IIss N

Naannoo aa bbiigg N
Noo--N
Noo ffoorr T
Taattaa M
Moottoorrss
When Tata Motors launched the Nano seven years back, prospect of the car
becoming
a
roaring success
was sky high. It
was listed as the
people's car, the
cheapest in the
world, the base
model quoting
just Rs 1 lakh.
The car was nofrills, but was
designed as an
affordable
transport solution for a family of four, and offers its maker Tata Motors a
spur in the growing Indian car market.
But things started going downhill right from the begining, which were
highlighted by the harsh spat that has broken out between ousted Tata
Sons chairman Cyrus Mistry and the Tata group.
The Nano had actually all but faded into forgetfulness until the spat flashed
a harsh light at the car's colossal failure. In a letter to the board of Tata
Sons, the holding company of the Tata group, and Tata Trusts on October
25, Mistry had written that the cost of Nano's production was always
higher than Rs 1 lakh and the project needed to be closed if Tata Motors
wanted to remain profitable.
He claimed that emotional reasons were keeping Tata Motors away from
closing the Nano's production. Mistry was dismissed in a boardroom coup
on October 24.
In response, Tata Motors fortified its strategy for producing the Nano. On
November 4, the company issued a statement to the BSE, saying the Nano's
concept bagged global interest for its affordable pricing but a shift in its

manufacturing location, due to objection by farmers led by West Bengal

chief minister Mamta Banerjee when she was in opposition, and the
perception of a cheap car impaired the production and sales.
Tata Motors, however, confessed that the car has been a loss-making
product in a highly price-sensitive market, due to a blend of several factors,
including project delays, change in location of the factory from Singur in
West Bengal to Sanand in Gujarat , and the perception of being a low priced'
car.

Restarting Engine
Tata Motors has made several attempts to revive the Nano, even under
Mistry's watch. One was the Nano Air, which Tata Motors decided to
develop in partnership with French firm Motor Development International
in 2007.
That car was made to run on compressed air and would have zero
emission. An electric version too was in the making. Both models did not
take off.
The last marketable option that Tata Motors worked on robustly under
Mistry was the Nano Pelican, or a 1 litre version, which was planned for
2016-2017.
The car was to sport a 1 litre 3 cylinder petrol engine, a new dashboard and
a noteworthy changes in the exterior design, to make it well built. But the
Tata Motors boards resolute to first go slow on the project and finally drop
it because the directors thought the investment entailed was considerable
and more suitable for bigger cars in the future. The team for Nano Pelican
has since been dispersed and the executives have been moved to different
other projects in the passenger vehicle space. Under Mistry's watch,
attempts were made to move the Nano as a cool city car but customers did
not buy it.
At first, the car generated a buzz with over 3 lakh bookings. But a series of
episodes, including shifting of the plant from Singur to Sanand which
delayed deliveries and cases of the car catching fire, ensured the Nano got
off to the worst possible start. The product was launched looking at
considerable opportunity between two-wheelers and entry-level cars
because the gap in the price between the two segments was significant.

But a lot of first-time car buyers began hopping straight to premium

hatchbacks giving the entry segment a skip. Complacence also didn't help.
Given that there was so much of attention in run-up to the launch, Tata
Motors didn't bother spending much money or attempt on marketing the
product, which led to a mixed perception. The price tag of Rs 1 lakh, which
was once seen as a big selling point, all of sudden became a curse.
The Nano was a strategic big time error in terms of positioning the vehicle
as a "cheap" vehicle. Instead it should have been placed as a lowest entry
level car. Cheap is usually associated with low performance, and low
quality, which went against the vehicle. Following attempts to add features
and bring it closer to nearest competitor to Alto through model year
changes hardly made a difference.
These changes were strenuous too. There were holdups in making changes
like a rear hatch or a boot opening or improved braking or a power
steering. The optional power steering was instituted only by end 2013. The
rear window hatch came only in 2015. Other versions such as a diesel
version, a European version, the Pixel and CNG variants were all deserted.
Only the Emax CNG variant witnessed the light of the day.
The company even tried to reposition the car as a Smart City Car, with a
power steering, automated manual transmission and openable tailgate,
among other features, but to no avail.
The various iterations of Nano projects not only sucked a lot of money but
the company even lost its way in the market. The Indian automobile
market, meanwhile, was becoming very demanding.

Why Nano Failed?

Defensive Mindset
One major issue for the Nano's failure was its marketing. A potentially
game-changing innovation, Tata made Nano look practical but tagged it as
"cheap" in a market where buying a car is related with social status and
prestige unlike in the west.
Poor Perception
The launch price of the two variations of Nano was between Rs 1.2 lakh and
Rs 1.5 lakh, which was apparently 2050 per cent higher than the proposed

"one lakh car". Nano remains priced at a range where it is too expensive for
the lower middle class and too ragged for the upper middle class. The class
in between always looks to the upper class and upper middle class, and
thus shunned the product altogether. Due to the low engine displacement,
consumers did not look at Nano as substitute to motorcycles for driving in
highways or long distances.
Production Delays
Tata also faced political problems and had to move the plant location,
which led to production delays. Transfer of the whole plant radically added
to the product's cost. The preliminary waiting period was too high, making
several customers go away empty handed when the company could have
potentially swamped the market. And now due to inflation, Nano's prices
have further increased due to the rise in the prices of raw material such as
steel, rubber and others.
Product Deficiencies
It is for the intercity transportation that middle class often needs the car.
However, due to low ground clearance, Nano is dreadful on these roads.
Also, within a few months of initial sales, technical problems were
discovered in the Product and reports of Nano catching fire diluted the
trust for the brand as a whole.
Inability to manage PR
Everyone got to know of the event where a Nano caught fire; no one got to
know, how many Nanos are running beautifully. And as it stands, the
targeted segment for the car were first-time buyers, who get easily worked
up by such news .
Attitudinal Issue
Tata has conventionally been an SUV and HCV manufacturer, making
products with low volumes and high margins. In the case of Nano, the
format went upside down. The team wasn't aligned attitude wise, to push
for the desired number of vehicles that needed to be sold for a low margin
product.
Among the indecisiveness, Tata Motors share price was trading with a
decline of over 7% and had been sliding since November 9th 2016.

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Article Written by
Tanaya Nath