Thursday, May 21, 2015

Tata Motors Nano sheds its people's car image

One of India's big vehicle manufacturers; Tata Motors, announced this week, a major marketing shift for its once hoped to be the flagship car; Nano. The car would no longer be categorized as people's car and would not be sold around hundred thousand Rupees as promised earlier. It will have more boot space. all high tech stuff like blue tooth connectivity and would be known as "Gen X Nano." With the changes, the price would also double. 

Sometime in 2005-06, Tata Motors had displayed Nano for the first time as it's  latest creation, at the Auto Expo exhibition in New Delhi, claiming that the car would be the true people's car as it would be sold under one hundred thousand Rupees.

During following years, the expectations rose to very high level, as the car, named as 'Nano,' was being planned to be manufactured in a brand new factory near Kolkata on a massive scale. A 2008 study, by Indian rating agency CRISIL, thought the Nano would expand the nation's car market by 65%. 'Nano' made its debut in 2009 and Tata Motors announced plans to make 2500000 cars every year from the brand new factory that was coming up.

Things however turned for worst. Local farmers soon began protesting the forced acquisition of their land for the new factory and the dispute got sucked into the political whirlwind of the state of West Bengal. Finally, Tata Motors was forced to close down the construction of the factory and shift the location to the state of Gujarat. Initially, when there was a great demand for the car, the company was not able to produce enough cars to meet the demand because of this delay.

Subsequently, in spite of the adequate manufacturing capacity now available, Tata Motors were not able to sell more than 70000 'Nano' cars in a year. The company was also not able to keep the price of the car below one hundred thousand Rupees due to increased material costs. 

What were the reasons for such under performance of sales of this car, when it had all the potential, quality and pricing, going in its favour. In July 2012, then Tata Group Chairman, Ratan Tata, accepted that even though the car had immense potential in the developing world, company lost early opportunities due to initial problems. That surely was a reason no doubt, but surely not the only reason.

This car was supposed to have been targeted at the urban users of motor cycles. However, there remained a huge price difference between two and secondly on India's congested urban roads, maneuvering a motor cycle was far simpler and cheaper than a car. 'Nano' gained acceptance only as the second car used by the housewife for marketing etc. at best.

However the main and most serious obstacle in increased sales of the car was the brand image of the car, initially created by the company. Since the 'Nano' was launched in 2009 as a budget solution for millions of aspirational lower-middle class Indian families wanting to change from two- to four-wheel vehicles, the real car buyers, hated this “cheap” tag and shunned it, being highly status-conscious consumers.

  Tata group chairman, Cyrus Mistry  finally accepted the inevitable and told this fact to the shareholders of the company at its annual meeting on 21st August 2013, in Mumbai. He said that Tata Motors would now reposition the Nano as a "smart city car" and change its marketing pitch as the world's cheapest auto, which has failed to give desired results.

With Announcement of "Gen X Nano," this shift has come true. Tata Motors do not really have any other option because of the showdown in the domestic auto sector, high interest rates, stagnation of industrial growth in sectors such as mining and infrastructure and finally the free falling Indian Rupee. 
Let us now watch and see how the new Car performs in the market. If this aalso does not work, Tata Motors  may not be left with any other option but to junk the car. 
21st May 2015  

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