The Snall Beauty, Deep Pleasure: A Case of Tata Nano

THE SMALL BEAUTY, DEEP PLEASURE: A CASE OF TATA NANO

Dr. Samta Jain, Professor, Program Coordinator and Research Coordinator, IBS Mumbai Dr. Namrata Mehta, Visiting Faculty, J.N.V University and Psychologist, Manidhari Hospital, Jodhpur, Rajasthan Abstract Today the corporate houses are making all attempt to innovate, diversify and even expand their products lines in order to satisfy the customers with wide range of products quality and design. All this is done in pursuit of customer excitement and delight. Even the companies are catering to the environmental concerns and awareness levels of the people in these areas. The ideology of the business is changing and companies like Tata are keeping in mind the values that seek to create a harmony between customers, stakeholders, the environment and the profitability. There is realignment to the concept of Triple bottom line Keywords: Innovation, Customer Satisfaction, Triple Bottom Line, Asthetics. Introducing Tata Nano In the Indian car world, the proverbial pot of gold lies at the bottom of the pyramid holds true. Basically, the more affordable a product, the wider the appeal and the greater the number of potential customers it has. And Tata Nano represents this very philosophy. For millions of people in the developing world, Tata Motors' new $2,500 four-door subcompact, the world's cheapest car, may yield a transportation revolution as big as Henry Ford's Model T. The potential impact of Tata's Nano has given environmentalists nightmares, with visions of the tiny cars clogging India's alreadychoked roads and collectively spewing millions of tons of carbon dioxide into the air. Industry analysts, however, say the car may soon deliver to India and the rest of the developing world unprecedented mobility. The basic model of Nano, expected, sold for 100,000 rupees, or about $2,500, but analysts estimate that now the customers could pay 20 percent to 30 percent more over and above the cover taxes, delivery and other charges. Company chairman Ratan Tata,
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who introduced the new car at India's main auto show, has long promised a $2,500 "People's Car" for India -- a country of some 1.1 billion where only seven of every 1,000 people own a car. That vow has been much-derided by the global industry which said it would be impossible without sacrificing safety and quality. "A promise is a promise," Tata told the crowd after driving onstage in a white, luxury edition Nano, his head nearly touching the roof. Four company executives emerged from another. Tata says the Nano can seat five. This car may well spark a revolution on the streets. Will Tata Nano be the iPod of the car market or Nirma? The iPod changed the MP3 device market and it did not really matter what the competition did. Nirma, in late 80s, handed out a beating to Hindustan Levers Wheel and created a new mass segment. Experts say Nano will perhaps be more Nirma than an iPod. They feel there wont be any spillovers in the car industry. Nano is expected to change the automobile market in India, which should ideally mean new strategies for competitors. Company Background TATA Motors Set up in 1945,Tata Motors is India's largest automobile company. With close to 4 million Tata vehicles plying in India, since the first roll out in 1954, it is the leader in commercial vehicles and the second largest in passenger vehicles. It is also the world's fifth largest medium and heavy truck manufacturer and the second largest heavy bus manufacturer. In India, the company has manufacturing facilities in Pune (Maharashtra western India), Jamshedpur (Jharkhand eastern India) and Lucknow (Uttar Pradesh northern India), and a nation-wide dealership, sales, services and spare parts network comprising over 2,000 touch points. The company employs over 22,000 people. Tata cars, buses and trucks are being marketed in several countries in Europe, Africa, the Middle East, South Asia, and South East Asia and in Australia. Tata Motors has research centers in India, the UK, and in its subsidiary and associate companies in South Korea and Spain. In the financial year 2005-06, it earned net revenue of USD 4.65 billion, compared to USD 3.98 billion in 2004-05, a growth of 16.8 per cent. For 2005-06, the companys exports rose to USD 496 million, as compared to USD 332 million in 2004-05, representing an increase of 49 per cent. With 50 years presence in the automotive business, Tata Motors understands customer needs and develop products that meet their needs. To consider a few examples, as early as 1980s, the company launched Light Commercial Vehicles, amidst Japanese competition, in which it today strongly leads. In the 1990s, anticipating the need for an affordable family car, it launched the now famous Tata Indica, which occupies a leading position amongst compact cars. This keen sense of the customer pulse led the company to launch in 2005, the Tata Ace, Indias first sub one tonne mini-truck, as a last-mile distribution vehicle once again creating a new market. Going forward, Tata Motors has anticipated that non-car owning families, at the bottom of the pyramid, will look for an extremely affordable vehicle, providing exceptional value.

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What inspired the Tatas to make Nano? In 2003 Ratan Tata, the Chairman of the Tata Group, mentioned his intention and dream of coming out with a small car, the 1 lakh car, the name given by the media. The reason behind Tatas intention and ambition were the daily but common images of an Indian family of four, with the parents and two children, travelling in the dense Indian traffic precariously positioned on a two wheeler. While industry rivals said a car couldnt be made at this price, Tata said They are still saying it cant be done, Everybody is talking of small cars as $5,000 or $7,000. After we get done with it, there will hopefully be a new definition of low-cost. Initial media speculations were that this low cost car would be a simple four-wheeled auto rickshaw. This changed when Tata decided that a contemporary car not unlike its costlier models could be made at a low cost. Tata had decided to come out with a welldesigned car instead of making a simple four-wheeled auto rickshaw as thought of by their rivals. The car was designed at Italys Institute of Development in Automotive Engineering, with Ratan Tata ordering certain changes during the process, such as reducing the number of windscreen wipers from two to one. The secret behind the 1 lakh car How has Tata taken a more-or-less conventional car and managed to cut a massive slice of cost. Has it used motorcycle components, cheap parts, or is this the real thing? If youre expecting a tiny car, you are going to be in for a shock. Aesthetics: The Nano is not only wider and taller than a Maruti 800, its wider and taller than an Alto as well. The fact that the compact engine sits just above the rear wheels allows it to use space more efficiently. Space available to the passengers is, according to Tata Motors, 21 percent more than that given by Maruti 800. Tata has made design and styling a key differentiator with its products, and the Nano is no exception. In fact, styling is one area where there is no compromise. There are no cost-saving flat surfaces or flat plane glass on the Nano. Its a stunning- looking car by any standards and proves the point that cheap cars dont have to look cheap. Stand-out features include a very steep bonnet, triangular front quarter-glass, high roof and mini side vents under the rear doors that cool the engine compartment with fresh air. Tata engineers admit that sorting out the dynamics was one of the biggest challenges and it remains to be seen how good the Nanos handling is. The brakes, however, are anything but expensive. The Nano does not use expensive disc brakes, but relatively inexpensive drum brakes instead. Further, some versions do away with even the servo system or the brake booster. Engine and Gearbox: The Nanos motor is an all-aluminium, 624cc, in-line, two-cylinder motor. Like with every other bit on the car, it is pared down for costs. The engine is situated somewhat
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inside the rear axle line to benefit handling, but other bits like the radiator are behind it. The tiny engine cranks out a mere 33bhp, which is comparable to the Maruti 800s 37bhp. Performance should be similar, though, owing to the Nanos meagre weight. The fuel tank is situated under the front passenger seat and holds a mere 15 litres, an indication of the fuel efficiency of the Nano, which Tata claims will be upwards of 20kpl. Interiors and Comfort : The interiors are quite basic and distinctly austere, but its far better than a Maruti 800 and we have to keep reminding ourselves that this is a Rs 1-lakh car. The seats cannot be reclined, have in-built headrests and the exposed seat mountings look crude and basic as well. But when it comes to sheer passenger space, the Nano shocked the analysts. This is a genuine four-seater that can seat four large adults in pretty good comfort. Global Impact of Nano What makes the ultra low cost (ULC) trend even more very exciting is the number of top MNC car makers that have indicated that they would be looking at the segment in the near future. Immediately after the launch of the Nano, engineers from Volkswagen and Renault were seen and heard discussing the cars build, development and styling. Auto industry sources say, top global companies like Volkswagen, Nissan and Toyota have reportedly sent out to feelers to Indian vendors for their version of a $3000-4000 car. This is in addition to the Bajaj-Renault project where feasibility study is already on. The cost benefits of the ULC segment have triggered interest from top names in the global auto business. And given the Tata and Bajaj project, India is being seen as a hub for this segment. Toyota has been mulling a small car for emerging markets which will be sourced mostly from India and its interest in the ULC segment could give Tata Motors some really tough competition particularly since Toyota is extremely efficient at globally procuring for low cost platforms, something it fine-tuned with the Innova project. As for Volkswagen, a top company official said that the German marquee has not firmed up plans for a low-cost car but is looking for high localisation in all cars that will be produced in India. Sources say VW, which is setting up its own plant at Chakan near Pune, is seriously looking at the ULC market. Worldslargest car manufacturer GM said made its intensions clear as it said in a statement that it had no intentions of making a ULC car in the near future. The other company that may be considering an ULC foray is Korean major Hyundai. The company had earlier announced plans to venture into the low-cost car market but the global cars it is working on would be priced around $5,000-6,000, doubles the Nano segment are were scheduled for roll out in the market.. However latest reports trickling in say that Hyundai may also be looking to join the ULC bandwagon. In a recent interaction with the media , top officials of the company were quoted saying that
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it is planning a public car that is suitable for India and other eastern countries and that the car will most likely compete with the Tata Nano when it rolls out. However the launch is not going to be immediate because developing a new model takes at least three years. If and when Hyundai does launch its Nano competitor , it will join the ranks of the Bajaj-Renault-Nissan vehicle. Bajaj showcased a proto-type which will be the basis for the ULC car that the company will develop along with Renault and Nissan. Nissan-Renault boss Carlos Ghosn was the first MNC to join the ultra low cost bandwagon and kicked off partnership talks with Bajaj middle of last year. The two companies are currently conducting feasibility studies on the project. Ghosn has indicated that his $3000 car will be built on a Bajaj platform with an Indian power train with design and chassis cues from Renault. When productionised, the car will give twice the mileage of current B-seg small cars with its gasoline engine. And it will have multiple power train options. They will also have a diesel option and one can always build LPG, CNG and hybrid options on to the platform as well. Car sales in India are expected to cross 24 lakh units in 2011 according to the Society of Indian Automobile Manufacturers. The small car segment here is expected to notch up sales of over 8.8 lakh end of this fiscal as against the 7.8 lakh units sold in 2006-07. Concerns for Nano Loans for Nano riskier: Tata Nano is expected to create a huge dent in the two-wheeler segment and many two-wheeler owners have already expressed interest in owning a Nano. They are even willing to defer their decision to buy another or a new vehicle till the car is available in the market. The two-wheeler loan segment has one of the highest default rates among various retail loans and hence carry a higher rate of interest. At present the car loans in India are available from lenders at interest rates ranging betwen 12-16 percent, while the two-wheeler loan segment have higher interest rates ranging between 18 -22 percent. In addition to the high interest rates, two-wheeler loans have low tenures generally around two years, while car loans are available for around 7 years. This loan tenure and interest rate scenario of two-wheeler loan segment can come into picture since the entry level model of Nano is expected to cost around 1.25 lakhs. Keeping in mind the income profiles of this segment of borrowers, banks are contemplating on adding a running cost component to the loan for Tata Nano. This could effectively increase the loan amount and hence enable banks to offer loans of longer tenure with lower EMIs, which could be easily afforded by borrowers of this segment. The resale value of Tata Nano and design defects, which have been a regular feature of Tatas popular cars like Indica, are also making the banks take a cautious stand on financing Nano.
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Environmental concerns: Currently, only about 12 in 1,000 Indians have a car, according to the United Nations. In the United States, the ratio is 765 cars for every 1,000 people. What happens if, through a combination of its incredibly rapid economic growth and innovations like the Nano, Indias car-ownership ratio hits that of the U.S.? That would put 864 million cars on Indias roads, more than 3 1/2 times the number in the U.S. It wouldnt happen for several decades, if ever, but the same phenomenon is occurring in China, which has an even bigger population. The International Energy Agency estimate that the number of cars in China will increase sevenfold, to 270 million, by 2030.Thats a scary prospect. Light-duty vehicles account for about 10% of global carbon emissions, and that number is going to rise quickly as more Indians and Chinese get behind the wheel. Indians, of course, have every right to enjoy the newfound freedom and status that comes with owning a car. There is nothing the worlds environmental community can or should do to interfere with the rollout of the Nano. Yet it does point up the urgency of developing technological alternatives to the internal combustion engine and the burning of fossil fuels. Prices for gasoline will probably keep rising as millions of cheap cars hit Asian roads. That will spur research into alternatives and discourage people worldwide from buying low-mileage cars. Its even possible that gas prices in India might rise to the point that those who could afford a Nano wouldnt be able to afford the gas to fuel it. Probability of a capacity crunch: A car as cheap as 1 lakh is sure to attract many buyers. The chances are that the plant capacity may not meet the needs of the Indian customers. This situation would be similar to the time when Bajaj used to have a monopoly in the Indian 2 wheeler market. An average customer had to wait for 2 to 3 years to get the scooter after placing the order. In this case the image of the company would be so bad that a new company like Honda which had no prior experience in the Indian market swept away Bajajs market in the scooter segment. There is every chance that companies like Hyundai and Renault which are bringing their ULCs could get the upper hand in this case. Tatas bad record with new models: Tatas cars when they enter the market have more often that not been detected with technical errors. Indica for 2 year after its launch was notorious for its technical errors. A similar situation in the case of Nano would be disastrous for Nano as competitors like Bajaj, Renault and Hyundai are getting their ULCs ready. Political pressure: Tatas Singur plant set up in West Bengal was the eye of a political storm even before Nano was shown in the Delhi Auto expo. It became at the very start a controversial car as controversies arose about Tatas planned manufacturing unit for the car in Singur,
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West Bengal, where the regional government of West Bengal has allocated 997 acres (4.03 km) to Tata Motors. Activists near Kolkata, where Tatas manufacturing unit is located, started burning the car in effigy. In New Delhi, women protested wearing Tshirts bearing slogans that said, The Rs 1 lakh car has Singur peoples blood on it. The Trinamool Congress alleged that Tata motors usurped the agrarian land for the construction site and have threatened to stall the manufacture of the car. Tata Nano has set up a landmark in the industrial history of the State of Gujarat by setting up the mother plant for the worlds smallest car, Tata Nano, the Tata groups automobile arm has more in kitty for the state with some additional investments lined up to be made over several months and making the peoples car Tata has done wonders. Conclusion According to studies, Nano may take about four years to break even, even if the company rapidly ramps up production capacity. By then, similar models of rival companies would have rolled into the market, like Bajaj Autos low-cost car, which has promised to deliver more fuel efficiency than the Nano. The company has said that it will hike production of the car beyond 250,000 units a year if the demand is buoyant. The major implications are: Nano will have to outsell Maruti's Alto, the highest selling model in India Tata Motors will be able to generate higher margins on exports as the price tag of "Rs. 1 lakh" will ease out. The plant capacity will be ramped up to 350,000 units at an investment of Rs 300 crore, which will squeeze company margins.

However what remains is Ratan Tata, one of the few principled Indian entrepreneurs, a man of his words, has kept his promise of creating and bringing before us a car for the masses. The Nano is very much keeping with the companies vision of meshing local values with a global outlook. It was really well received and has created a niche market for itself. Some of the American Press have compared it with the Ford Model T of 1908 in terms of importance because no company in the world enough thought it would be possible to launch such a cheap product, and this move is drawing other companies to the segment. References 1. 2. 3. http://economictimes.indiatimes.com/Nano_effect_in_global_auto_industry/artic leshow/2763864.cms http://www.gulfnews.com/business/Automobiles/10194251.html http://www.livemint.com/2008/02/10232518/GM-plans-new-small-car-inIndi.html
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4. 5. 6. 7. 8. 9.

www.delsgp.ec.europa.eu/en/pdf2008/Europes_openness_and_the_politics_of_gl obalisation.pdf www.indembassyhavana.cu/News%20Letters/January%201-15,2008.doc www.bssia.org/nano.doc www.valuenotes.com/krc/krc_Tata_22Feb08.pdf www.indiaprwire.com/pdf/news/27462.pdf www.articopia.com/pdf/article-70529.pdf

10. www.business.baylor.edu 11. www.indembassyhavana.cu/News%20Letters/January%2016-31%20,2008.doc 12. Business Standard Motoring Magazine, Feb Edition 13. http://www.tata-nano.info/ 14. http://nanocar.wordpress.com/ 15. http://www.articopia.com 16. http://www.cpcug.org/user/houser/advancedwebdesign/Tips_on_Writing_the_ Case_Study.html 17. www.krchoksey.com 18. Nano may take 4 years to break even, Swaraj Baggonkar, Mumbai January 24, 2008 19. http://www.business-standard.com/ 20. www.tata.co.uk 21. http://in.ibtimes.com 22. www.IndiaeNews.com 23. www.scribd.com 24. www.rediff.com 25. www.Indiaphotoblog.com

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