase the buoyancy in the market. In this segment, Tata Motors prime target was the young college graduates midlevel government officials, small traders who earn between 200,000 and 500,000 rupees ($4,376- $10,941) per annum. They are either first time car buyers or are planning to graduate from two wheeler to a four wheeler.

13

A 2006 study on the potential of the Indian car, conducted by Maruti & NCAER, revealed that there are 5.5 million two wheeler households out of a total of 60 million odd planning to graduate to four wheelers by 2009. If customer reports are to be believed, the most unique aspects of the Nano is that there is no single customer profile that alone will drive this demand. The neo rich elite class may also like to have a Nano but as the toy car or the extra car in the family. This class of customers is an indulgent class earning 500,000 to 1 million rupees per annum. They are senior professionals, rich urbanites, senior government officials in very senior position and also CEOs of large business houses. Taking the example of UK and US upper market, where there is one or two Bentley in every garage, there is also a small fun car - the Daimlers Smart car in the same garage. Quite similarly, Nano too will looked up as a cute car which one doesnt need it but may have it or becomes an ideal birthday gift to their grow ups . Another class of Nano buyers could be business class for whom it would mean a business opportunity. With its low price, high mileage and small size, it is compelling taxi material that can be a good replacement to the current fleets of black ambassadors or black Omnis. Economically also, Nano is a better replacement for an auto rickshaw as it can ferry two people more per trip. For commuters too its more value for money as they can get to travel in a car at the fare of Auto. If the government stipulation of minimum capacity of 1000 cc for operating taxi is relaxed, Nano could be the best pick for the taxi owners. Especially in rural India where are

transportation

facilities

still nascent and the mind of small time entrepreneurs is a box of alternatives Nano can serve as a great alternative. The

14

non AC -Nano can be locally redesigned with ethnic grass mats on the windows and petrol can be replaced by gas cylinders. Thus, we will have a whole new set of customers, both in the rural and urban areas, for whom a car will symbolize a dream that can be realized. The market sentiments now seem to be buoyant with the first delivery on 17th July 2009 when Mumbai resident Ashok Vichare, 55 years old, received the keys to a silver LX version of the 624cc vehicle from Tata Motors chairman Ratan Tata. It is Vichares first car and the proud owner said, This is the smallest and the cheapest car in India thats why I bought it. Now there is no looking back and Tata motors is all set to chose the rest 99,999 customers for the 123,360 rupee (1,800) Nano by a lottery. Nano Abroad Tatas Prospective Customers Going global is a natural progression for any marketer? Ratan Tata too aspires to enter the foreign land which is evident from the fact that he unveiled the European version of Nano the Tata Europa at the 79th Geneva International Motor Show, which will have a larger engine, better interiors with leather trim, a superior exterior finish....and would be ready by 2011. Tatas moves may be justified considering the KPMGs report on India automotive study 2007 which says that Indias low labour cost, high level of available management and engineering skills will augur well for ultra low cost cars and by 2020 India will become the biggest

manufacturing hub of small cars in the world. However, it would be a little too premature for Ratan Tata to make a move to the UK market because the developed nations are currently at Euro IV ready to graduate to Euro V by 2009 while developing nations like China and India are still defining standards which takes them five to seven-year behind. For Nano with its small engines and modest fuel consumption, it will further become difficult to meet International standards. Nano may also
15

face compliance issues with respect to seat belts, rollover and rear-, side- and frontal-protection standards because the standards in North American and UK are very strict.

Further a report generated by Automotive News Data centre estimates that the

overhead costs

incurring due to logistics, marketing and promotions, manufacturer-dealer profits, tariffs, account destination fees, and taxes would raise the final cost up even further.

All these conversions as given in the figure below will take up the sale price of ultra-low-cost car to a price point of more than $9,000 which will make Nano lose its attraction and thus a competitive advantage of being the cheapest car of the world. Nano has to work a lot harder to make an entry into the foreign land yet entry in the South Asian pacific region is not completely ruled out once the domestic market is satiated.

Challenges Tatas future concerns While Tata motors knows it has changed the face of the Indian automobile industry by developing a product that no manufacturer though of, but beyond this initial buzz and excitement there are some concerns that Tata motors needs to be aware of in order to maintain the first mover advantage in the ultra low cost segment.

16

Holding the price point The immediate concern is the growing dichotomy between cost of developing and cost of running Nano in India. While cost was cut at all corners while creating it but the same is not true about the cost of operations that continues to rise due to uncontrollable factors like cost of inputs and inflationary trends. This may cause Nano to lose its price point and would probably go upwards. It would largely depend upon various factors like profitability levels and volumes. If they are able to get good volumes and absorb a lot of the fixed costs, it will give them more pricing power. One option available to hold the price point could be to employ more resources in research and development which at the moment seems improbable in the wake of huge losses suffered due to the Singur impasse. Second, could be increasing productivity which again seems to be implausible due to the unceremonious shift of mother plant from Singur (West Bengal) to Sanand (Gujarat). Unfortunately for Nano the clock was set back by six months and it may take some more time to make the mother plant operational to its full capacity. With so much riding on it, Nano price is sure to drift upwards to a more comfortable equilibrium. Though at the moment, buyers are not raising much hue and cry on a small rise of Rs 1 lakh to Rs 1.25 lakh, but further rise may lead to disappointment and may also compel buyers too switch to the next best. Providing a wide after sales service network: Since Nano buyers are mostly first-time buyers, they are bound to be more discerning and demanding. While they demand quality, technology, fuel efficiency as essentials they also need an easy access to repair services preferably as near as possible. Therefore, along with an aggressive distribution network, Tata Motors will have to provide an excellent after sales service network. Taking lessons from success story of Maruti, Tatas may have to persuade the Nano distributors to invest a good sum of money in opening workshops or 24 x 7 mobile emergency service vans to give good support to Nano buyers. Along with after sales service, special efforts have to be made by Tatas to give customer a hassle free experience of buying a Nano. In the past, many low cost service providers in India failed to gauge expectations of middle class buyers and in turn provided substandard product or service. Tatas must absolutely refrain from doing this. Therefore, in order to sustain the first mover
17

advantage and to raise confidence levels of Nano buyers, it is imperative to have a polite and efficient sales force to advise the first time car drivers on issues like running and maintenance of the car. Handling of supplementary services like loans facility, money back policy, insurance claims billing, and delivery schedules must be done meticulously and efficiently. In case Tatas do not do it well it will lose out a very potential segment to its competitors. Guaranteeing Durability and low Maintenance Cost: There is one more sizeable challenge for Tatas, durability and fuel efficiency. The true test of Nano will of course be on the roads. The big question at the moment is - Will Nano's insides pass test of durability on Indian roads, which are not as good as in other parts of the world ? Moreover, unlike an American, a middle class Indian does not buy a car again and again. For most twowheeler-owning buyers it is going to be a lifetime buy. Therefore, the longer the car serves, the greater its chances of survival as a "family" car. Also while Tata motors claims are 23.5 km per liter, it is yet to prove itself in real life condition. Till the car unfolds it is too early to take Nano for granted. Battling the green & safety issue: Yet another battle that needs to be won is over the Greenpeace activist. Tony Bosworth, from Friends of the earth, UK , said, the Tata Nano makes motoring cheaper and growing car sales in India will lead to big rises in carbon di oxide emissions. This is another blow of effort to tackle global climate change. Adding to this, the environmentalists Anumita Roy Choudhury of the Centre for Science and Environment (CES) raised a safety concern saying, "When you lower prices that drastically, how will you be able to meet safety standards? Till the car unfolds itself, the reports from Tata camps have to be believed and according to them Nano meets the Euro IV norms and has passed the full frontal crash and the side impact crash tests. It possesses safety measures like crumple zone in the event of a collision. While Nano choking the cities or breaking down becomes an issue for activists, the bigger danger which no one seems to be talking about is the prospect

18

of so many first time drivers on the road passing the farcical driving test in India. While fatalities can be brought down by airbags, seatbelts but what is more urgent is to take proactive actions to ensure that the current two wheelers graduating to four wheelers must be trained on issues pertaining to proper driving and road safety. Maruti Udyog Limited, is the one of the auto manufacturer that has made huge investment in driving schools to improve driving standards. With Nano on the road, Tata will have to follow suit.

Lack of infrastructural support: Another uncontrollable factor which directly or indirectly will affect Nano acceptability would be poor infrastructural facilities in India. Currently, our roads creak under the weight of vehicular traffic and with the increase in number of vehicle it would become more precarious. Now that Nano will increase mobility the traffic congestion becomes a countrywide urban nightmare. The need of the hour is not to stop making of cars but to have a political will to create and ugrade road network and connectivity

Preparing for stiff competition in the offing: Though Ratan Tata at the moment doesnt look so much worried about competition but sooner or later they would be because the auto giants have already decided to make an entry into the small car market with a better offing. It is just that they are waiting to gauge market sentiments. In case Tata fails to live up to customer expectations, the gap would be easily filled up by Bajaj Auto Ltd which is almost ready to flag off its Bajaj Lite car, an outcome of a joint venture with Renault and Nissan. It can challenge the first mover advantage of Tatas as it is priced at $3,000, very close to Nano. Honda Motors, General Motors, Fiat and Volkswagen too are close on heels. The biggest threat could be Maruti Udyog Ltd in India, which at the moment has shown no inclination towards entering the ultra low cost car but they may surprise Nano. They have a good access to Kei cars which their Japanese partners have in their garage and are quite comparable to Nano with 3.4 meters length,
19

1.48 meters width and 2 meters height and 660 cc engine capacity. Honda Motors also may take on Nanos- Taxi buyers. By selling 1,250 Santro taxis (non-AC version) priced at Rs 2.42 lakh and 500 Air conditioned variant, it will be a better option. Though the market is yet to decode itself, the fact remains that price difference between Nano and base model of small cars in India is so marginal that customer would buy a Nano only if it outperforms the entry models on fuel efficiency, customer service and lastly the price. Yet Tatas has dared to welcome all saying, I urge all players to fight in market . I dont believe that Tata Motors can fulfill the entire demand of the country. So if Bajaj and Mahindras and Maruti produce small car, then 3 or 4 brands of small cars, customer will get a better choice to choose from and may the best player win. Conclusion Thus, Nano with its innovative technology, frugal engineering and creative marketing has done on grounds what Air Deccan did in the air, a few years ago. With its enviable price, modern looks and great technology it is sure to be a runaway hit with the middle class who is riding on a high disposable income and changing life styles. However, the ultimate key to success of the Tatas Nano venture lies in ensuring its commitment with regard to low pricing, affordable after sales service, durability of the product and lastly excelling customer support system, failing which the euphoria at the time of product launch will fade away without any notice and other auto manufacturers would fill in the gap. It would be an fascinating area of study for the students of management to see how this new ultra low segment unfold itself and more interestingly how Tatas carry itself in there. For now, it is time to doff Indias hat to Mr. Ratan Tata and to salute the ingenuity which his team has displayed. Fords head of Asia Pacific, John Parker, certainly thinks so as he said to the world, It is a groundbreaking product. The car will cause people to think differently about the car. I have a lot of respect for Tata.

20

Issues for discussion:

1. What environmental changes will be triggered by the advent of Nano?

2. What are the marketing strategies adopted by Tatas to address the bottom of the pyramid?
3. Do you think Nanomania is just a buzz or a sustainable business proposition ?

Sources
Ghosh Avijit, Tata Reinvents the wheel, The Times of India, January 11, 2008 Interview with Tata: A Peoples Car named Tata, Economic Times, January 11, 2008 Suri Megha, Auto drivers want to switch, The Times Of India, January 11, 2008 Pachauri, Nano sign of government bankruptcy,Statesman, January 11, 2008 Sanghvi Vir, Ratan Tata : Then and Now, Hindustan Times, January 13, 2008. Bose Sushmita, The God of small things, Hindustan Times, January 13, 2008. Meenakshi & Deepshikha, Nano to drive in a new customer class, The Economic Times, January 15, 2008 Gupta Surjit das, VW plans rival to tatas Nano,Business Standars, January 16,2008 Reporter, Cars or scars, Business standard, January 24, 2008 Sangameshwaran Prasad, What Drives Tata motors, The Strategist, January 22, 2008. Choudhary Aroy, Making India the small car hub a Nano Step, Economic times, January 22, 2008 Dutt Barkha, India Driving, Times of India February 22, 2008 Indiresan P.V., Lets Plan Nano towns, Times of India, March 2008 Gooptu Pradip,World watch throws its weight behind Nano,Economic times , April 3, 2008 Chenoy Dilip, A street Named Desire, Hindustan Times, January 14, 2009 Philip Lijee, Limited debut for Nano, Econbomic Times, January 21, 2009 Banerjee Sumant, Nano to fetch Tatas a welcome cash pile, Hindustan times, March 24, 2009 Ghosh Suprotip, A dream takes wheels Hindustan Times, March 24, 2009 Chikarmane Gautam, Nano is beautiful, Indian Express, March 24, 2009 Khattar Jagdish, Will the Nano Change Indias auto industry, Business Standard, March 25, 2009. Chauhan Chanchal Pal, Launch Delay Boon for nano, The Economic Times, March 26, 2009 Subramaniam Shobana, The making of a brand nano, The strategist, March 31, 2009 Gopala Krishnan, T R,Nano.. Oh ! The Week, April 5, 2009

21