The classic case of the Tata Nano

Touted and marketed the cheapest car in the world, the Tata Nano was a car that the company (Tata Motors Limited) expected could bring about comfortable mobility for the market at a very reasonable price point. Designed to lure India’s burgeoning middle classes away from motorcycles. It received much publicity, but the sales expectations were not met.

Unfortunately, it was the same ‘cheapest car’ marketing approach that almost killed the product.

The market

India is a very price conscious market when it comes to product price, maintenance costs as well as fuel efficiency. Due to this a vast majority of the population uses motorcycles for their daily commute. A vast majority of these motorcycles are in the range of 100cc to 150cc.

The company

The Tatas are well known risk takers when it comes to the automotive industry in India (See why). After having successfully launched the low cost Tata Ace truck in 2005, Tata Motors saw the opportunity and began development of an affordable car that would appeal to the many Indians who ride motorcycles. Along with the market that would be upgrading from motorcycles to cars, Nano was built up to replace the ageing Maruti 800. And to do that, it’s design was made to work.

Maruti-Suzuki 800



The development

Tata Nano had a very ambitious target price: 100,000 INR. In 2008 when Nano was released, a 200cc motorcycle would have cost you 60,000-70,000 INR. The purchase price of the car was brought down by eliminating with most nonessential features, reducing the amount of steel used in its construction, and relying on low cost Indian labour.

The nonessential features include, removal of the passenger’s side wing mirror, having one wiper blade, no power steering, closed boot (can only be accessed from within the car), integrated headrests, having only three lug nuts per wheel, removal of the fuel filler cap from the fuel tank and not having air conditioning.

All in all, the specification, price point and the design was something everyone’d expected to take the Indian automotive market by storm. Except it didn’t.

So what went wrong?

Tata Nano was marketed the ‘cheapest car’ in the world. After launch, the Tatas found that the people the car is targeting, lower income masses of India, do not want the stigma of owning the cheapest car in the world. The word ‘cheap’ in its marketing campaigns spoiled everything. It had to be subtle yet hidden from the promotional messages.

Tata Motors announced in 2006 that the Nano would be manufactured in Singur, West Bengal. Local farmers soon began protesting the reportedly forced acquisition of their land the new factory entailed. Tata first delayed the Nano launch and later decided to build the car in a different state, Gujarat, instead. This negative controversy as well as the delay in establishing production facilities by around 2 years might have affected the product.

Announced as the most affordable production car in the world, Tata aimed for a price of  ₹100,000, which was approximately $2,000 US at the time, only the very first customers were able to purchase the car at that price, however, and as of 2017, the price for the basic Nano starts around ₹ 215,000. Increasing material costs may be to blame for this rapid rise in price.

There were reports of several fire incidents involving the Nano. The company denied those were connected to the car’s design or its parts and blamed “foreign electrical equipment” found on top of the exhaust system. The company offered to retrofit the exhaust and electrical systems but said that recall was unnecessary. Tata extended the warranty on the car, including those already sold, from 18 months to four years in early December 2010 to prove that it was not a design problem.

 

All in all, Tata Nano is a brilliant piece of frugal engineering that lost its charm due to unforeseen events and bad publicity. Tata Motors considers the Nano concept such an integral part of their commitment to the masses that they have refused to let the product go despite its bad performance. They have been constantly improving the design and launching the product, albeit a little more silently now.

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