The Nano Saga

It all started with a dream – a dream to transform the great Indian middle-class, a dream to bring prosperity amongst all, and a dream to build the world’s cheapest car. When Ratan Tata announced the Nano, he had proudly asserted that the car would bring in a revolution in the Indian automobile sector. When it was first unveiled, people went berserk. While its admirers were convinced that the Nano would surely rule the auto-mobile market going forward, critics were worried about the traffic snarls that a mass product would set in. None of this has actually happened. And yet, something went wrong. Was the idea in itself of building a cheap car for the masses an untimely one? Or did the company fail on the execution side?

As a consequence of all this Tata Motors took to the booking route instead of an open sales’ launch. It opened bookings for the car in April 2009 and could begin deliveries only in July 2009 and that too in a staggered manner. Since then the company has managed to sell only 77,110 vehicles up to the end of December 2010. Also, it was only when the Sanand facility was inaugurated in June 2010 that the company could finally open up the option of open sales.

Forget about refuting, Tata Motors actually used it as a marketing gim-mick. According to Ray, there were two options. One was to go and clarify that the company was not developing a `1,00,000 car. The other option was to adopt that as a benchmark and try and see if it could be done. “We opted for the second option. And the car actually cost `1,00,000 at the factory gate,” Ray points out. However, the point is when you tell the consumer the price of the car, you tell them the ex-show-room price and not the manufacturing cost. Considering the target consumer for Nano (middle-class and the rural residents who are not too aware of such marketing gimmicks), it forced people to believe that the car would cost `1,00,000.

The moment potential buyers realised that the on-road price of the vehicle was way above what was being perceived, a whole lot of them who had initially decided to go for the Nano backed out and started looking for alternatives instead. Another problem was the euphoria that the car created before it was launched. Expectations about product quality, its performance, service, and pricing were sky-high. But when it hit the roads, safety-related incidents got the customers worried. This resulted in a lot of bookings being cancelled. The word-of-mouth public-ity about quality and security-related issues hurt the Nano very badly.[PAGE BREAK]

The management claims that 80 per cent of its customers are satisfied with the car. However, it was the remaining 20 per cent that actually were respon-sible in ruining the prospects of the car. One of the Nano users (who does not want his identity to be revealed) irritat-ingly complains about the noise that the car makes. Since the engine is on the rear side, he always keeps worrying that someone might bump into him from behind and the engine would be gone. He also feels that the car looks like one designed for the elderly.

“In fact one of my relatives wanted to buy the Nano but then I advised him otherwise,” he says.

What is so different in a Nano that a very simple process like the fitting of a music system could put so much pressure on the vehicle for it to com-pletely turn into ashes? Anyway, the company now claims to have intro-duced a safety kit to make it more robust. All its customers are being told that the safety kit would not allow additional fittings in the car. This means, you either buy add-on facilities from Tata Motors or be con-tended with what you have. However, the safety issue still remains a bone of contention.

The positioning of the car as an entry level product was also not apt. The tag of being an entry level car has already been assigned to Maruti’s products for long. First, it was the good old Maruti 800 and now the Alto that rules this segment. Breaking into Alto’s territory became almost impossible for the Nano (the Alto sold over 2,35,000 units in the financial year 2009-10 while the overall sales for Nano from July 2009 to December 2010 (18-month period) is only 77,110 units). Also, the ‘lacta-kia’ tag has proved to be a farce and the Nano has been facing stiff competition from models such as Alto, Chevrolet Spark, and Hyundai i10.

Additionally, all the buyers will have the option to avail of a comprehensive maintenance contract at only `99 per month that will take care of all the parts except tyres and the battery. This contract will help customers reduce the burden of the running maintenance of the car. Also, Tata Motors has set up financing arrangements with about 28 public sector banks, private banks, non-banking finance companies, and cooperative banks, which will fund 100 per cent of the vehicle cost for the consumer except for the registration and insurance charges.

It does seem that the aam admi’s car could bounce back provided the company fulfills its promises on the safety front and revamps the model in such a manner that it addresses the performance part as well. Abdul Majeed, Leader (Automotive Practice), PricewaterhouseCoopers, feels that the Nano is showing signs of improve-ment. In November 2010 it sold only 500 units while the December sales touched 5,748 units. However, Majeed feels that quality would play a pivotal role in deciding the fate of the Nano. With superior quality and proper mar-keting, Nano may return with a ven-geance though it will be a time-con-suming as well as resource-consuming process for Tata Motors.