Is Nano a big No-No for Tata Motors

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 no-frills, 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 beginning, 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 20–50 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.

Source  :   https://www.dynamiclevels.com/en/blog/is-nano-a-big-no-no-for-tata-motors