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k k k k k k k k k NANOnomics-Ankeconomickanalysisk ofkTATAkNANOk k k nano.

jpgk DIV-Bk Group-5:k VaibhavkBothra:k110k RohitkChhabra:114k NitinkDhawal:117k An itkJain:122k JaykJoshi:k126k AnuroopkKrishna:k132k Abhishe kPassi:k144k k k

Contentsk IntroductionktokTATAkNANO:k..................................................... ...................................................................k3k NANO-ThekChange:k............................................................... ........................................................................k4k CURRENTkCONDITIONkOFkSMALL-CARkMARKET:k......................................... .................................................k5k FUTUREkPROSPECTSkOFkTATAkNANO:k................................................. ..........................................................k7k EFFECTkOFkNANOkONkTATAkMOTORS:k................................................. .........................................................k9k EFFECTkOFkTATAkNANOkONkTHEkCONSUMERSk........................................... ...................................................k9k EFFECTkOFkNANOkONkCOMPETITORSk.................................................. ........................................................k10k CONCLUSION:k.................................................................... ..........................................................................k11k k

IntroductionktokTATAkNANO:k Tatakmotors,konekofkthekleadingkplayerskinkthekIndiankautomobilekindustry,kthekw orld sk2ndklargestk buskmanufacturerkandk4thklargestktruc kmanufacturer,klaunchedkthekcheapestkcarki nkthekworldk-k TatakNano.k Atkthektimekofkinception,kTatakNanokwaskestimatedktokbekpricedkatkRs.k1,00,000.k However,ktillk Decemberk2008,kthekmaterialkpriceskrosekbyk23%kaskopposedktok13k%kaskinitiallyke stimated.kAskak resultkthekcostkofkthekcarkalsokwentkupksubstantially,kandkthekcompanykhadkthekf ollowingkoptions:k .kGovernmentkSubsidiesk .kForegoingksomekofkthekprofitk .kUsingkverticalkintegrationk .kPartiallykusingkinexpensivekpolymerskorkbiodegradablekplasticskinsteadkofkakfu llk metal-body,k .kRaisingkthekpriceskofkthekcark Thekcompanykchosektokforekgokprofitskforkfirstkfewkcarskatkreducedkprices,khowev erkthekpricekisk fixedkat:k .kBasekModel:kRs.k1,35,151k .kTatakNanokCX:kRs.k1,64,481k .kTatakNanokLX:kRs.k1,81,498k Thekcarkiskcurrentlykbeingkproducedkinksmallkquantities.kHowever,koncekthekTatak Nanokplantkatk Sanand,kinkGujaratkiskready,kitkiskexpectedktokhavekankannualizedkcapacitykofk35 0,000kunits.k Thekdemandkforkthekproductkiskprettykhighkaskthekproductkparticularlykcatersktok theklowerksegmentk ofkthekmar etskwhichkiskpresentkinkhighknumberskinkIndia.k k k k k

NANO-ThekChange:k k PriorktokTatakNano,kthekcheapestkcarkinkIndiankAutomobilekmar etkwaskMaruti-800k whichkwask pricedkatkaroundkRs.k188,988k kRs.k223,498.kThekcarkwaskmadektokcaterktokthekmiddl ekclasskork higherkmiddlekclassksegmentk(AnnualkincomekabovekRs.k300,000).kThekotherkcarskpr esentkinkthisk small-carksegmentkarekMarutikAlto,kHyundaikSantro,kChevroletkSpar ,kTatakIndica. k NANO skMonopoly:k Theksmall-carksegmentkbasicallykiskankOligopolykwithkmajorkplayerskli ekMarutikS uzu i,k Hyundai,kTata,kGeneralkMotors.k TatakNano,khoweverkopenedkakcompletelyknewkmar etksegmentkcateringktoktheklowerk middlekclassk orkmiddlekclassksegmentki.e.ktheklowerkincomeksegment.kCurrentlykthiskiskthekonl ykcarkavailablekink thiskUltrakSmallkCarkmar etksegment.kAskakresult,kTatakNanokhaskestablishedkakMo nopolykinkthisk segment.k Becausekthekotherkplayerskdoknotkhavekthektechnologyktokproducekcheapkcarskaskye t,kthekNanokwillk enjoykthekfirstkmoverkadvantagekforkatkleastknextkcouplekofkyearskaskitkdoesknot kseekanykthreatk fromkthekcompetitorskinktheknearkfuture.k k k k k k k k k k

0 500000 1000000 1500000 2000000 2500000 2003 04 2004 05 2005 06 2006 07 2007 2008 2008 09 2009 10 Production 0 5,00,000 10,00,000 15,00,000 20,00,000

25,00,000 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 PassengerkVehicles CURRENTkCONDITIONkOFkSMALL-CARkMARKET:k Thekproductionkofkcarskhaskincreasedkoverkyearskasktokmeetkthekincreasingkdemand .k .kProductionkofkcarskhaskincreased:k k Source:SIAMk Usagekofkcarskhaskalsokincreasedkduektokincreasekinksavingskandkemploymentkrates k .kUsagekofkcarskhaskincreased:k k kSource:kSIAMk

0 200000 400000 600000 800000 1000000 1200000 1400000 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 TotalkSavings .kCapacitykInstalledkiskmuchkhigherkthankconsumptionk Thekgapkbetweenkcapacitykinstalledkandkcapacitykutilizedkiskstillkveryklarge.k kCurrentlykUsed:k2.5kMillionkUnitsk(Approximately)k kFourkWheeler:k3.88kMillionkUnitsk .kNetkHouseholdkSavings(kinkcrore)khaskincreasedk k Source:kwww.india.gov.ink k

5 6 7 8 9 10 2008 2010 2012 2014 2016 GDP(%) GDP(%) Poly.k(GDP(%)) 1120 1140 1160 1180 1200 1220 1240 1260 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Totalkpopulation FUTUREkPROSPECTSkOFkTATAkNANO:k

ThekestimatedksalekofkNanokforktheknextk5kyearskwillkincreasekgivenktokfollowing kfactors:k .kIncreasekinkestimatedkgrowthkinkGDPk(%):k k k .kProjectedkPopulationkGrowthk(directlykproportionalktoktheknumberkofknucleark families)k k kSource:kRBIk k k

43 43.5 44 44.5 45 45.5 46 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 LFPRk(%) https://lh3.googleusercontent.com/ElsDQdP_TnXAup-bp3EojepcJrN_tg9L-XEBZXWGl6Gm1p _3WhJmVTwfaSI2oq6QwVTc2zBG5PQ-Q3Rh6s YdZB9AmCN69AlG25uBx-m0sfnwXm-4w .kProjectedkIncomekGrowthkcombinedkwithkdreamktokpurchasekakcarkearlykalsok strengthenskthekfuturekmar etkprospectsk k Source:kRBIk Askshownkinkthekgraphskabove,kIndiakiskexpectedktokshowkakrisekinkGDPkofkoverk8% kconsistentlyk forktheknextk5kyears.kThiskwillkresultkinkincreasedkpurchasingkpowerkforkthekcon sumers.kThek populationkiskalsokexpectedktokgrowkatkakhealthykrate,kwhichkmeansktherekwillkbe kankincreasedk numberkofknuclearkfamilies,kresultingkinkincreasedkdemandkandkpotentialkbuyers.k Thekemploymentk iskalsokexpectedktokrisekatkakoverktheknextk5kyears.kThekcurrentkIndiankpopulati onkbelowkpovertyk linekisk25%kwhichkiskalsokonkakdecliningktrend.kAllkthiskiskexpectedktokresultki nkincreasedksaleskfork TatakNano.k k

EFFECTkOFkNANOkONkTATAkMOTORS:k k ThekbiggestkimpactkofkTatakNanokwaskseenkinkthekoverallksaleskperformancekofkTat akmotors.kThek totalksaleskshotkupkbyk49.05%kinkJunek2010ktok67,730kfromk45,440kinktheksamekmon thkthek previouskyear.kThekcompany skdomestickmar etkhoweverkshotkupkbyk63%.k ThekoverallkTatakNanoksaleskinktheklastkmonthkstoodkatk7,704.k ThekdirectksubstitutekeffectkofkTatakNanoksaleskaffectedkthekTatakIndicaksaleskw hichkwentkdownkbyk 12%kfromk8070kinkJunek09ktok9036kinkJunek10.kThekotherkcarskli ekTatakIndigo,kSu mokandkSafarik whichkcomekunderkakdifferentksegmentkshowedkincreasekinktheksaleskasktheykwerekn otkimpactedkbyk TatakNano.kTheknanokthuskplayedkankimportantkrolekinkincreasingktheksaleskforkTa takmotors.kThek mar etksharekwhichkcurrentlykstandskatk13.34%kiskexpectedktokgokupkaskthekcompan ykscaleskupkitsk operationskinkfuture.k EFFECTkOFkTATAkNANOkONkTHEkCONSUMERSk k ViewskInkFavour:kThek2500$kcarkcreatedkakhavockinkthekmar etkink2008kwhenkitkwas kcoinedkthek cheapestkcarkeverkproduced.kThekcarksawkakpre-orderkofk203,000kboo ingskwhichkac countedkfork 17%kofkthekautokmar etkandk$501mnkinksales.kThektotalkproductionkofkGMkinkthatkm onthkforkallk itskproductskwasklesserkthankthiskfigure.kWithkthekadventkofkNano,k30%kofkthekpo pulationkofkIndiak waskinkakpositionktokhavekthekpleasurekofkowningkakcar.kInkakdevelopingkcountryk li ekIndia,kthek pricekofkthekproductkiskverykimportantkinkattractingkbuyerskandkthiskiskonekofkt hekmajorkreasonskfork thekcarktokbeksuchkakhugeksuccesskinkthekcountrykaskwellkaskacrosskthekglobe.kAk similark indkofksetk upkiskproposedkinkIndonesia.kApartkfromktheklowkcost,kthekcarkprovideskakbetterk fuelkeconomy(k 20 m/l),kgreaterkspacekinsidekthekcar(k20%kmorekthankMarutik800)kandkconformskwi thkEuroIVk normskrequired.k ViewskAgainst:kBut,ktherekiskagainkakclasskofkcustomerskwhokfeelkthatkthekcarkis knotksuitablekfork longkdrivekandkluxurykandkarekagainstkthekproductionkofkNanokaskitkwillkincrease kthekloadkonk alreadykloadedkroadsksincekmorekpeoplekwillkwantktokbuykit.k Thekconsumerskfeelkthatkwithkthekincreasekinkcarskonkthekroad,kthekaccidentsksha llkalsokincrease.kAtk present,kIndia skroadkaccidentskaccountkfork6%kofkthekworld skaccidents.kWithkthekar rivalkofkNano,k

thiskfigurekiskboundktokgokup.kTheknumberkofkaccidentskwillkbekgreatkbecausekthe knanokiskmadekoutk ofklightkweightkaluminium.kItkwillkfoldkupkli ekakmatchboxkinkankaccident.k Thekenvironmentalistskarekalsokconcernedkwithkthekincreasingklevelkpollutionktha tkshallkbekcausedk bykmorekandkmorekpeoplekpurchasingkNano.kLifekwillkbekdifficultkforkakpedestrian kforkthek pollutionklevelskwillkbekverykhigh.kEveryksecondkpersonkwillksufferkfromkvarious krespiratoryk problems,kbronchitiskandkasthmakduektokthekhighkairkpollutionkcausedkbykemission kofkpoisonousk gases.k Also,kthekconsumerskhaveksomekapprehensionskaboutkthekcarksincekitsksparekpartsk arekavailablek onlykatkTATAkdealerships.k OilkDeregulation:kThekincreasekinksupplykofkNanokshallkresultkinkthekincreasekin kdemandkofkpetrolk whichkshallkagainkresultkinkthekincreasekusekofkpetrol.kAskakresultkthekpricesko fkpetrolkarekboundktok increase.kAfterkthekderegulationkofkpetrol,kwhichkcankhappenkanytime,kthekprices karekagainkboundk tokgokup.kThus,kthekNanokconsumerkwhokonkankaveragekbelongsktoklowerkincomekgrou pkask comparedktokthosekbuyingkhigh-endkcars,kshallkfacekakfinancialkcrunchkmostlykbec ausekofkthekrisek inkpetrol.k k EFFECTkOFkNANOkONkCOMPETITORSk AccordingktokCRISILkwithkthekcomingkofkTATAkNanokthekIndiankcarkmar etkhaskgrown kupkbyk 65%.kThekUSPkofkthekTATAkNANOkiskitskpricekandkalsokthatkitkhask21%kmorekinterio rkspacekandk 8%ksmallerkexterior.kWhatkthiskmeanskiskthatkaknewkmar etkhaskopenedktokthekcomp etitorskandk playerskli ekBajaj,kFiat,kGM,kFord,kHyundaikandkToyotakhavekexpressedktheirkinte restskinkgettingk intokthiskaffordablekcarksegment.kThiskwillkresultkinkintensekcompetitionkandkhe ncekwillkresultkink lowerkpriceskandkaskpricekdecreaseskthekdemandkincreases,kaccordingktoklawkofkde mand.k k SubstitutionkEffect:kAlsokTATAkNanokiskaksubstitutektokbothkthektwokwheelerskand ktheklowerkcark mar etksegment.kHencekthiskiskaffectingktheksaleskofkthekcompetitorskbyktheksubs titutionkeffect.kAsk cheaperkalternativeskarekavailablekwithktheksamekutility,kakrationalkconsumerkwi llkalwayskbuykthek cheaperkgoodskandkthereforekdemandkforkotherkgoodskwillkfall.kSokTATAkNanokhaskf orcedkthek consumersktokchangektheirkdemandkrequirementskbyksubstitutingkotherkcarskorkgood sktoksatisfyk theirkwants.k

Anotherktrendkwhichkiskemergingkiskthekincreasekinktheknumberkofkcompanieskwhoka rekusingk TATAkNANOkaskankitemkofkgiftkinsteadkofkLCD s,kexpensivekforeignktrips.kSokherekal sokTATAk Nanokhaskresultedkinklesskdemandkofkconsumerkdurableskandkhospitalitykindustrykb ykthekwaykofk substitutionkeffect.kAskthekdemandkforkthesekgokdownkthekpricekwillkfallktokcoun terkthekdecreasekink demand.k UsedkCarskMar et:kDuektoktheklowkpricekofkNanokpeoplekareknotkbuyingkthekusedkca rskandkarek insteadkarekinterestedkinkbuyingkTATAkNanokandkarekreadyktokwaitkforkakmonth(wai tingkperiodkfork delivery)ktokgetkthekcarkasktheykarekmorekinterestedkinktheknewkcarkatktheksamek price.kThiskhaskledk tokdecreasekinkdemandkofkthekusedkcarskandkhencekpriceskhavekfallenkfurtherktoki ncreasekthek loweringkdemandksokthatkthekequilibriumkiskmaintained.k Alsokifkwekseekthatkinkthiskmar etkthekdemandkiskhighkandksupplykiskless.kTheref ore,kevenkifkTATAk NANOkincreaseskitskpricektokakcertainklevel,kduektokitskhighkdemandkitkwillkstil lkbekablektokgetk increasingksale.kButkitkhasktok eepkinkmindkthatkthekpricekshouldknotkreachkthek nextkcarksegmentk price.k TherekarekalsoknegativekeffectskofktheklowkpricekofkTATAkNANO.kAskwekallk nowkth atkIndiakiskak growingkeconomykandkhencekthekperkcapitakincomekiskincreasing.kThiskwillkencoura gekthek consumersktokgokinkforkakhigherksegmentkcarkasktheykwillkbekablektokaffordkitkno w.k SnobkEffect:kOnekmorekreasonkalthoughknotkthatkstrongkwhichkcankresultkinklowerk demandkofk Nanokisktheksnobkeffect.kAskmorekandkmorekpeoplekarekbuyingkNano,ktherekwouldkbe kakcertaink segmentkofkthekpopulationkwhokwouldknotkwantktokfollowkthekcrowdkandkthereforekw ouldknotkbuyk TatakNanokcar,kwhichkeventuallykwillkleadktokincreasekinksaleskofkcompetitors.k k k k CONCLUSION:k k

DuektokthekcontroversieskregardingkTatakNanokplantkstartkupkinkWestkBengalkandks ubsequentk decisionkofkthekmanagementktokmovekoutkandkstartkoperationskinkGujarat,kthekcomp anykhadktok incurkadditionalkexpenseskwhichkcouldkhavekaffectedkthekpricekofkNanokadversely. kHowever,kthek companykdecidedknotktokincreasekthekcostskfurtherkasktheknextkCarksegmentki.e.kt hekSmallkCark segmentkstartskatkakpricekofkaroundkRs.k2.25klac s.k IfkthekpricekofkNanokincreaseskbykaroundkRs.k50,000,kconsideringkthekoverallkfea tureskandkprice,k thekconsumerkcouldkgetkindifferentkbetweenkTatakNanokandkotherksmallkcarskwithkm orekfacilitiesk thuskreducingkNano sksales.k Nano skconsumerkbasekincludeskprospectivekbuyerskforksmall-carksegment,ksalekofkNa nokactuallyk eatskintoktheksharekofkotherksmall-carkproducers.kThus,kcompetitorskalsokhavekto klaunchktheirkownk variantskwhichkcaterktoktheksameksegmentkaskNanokdoes.k LowkpricekofkNano,kcoupledkwithkincreasingkpurchasingkpowerkwillkleadktokincreas ekinksalekofk Nano,kwhichkinkeffectkwillkleadktokmorekloadkoverkthekcurrentlykloadedkinfrastru cture.kThus,ktherek iskakneedktokupgradekinfrastructure.k k

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