Update on Tata and the Nano

August 25th, 2011

For those of you who have been following this blog, you know I have had an interest in the development of Tata as an automobile entity, and especially the plight of the Nano and Jaguar/Land Rover (see Is Nano the New Yugo?, Tata and JLR I, Tata and JLR II, Tata and JLR III, Tata and JLR IIII).

Anyhow, this week’s issue of The Economist provides a nice review of the most recent Nano developments (see Stuck in Low Gear). Their conclusion: So far, it’s been a marketing disaster!

Since its launch with great fanfare in 2009, the Nano has swerved from one crisis to another. There was opposition to Tata’s original plans to site the factory in West Bengal, 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 meet a huge surge of early orders. The orders then petered out. To make matters worse, a few cars burst into flames, raising fears about the Nano’s safety. Sales, which had been predicted to be 20,000 a month, fell as low as 509 in November last year. Sales recovered to 10,000 a month in the spring, but have fallen back again this summer: 3,260 in July, amid a slump in the Indian car market caused by rising interest rates and fuel prices.

Carl-Peter Forster…head of Tata Motors…admitted earlier this year that he was having to reinvent the Nano business model. There was no real national distribution scheme, very little marketing and advertising, and no effective system of consumer finance.

The Nano’s marketing problems began with its product positioning. The price crept up by around 15%, putting it out of the reach of first-time buyers with no regular employment or payslips to back an application for credit. And by emphasising its cheapness rather than its basic but appealing qualities, it deterred slightly better-off consumers who could afford one but aspired to more sophisticated vehicles…

Interesting stuff, and fully consistent with my priors.

Although the Nano is a wonderful concept in theory. In practice, it has turned out to be much harder to turn into a successful reality.

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