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The Turnaround of Tata Nano: Reinventing the Wheel

Swati Singh and Pallavi Srivastava Vision: The Journal of Business Perspective 2012 16: 45 DOI: 10.1177/097226291201600105 The online version of this article can be found at: http://vis.sagepub.com/content/16/1/45

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Forster 45
Management Case

The Turnaround of Tata Nano: Reinventing the Wheel

Swati Singh Pallavi Srivastava

Vision 16(1) 4552 2012 MDI SAGE Publications Los Angeles, London, New Delhi, Singapore, Washington DC DOI: 10.1177/097226291201600105 http://vision.sagepub.com

Abstract
Tata Nano has rewritten the evolution of transport by creating history as the worlds cheapest car. The creation of Tata Nano is a result of innovation leading to new market creation to tap latent opportunities lying at the bottom of the pyramid in the automobile, fourwheeler segment. This is the turnaround story of Tata Nano which focuses on how the initial strategies for launching and positioning backfired, leading to attraction of the wrong segment towards the car. There were instances that made people lose their interest and trust in Nano resulting into its nose-diving sales. The case highlights how Tata Motors Ltd. recognized its shortcomings and mistakes that led to the rejection of Nano among the segment it was created for. It revamped its strategies keeping in mind only its targeted segment that is the bottom of the pyramid. Thereafter it bounced back to win the trust of its prospective customers and is presently on a path-breaking journey to win sales.

Key Words
Innovation, New Market Creation, Positioning, Automobile, India

Introduction
If ever there were a symbol of Indias ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the... Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity. (David Pilling in Financial Times dated 24 September 2008)

The congested Indian city, Mumbai, more typically known as the city of dreams by the Indians once again fulfilled the dreams of many Indiansthose who had a tremendous urge to own a brand new car, which was often beyond their reach. It was in this city, on 23 March 2009 that history was created. Ratan Tata, a lifetime car enthusiast unveiled the first Nano car and kept his promise made to the country of producing a car worth 1 lakh1 (approximately US$ 2,000), which is affordable for a large majority of Indians. However, one chilly morning of November 2010 had some bad news for Tatas. An otherwise calm Ratan Tata, the tall, vital 73-year-old Chairman of Tata Group, was in a pensive mood. He had many things to worry about. Sitting in the fourth floor of his modest colonial-style office building known as Bombay House, he had the facts lying before him, Nano sold only 509 units in November 2010, a dramatic decline from 9,000 units in July 2010. In contrast,

Mercedes, reported to be the costliest car in the word sells more than 500 units in India. Infact, the overall secondquarter profits of Tata Motors Ltd. peaked more than 100fold in the case of luxury sedans and sports utility vehicles. This was not what he had envisaged. So where did Tata misfire? His shrewd business sense and foresightedness had found a new market at the bottom of the pyramid in India. Was he wrong in sensing opportunities? The white walls of his office were hung with large, abstract paintings. He picked up his coffee and stared out of his floor-to-ceiling window and looked onto a balcony filled with plants. He had been very optimistic while launching Nano and now this He sensed the palpable urgency in tackling this unforeseen turn of events. He must discuss the issues in an emergency meeting. He called on his secretary to fix up a videoconferencing with the Nano team.

Company Background
Tata Engineering & Locomotive Company Ltd. (Telco), one of Indias premier automobile companies, was established in 1945 to manufacture steam locomotives. A tie-up with Daimler-Benz to produce commercial vehicles lasted from 1954 to 1969. By then Telco was in a position to independently design and manufacture commercial vehicles

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46 and it ventured into the production of other engineering equipment before settling down finally to automobile and construction equipment machinery. Telco was rechristened as Tata Motors Ltd. on 29 July 2003. Tata Motors Ltd. was Indias largest automobile company, with consolidated revenues of US$ 20 billion in 200910.2 It was the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company was the worlds fourth largest truck manufacturer, and the worlds second largest bus manufacturer. The presence of Tata Motors Ltd. indeed cut across the length and breadth of India. Over four million Tata vehicles have plied on Indian roads, since the first roll-out in 1954. Following a strategic alliance with Fiat in 2005, it set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The companys dealership, sales, services and spare parts network comprised over 3,500 touch points. Tata Motors Ltd. also distributed and marketed Fiat branded cars in India. Now, Tata Motors Ltd. was also expanding its international footprint, established through exports since 1961. The companys commercial and passenger vehicles were being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. Through subsidiaries and associate companies, Tata Motors Ltd. had operations in South Korea, Thailand, Spain, Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. The companys manufacturing base in India spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). The foundation of the companys growth over the last 50 years was a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through cutting edge R&D. It was Tata Motors Ltd. which developed the first indigenously developed Light Commercial Vehicle, Indias first Sports Utility Vehicle and, in 1998, the Tata Indica, Indias first fully indigenous passenger car. Within two years of launch, Tata Indica became Indias largest selling car in its segment. In 2005, Tata Motors Ltd. created a new segment by launching the Tata Ace, Indias first indigenously developed mini-truck. Tata Motors Ltd. entered into several collaborations with different companies. Tata Cummins Ltd., a 50:50 venture with Cummins Engine Company, USA, manufactured fuel-efficient, low emission, environment-friendly diesel engines. A joint venture with Daimler Benz/Mercedes Benz A.G. produced the E-Class Mercedes Passenger Cars and Vision, 16, 1 (2012): 4552

The Turnaround of Tata Nano: Reinventing the Wheel it was also in collaboration with Holset Engineering Company, UK for turbo chargers to be used in the diesel engines manufactured by Tata Cummins Ltd. and other OEMs. Tata Motors Ltd. manufactured some of the most popular vehicles of all times which include Tata Safari, Tata Indigo and Tata Sumo along with trucks and buses. Its reintroduced model of passenger car Indica is also as popular as its other models. Tata Nano, its latest offering, was said to have revolutionized the automobile industry. Through its subsidiaries, the company was engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.3

Genesis of Tata Nano

It was one of the rainy days of Mumbai. Ratan Tata was going home in his Mercedes. As his driver stopped the car before a traffic signal, his eyes caught a family of four crammed on a two-wheeler. According to Ratan Tata, What drove mea man on a two-wheeler with a child standing in front, his wife sitting behind him holding a baby, add to that the wet roads was a family in potential danger. It led him to wonder whether one could conceive a safe, affordable, all-weather form of personal transport for such a family. This incident laid the seeds for the inception of Tata Nano. This made him dream for a vehicle that could be affordable and low cost enough to be within everyones reach, a peoples car, built to meet all safety standards, designed to meet or exceed emission norms and be low in pollution and high in fuel efficiency. Even though Nano would not be afforded by the poorest, Tata primarily aimed to serve the needs of those within the bottom of the pyramid who so far could afford a two-wheeler but not a car. This customer segment compelled Rata Tata to dare a `1 lakh car, less than half the price of the cheapest car available in India and, indeed, anywhere in the world. This way Tata envisioned to create a new market for cars which does not exist, making them accessible to Indias neo-rich middle classes growing at around 9 per cent a year. With McKinsey predicting the size of the Indian middle class to grow from 50 million now to 583 million by 2025,4 this rapidly expanding market was found to be extremely lucrative. However, there was a huge difference in switching cost from a two-wheeler to a car. The announcement of Tata Nano aimed to reduce this gap, with a

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Swati Singh and Pallavi Srivastava target sales price of `1 lakh, thereby making the shift easier for the bottom of the pyramid. Tatas dream project took off in 2003, spearheaded by the then MD Ravi Kant and a young team of five engineers. The idea was to develop an innovative and cost-effective means of transportation for the underprivileged. The toughest challenge was to keep the price at `1 lakh. This required efforts on keeping the cost low, while balancing the customers expectations and meeting the regulatory requirements. Our biggest challenge was to keep the balance between cost and performance, quoted Girish Wagh, Head, Small Car Project. The brief was that the vehicle should be attractive to customers without any compromises on quality and performance. Ratan Tata himself set the internal benchmarks. Designers from Italys Institute of Development in Automotive Engineering were roped in to design Nano,5 but Ratan Tata, a trained architect with an eye for designing consumer goods, stayed in the loop during the process. From its price to its engineering, design, manufacturing and retail network, he would review progress on a daily basis. The result was a fresh new design. Tata brought in

47 suppliers such as Bosch, a German maker of appliances and motors, and Delphi, a world leader in automotive parts (and one-time subsidiary of General Motors), in early-stage design to develop lower-cost components. The engine went to the rear with front wheel drive and the petrol tank to the front. This made the car more low-cost, more efficient and more compact (with a length of almost 3 metres). A lot of fibre and plastic were used instead of steel to keep the weight of the car low. Various other alternations were done like installing a single wiper instead of two, tubeless tires, weight being reduced by 2 Kg. No radio, power windows, air conditioning, anti lock brakes, air bags, remote locks or power steering were part of the car. Rear wheel drive had manually actuated 4-speed trans-axle that gives the car better fuel efficiency. It had strong wheel bearing to drive the car at 72 kmph (Refer Exhibit 1). Finally, Nano was produced in three variants standard and two deluxe models with AC. The standard version has been priced at `1 lakh (excluding VAT and transportation cost). As every innovation in its nascent stage is bound to be looked at with scepticism, the announcement of Tata Nano too had its fair share of the same. But the critics soon

Exhibit 1. Building the worlds cheapest car

The cheapest car in the world, set to sell for just $2,500, is being unveiled at the Delhi Auto Expo by the Indian car manufacturer Tata Motors. The one lakhslang for 100,000 rupeespeoples car is aimed at the countrys 65 million scooter riders currently unable tp afford a car Rear-mounted engine: Two-cylinder petrol, 660cc, 33bhp, built by Bosch Fuel efficiency: 60mpg Top speed: 75mph 060mph: 21 secs Instruments: Limited to analogue speedometer, odometer and fuel gauge Single windscreen wiper Front luggage compartment: Holds battery, windshield washer bottle. Room for single suitcase

Weight saving: Extensive use of plastic Cost saving: No radio, power steering, air conditioning, emissions control, antilock brakes, air bags, safety beams

Rear wheel drive: Uses continuous variable transmission, lighter alternative to manual or automatic Source: Industry experts.

Wheel bearings: Strong enough to drive car at 45mph, but will quick wear out at higher speeds

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48 realized their mistake of thinking that Tata will sacrifice quality and safety standards to meet the lowest ever target price. 10 January 2008 was the day India and the world had been looking forward to. Tata Motors Ltd. unveiled its Peoples Car, the Tata Nano at the Auto Expo in Delhi, the capital city of India. The world gasped at the little beauty in white standing tall amongst the already established auto giants. Nano will rewrite the evolution of transport, said Ratan Tata, unveiling the car. We are happy to present the Peoples Car to India and we hope it brings the joy, pride and utility of owning a car to many families who need personal mobility. Launching the car, Ratan Tata said, the company had given the country an affordable car and a major part of the country will be able to sit in it. It encapsulates the dream of millions of Indians groping for a shot at urban prosperity.6 According to the rating agency CRISIL, the new price point translates into a 65 per cent increase in the number of Indian families that can afford a car. Nano targets first time users, two-wheeler owners, and people in rural areas, which accounts to almost 60 million users.7 The public euphoria secured Tata Motors Ltd. more than 200,000 bookings, from which a computerized programme shortlisted 100,000 lucky customers for deliveries through 2010. Of the remaining, 55,000 chose to retain their bookings for the second lot of deliveries. The rest were refunded their entire booking amount. One of the most remarkable aspects of the Tata Nano was the way in which it had taken the world media by storm. The BBC termed it as a triumph of Indian ingenuity.8 For many, wrote James Kanter for the New York Times, it represents a leap, overnight, from the indignity of two-wheeled motor scooters to the relative luxury of four wheels and a roof. Nano is a symbol of freedom and prosperity. For just US$ 2,000, Indians now have the opportunity to own a car. Imagine it: US$ 2,000 for a car.9

The Turnaround of Tata Nano: Reinventing the Wheel forced land acquisition and reuse of farmland by the West Bengal government generated a strong protest among the local farmers. The first major roadblock was faced when political forces and the two-year long protest forced Tata to shift the plant from Singur in West Bengal to a new plant at Sanand in Gujarat, resulting in loss of time. This further delayed the launch of Nano. The Sanand plant started its operations in June 2010. In the interim, it rolled out only 50,000 units (as opposed to 300,000 units at Singur) from its Pantnagar plant in Uttarakhand. As a result, instead of an open sales launch, we had to launch the car through the booking route in April 2009 and could begin deliveries only in July 2009, that, too, in a staggered manner, said Tata Motors Ltd. spokesperson Debasis Ray.10

The Green Concern

Another concern was raised by environmentalists. They felt that the launch of Nano would lead to increased traffic on the already congested roads of India thereby raising the levels of pollution. They feared that the countrys infrastructure is not robust enough to bear the burden of so many cars on the road. It gave nightmares to another prominent environmentalist, Dr Rajendra Pachauri, Chairman of the Intergovernmental Panel on Climate Change and a 2007 Nobel Laureate for Peace Prize, along with Al Gore. Daniel Esty, an environmental law professor from Yale found it to be, an environmental disaster of substantial proportions. There is this mad rush towards lowering the prices to achieve mass affordability, said Anumita Roychoudhury, of the Centre for Science and Environment in Delhi. If vehicle ownership increases very rapidly, well have a time bomb ticking away. When you lower the price drastically, how will you be able to meet the safety and emissions standards? There are no clear answers yet.11 Tony Bosworth, from Friends of the Earth UK, said, The Tata Nano makes motoring cheaper and growing car sales in India will lead to big rises in carbon dioxide emissions. He found it to be another blow in efforts to tackle global climate change.12 Sunita Narain of the Centre for Science and Environment (CSE) insisted on Tata Nano to be taxed like crazy. Some Westerners also feared that Nano would raise the oil prices. This is going to really shoot demand to levels we have not seen before, said Michael Economides, an oil expert at the University of Houston and a former adviser to several state-owned oil companies. Thats going to open up segments of the population that werent accessible.13 Inspite of all these challenges, Tata at no point of time felt, it was not possible to produce such a car. Finally, Nano was launched with great fanfare at the 9th Auto Expo held in New Delhi. At the launch, everyone imagined it to be an

Initial Hiccups
Unfortunately it was not a smooth drive for the company as this successful launch was not without initial hiccups. Many a times it was faced with challenges in meeting cost and time targets. Sometimes it was the shifting of their plant, the uproar created by environmentalists or a snag in demand pull because of recession, etc.

The Singur Controversy

In 2006, Tata announced the manufacturing of Nano from its forthcoming plant at Singur, in West Bengal. But the Vision, 16, 1 (2012): 4552

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Swati Singh and Pallavi Srivastava ugly looking boxy hatch. Surprisingly, at its price, it was quite proportionate and well styled. Its mono box design seemed boxy but generated a lot of interior space which could comfortably seat four adults. Nano had its engine at the rear and was a rear wheel drive car. That made it sound like a small fun hatch to run around town in. Fuel efficiency was expected to be in the range of 1820 kmpl and Nano was tested at a top speed of 105 kmph by Tata Motors Ltd. Nano met all emission and safety norms including crash test norms in India and was geared to meet European and other country norms as and when it would be launched internationally. Tata also had his answer to the green brigade. Issue of congestion, number of vehicles, implies we will seed global market with millions of vehicles and let me tell you Tata Motors Ltd. does not have the resources to do that, says Ratan Tata. It conformed to Indian safety standards, was Euro IV compliant in terms of emission norms and very fuel-efficient. Euro IV standards are more stringent than those in place for the motorcycles and scooters, which make up a big chunk of Indias motorised traffic.14

49 I would like to announce that the standard car will have a dealer price of `1 lakh only. I just want to say that because a promise is a promise.17

Strategies that Misfired

Though incidents of fire had a big role in creating a negative mindset towards Nano, major failure was attributed to its marketing strategies. First marketing mishap was confusion about its positioning that resulted into flocking of rather unexpected bunch of affluent buyers. Nano initially failed to reach the customers it was targeted at. The major targeted segment was the lower middle class with twowheelers, who aspired for a four wheeler which was beyond their pocket. The strategies and the car itself were designed around this segment only. But, the pay-first, drive-later booking model adopted by the company attracted a bunch of customers the car was not quite intended for. Hence, of the 2.06 lakh bookings it initially got, a big chunk, i.e., 7080 per cent were done by people who looked at Nano as a second or third car or elites who wanted to show their patriotism by acquiring this symbol of national pride. For these urban customers, the initial excitement soon wore off and sales dipped. This was very different from the bigger and targeted customer segment that had inspired its conception. Second, their communication campaign aimed to be cost-effective and innovative so that Nano becomes synonymous with anything small, cute and brief. Tata chose to go only for print medium and radio, leaving the most popular and easily accessible medium of television. They also advertised through online Nano games, Nano chat rooms, Nano conversations on facebook, Orkut and blogs, Nano pop-ups on major websites launching Nano merchandise like baseball caps, key chains, T-shirts, etc. The Tata group also channelled marketing efforts through Tata Sky (satellite television) where new customers could obtain a special 20 per cent discount on their satellite connection by submitting their booking proof for Tata Nano at any authorized dealer. In addition, Westside, the Tata groupowned lifestyle retail chain, advertised Nano through text messages to customers.18 The distribution network of Tata Nano was also very different from contemporary ones. Lower income customers were apprehensive and hesitant to walk into large Tata Motors Ltd. showrooms. The initial assumption was that Nanos target customers would behave like any other walk into dealerships, take a test drive, and buy the car. But the experience has been otherwise. They are a little apprehensive and shy and hesitant to come to showrooms, a company spokesperson said. It was also sold through its own retail and electronics megastore (Westside and Chroma) Vision, 16, 1 (2012): 4552

Aftermath of the Launch

Tata Nano was a small car that was expected to deliver big numbers. The new plant at Sanand in Gujarat was built to produce 2.5 lakh units a year, eventually ramping up to 5 lakh units. However, somewhere along the way, it lost its way. Nano, the worlds cheapest car, failed to find favour with Indian families who could not previously afford an automobile. Fifteen months after a high-profile launch, it encountered trouble at every turn. Its sales dipped from 9,000 units in July 2010 to 3,000 in October to just a little over 509 in November 2010.15 This led to reduction in number of workers by 80 per cent at Sanand, the industrial zone, due to which the production of the Nano came to a near standstill. Coupled with this, dealers refused to pick any fresh stock as they were trying to sell existing cars. Major concerns for the company started when the engineering marvel had cabling problems leading to half-adozen instances of cars going up in flames and emission of smoke.16 Dramatic footage of fires on TV news channels had a negative impact on the sale of the two-cylinder, 600cc Nano. This doused the initial enthusiasm of customers who had rushed to book the car when Tata Motors Ltd. launched it. Nano was strategically placed to sell on demand pull. It aimed at attracting maximum footfalls to dealerships in an effort to have a rub-off effect on its other models. But, now it was plagued with poor image and quality issues. In many ways, the `1 lakh tag stuck with the consumers. Tatas announcement was etched clearly in their minds:

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50 outlets as well as auto dealerships. The company did not provide them with a place where they would be comfortable to get a touch and feel experience. Apart from marketing misadventures, there were many financing bottlenecks. In order to get substantial demand from the remotest corner of the country, the sale of form for booking were facilitated through 18 preferred banks/NonBanking Financial Companies (NBFCs). New insurance schemes were co-designed with five partner insurance companies to enhance the sales and service network for better reach and service to the customers. The prospective customers had to book Nano with `3,500 with the banks which were not refundable. The availability of easy finance was also a big hurdle. Banks have separate departments for two and four-wheelers. When the customers used to visit the two-wheeler department, they were sent to the fourwheeler department and when they went to the four-wheeler department their profile was considered to be that of a twowheeler customer. The banks and the finance companies were also not geared to cope with the risk profile of the Nano buyers. It led to high conversion time for loan, i.e., around 14 days from the intention to buy. Higher interest rates, i.e., upwards of 20 per cent per annum added to customers shying away from their decision to buy. From the bookings a lottery system was adopted to select customers for delivery of cars. This strategy misfired as the selected few got cars and other hopefuls became disgruntled, leading to bad word of mouth. This made Tata loose their credibility and brand equity in the market. Innovation for a new market segment requires major process reengineering which has to be accepted by the customers. Tata tried a new design for Nano to keep the cost low. In order to ensure a spacious interior, lower weight and push costs down, engine was strapped to the cars rear. But this increased heat and sound leading to difficulty for those sitting on rear seats.19 Another problem was lack of power (with a 543 cc engine) and performance. This design did not go down well with the customers as they were used to the same old pattern of cars. Also, the rising prices due to rise in raw material prices hurt the sales of Nano. Costs of the raw material rose from roughly 13 per cent to 23 per cent over the cars development, which began in 2003.20 The major difficulty with Nano was in keeping the base price at `1 lakh due to rising input costs. This eventually pushed the base price to `1.37 lakh. The psychological barrier for the consumer led to sales decline. However, Tata Motors Ltd. guaranteed that the first 100,000 cars will be delivered price protected to owners, which means they get the vehicle at the promised price, regardless of rising costs.

The Turnaround of Tata Nano: Reinventing the Wheel

Recovery Strategies
Earlier there were some difficulties in understanding the new market segment that Tatas innovation generated, but now they were ready to win back their customer base with their new strategies. The success of Tata after such major failure lies in their brand power. It was an out-of-the-box thinking that led to the birth of the Nano in 2003. Now, it was a similar stream of innovative marketing ideas that prodded the company into taking some aggressive steps to resuscitate the `1 lakh car after sales crashed to a mere 509 units in November 2010. As the deviation was huge from the targeted to achieved customer base, the company tried to woo back the targeted customer who showed a little apprehension and hesitation to come to showrooms. The company launched low-key access sales points called F Class showrooms. They were only about 500 sq. ft in size compared to conventional 3,0004,000 sq. ft showrooms and display just one car. The company also hired 1,200 people to man these showrooms. This was the first step to entice back the lost first-time car buyers from the targeted economic segment. The company overcame its problem of inaccessibility of reaching smaller towns. They set up special Nano access points for customers in the hinterlands to experience and test-drive the car.21 The new strategies were designed to gain the segment back through zero per cent finance schemes, 4-year extended warranty and a maintenance contract of `99 to boost customer confidence. Since January 2011 the company excluded 11.5 per cent increase in car price to retain its appeal. These new schemes helped in attracting the first time buyers and in building an emotional connect with the customers.22 The company undertook a massive outdoor campaign across 104 towns in five states. They want to get twowheeler owners who wish to upgrade to a four-wheeler in tier two and tier three towns, said Sanjay Pareek, President of marketing services firm, Percept Out-Of-Home. Accordingly, the communication that went out clearly stated that Nano was now easily available with an easy-payment scheme. Tata Motors Ltd. launched a multi-crore media campaign to rebuild Nanos brand image. Effective communication strategies were designed with new advertisements refocusing on positioning. We want to highlight the proposition of the car, its reliability and durability and to position it as a family car, said Tata Motors Ltd. spokesman Debasis Ray. The latest commercials portrayed all these qualities of Nano. This was a prelude for families wanting to upgrade from two-wheelers.23 One of the cars latest television commercial was set in small-town India. It showed a young girl repeatedly asking her grandmother,

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Swati Singh and Pallavi Srivastava When will it arrive? Finally, after narrow lanes, rocky terrain and compliments from passers-by, the sunshineyellow Nano arrives. The little girl excitedly hugs the car. Then she notices a gathering of admiring neighbours, and dabs a little dot of kohl on the car to ward off the evil eye. Thus, Nano was exhibited as a means to raise the status in society for the whole family with two-wheeler owners envying its performance. With this advertisement and other ones, Tata was now clearly spelling out the positioning of the car to its targeted segment. To increase sales, top management of Tata Motors Ltd. visited dealers to boost their confidence and trained the staff to educate customers about changes in the product and new safety standards. They also supported the dealers to carry more stocks by giving Nano on a 30-day interestfree credit against a cash-and-carry model for its other vehicles. The company also identified and fixed the problem of fire and smoke incidents. It installed additional safety features as a retrofitting exercise in the 70,000 Nanos already sold. A fuse was introduced in the wiring circuits to prevent a short circuit and a non-inflammable cover (shrouding the manifold of the engine) for the exhaust system. This brought back confidence in driving Nano among the customers. The company also made a tie-up with value retailer Big Bazaar to gain traction among the 150 million footfalls the retailer gets every year. The chain had 70 outlets in smaller cities and towns. There is a Nano parked in every Big Bazaar outlet and the touch and feel experience has accelerated decision-making, especially in smaller towns, said Future Group Customer Strategy President Sandip Tarkas, who headed this initiative at Big Bazaar. This contributed to Nano sales in a big way which Westside and Chroma outlets could not achieve.

51 Tata Motors Ltd. also planned to launch an upgraded version of the Nano. As a makeover it was supposed to have a sportier appeal with more features like power steering, five speed gear box and a variable transmission that would boost fuel-efficiency and performance. This car was to be priced at 510 per cent more than the current model.25 The company also expedited plans to launch the Nanos diesel variant.

New Challenges
Industry officials felt that Nano could maintain its sales at around 8,000 units per month but still it would fall short of the breakeven target of 15,000. As sales grow, the marketing expenses increase. Steel in most forms had seen an average price rise of 25 per cent since April 2009, while the prices of tyres and auto accessories were rising as demand for copper, aluminium, plastics and rubber picked up. At the current price tag, it was a challenge for the company in view of the rising costs of raw materials, labour and new higher taxes. There was a fear that as costs rose, Nano would not remain a 100,000-rupee car.26 The company needed to have novel strategies up their sleeves to counter this issue. Nano remains a modern-day symbol of Indias ingenuity. When a new market is identified by tapping latent opportunities, a snowball effect is created. It attracts more competition. Nano sparked a race to create other ultra-lowcost cars for the Indian and other emerging markets but Tata Motors Ltd. was not alone in developing new entry level value for money cars for the Indian market. Other major auto giants were also gearing up to fulfil this gap. Hyundai Motor India Ltd. introduced low-price car called Hyundai Eon in India in October 2011. French automaker, Renault and its Japanese partner, Nissan also planned to launch a car to rival Nano in 2012 in partnership with scooter and three-wheel specialist, Bajaj Auto. They aimed to gain an edge by having a better mileage than the Nano. The Indian motorcycle firm Hero Group was also set to launch a mini-car, possibly in conjunction with a Canadian company. Ford, Toyota and Honda were also poised to launch small cars in India in the next two years. Ratan Tata is due to retire in 2012. His vision and charisma had been a decisive factor in the birth of Nano. His absence from the corporate scene as a guiding light for Nano might have its own repercussions. Will Nano be able to retain its market share in the long run? What strategies should Nano adopt to capture the market before its rival cars come into full force? What are the other avenues that Nano can focus to increase its market share? Tata had to think of many answers before he got off from the steering wheel of Tatas.

Nano Gears Up for the Winning Spree

These new strategies helped Tata Motors Ltd. to achieve their aim of increasing the sales of Nano by taking the car closer to the consumer segments it was designed forboth geographically and psychographically. Since buying a car is a significant purchase decision for the first time buyers, the recently floated schemes increased the affordability and credibility of the car. It sold 10,000 units in April 2011 which is a 35 per cent jump in orders since March. This was the highest ever monthly sales since the car hit the roads in July 2009. With the company claiming that 85 per cent of its consumers are extremely happy with the car, there is hope to win more of the targeted customers.24

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52 Notes
1. Lakh = 100,000 units. 2. http://en.wikipedia.org/wiki/Tata_Motors (accessed on 11 May 2011). 3. http://www.scribd.com/doc/29462444/Report-on-TATANANO (accessed on 10 June 2011). 4. http://www.mckinsey.com/mgi/mginews/bigspenders.asp (accessed on 18 May 2011) 5. http://en.wikipedia.org/wiki/Tata_Nano (accessed on 14 June 2011). 6. Columnists/David PillingIndia hits bottleneck on way to prosperity. Ft.com. 2008-09-24. http://www.ft.com/cms/s/0/ e68ab572-8a3e-11dd-a76a-0000779fd18c.html (accessed on 14 June 2011). 7. http://articles.economictimes.indiatimes.com/2008-01-12/ news/27702855_1_car-sales-car-market-tata-nano (accessed on 10 June 2011). 8. http://blogs.telegraph.co.uk/technology/miloyiannopoulos/9271489/The_ecoloons_are_appalled_by_Indias_super cheap_Tata_Nano_I_think_its_brilliant (Accessed on 14 June 2011). 9. Ibid. 10. http://knowledge.wharton.upenn.edu/india/article.cfm? article id=4564 (accessed on 15 June 2011) 11. http://www.guardian.co.uk/world/2008/jan/10/india.climatechange (accessed on 15 June 2011) 12. http://www.independent.co.uk/environment/climate-change/ can-the-world-afford-the-tata-nano-769421.html (accessed on 14 June 2011). 13. http://www.chron.com/disp/story.mpl/business/steffy/ 5439103.html (accessed on 14 June 2011). 14. http://www.newscientist.com/blog/environment/2008/01/ environmental-impact-of-indias-nano-car.html (accessed on 14 June 2011). 15. http://articles.economictimes.indiatimes.com/2010-1203/news/27627574_1_nano-production-tata-nano-sanand (accessed on 11 May 2011). 16. http://autotrendnews.info/nano-sales-of-tata-nano/ (accessed on 14 June 2011). 17. http://epaper.timesofindia.com/Repository/getFiles.asp? Style=OliveXLib:LowLevelEntityToPrint_ETNEW&Type= text/html&Locale=english-skin-custom &Path=ETD/2010/ 12/31&ID=Ar01100 (accessed on 11 May 2011).

The Turnaround of Tata Nano: Reinventing the Wheel

18. http://cjres.oxfordjournals.org/content/3/3/443.full (accessed on 22 May 2011). 19. http://wiki.answers.com/Q/What_is_reasons_for_tata_ nano_car_failure (accessed on 11 June 2011). 20. http://www.motorauthority.com/blog/1023311_rising-costscould-eat-tata-nanos-prots (accessed on 15 June 2011). 21. Tata Motors to extend Nano warranty to boost agging sales (10 December 2010), The Economic Times. 22. Philip, L. & Chauhan, C.P. (31 December 2010), Nano set for smoother ride, Economic Times, p. 4. 23. Malviya, S. (20 December 2010), Tata raises ad spend to revive Nano Sales, Economic Times, p. 4. 24. http://articles.economictimes.indiatimes.com/2011-05-10/ news/29528296_1_nano-sales-tata-nano-nisheeth-mehta (accessed on 14 June 2011). 25. Philip, L. & Talukadar, T. (13 December 2010), Nano to sport more features to woo buyers, Economic Times (accessed on 4 July 2011). 26. http://www.independent.co.uk/life-style/motoring/tata-nanolikely-to-lose-muchhyped-price-tag-1921811.html (accessed on 24 June 2011). Swati Singh (swatirastogisingh@gmail.com), a Ph.D. from University of Lucknow, is an Assistant Professor in the area of Marketing at Amity University, Lucknow, Uttar Pradesh, India. She teaches marketing management, services marketing, retail and mall management. Her research interests include innovation, retail management, entrepreneurship and customer retention. Her papers have been accepted for presentation in various international conferences like APROS 12, 2011 Cambridge Business & Economics Conference, etc. Pallavi Srivastava (pallavisrivas@gmail.com), a Fellow of Management Development Institute, Gurgaon, is an Assistant Professor in the area of HRM at Amity Business School, Amity University, Uttar Pradesh. She teaches strategic HRM, cross cultural management, employee sourcing and competency management. Having more than ten research publications in various national and international peer-reviewed journals and conferences of repute, her current research interests lie in the areas of strategic HRM, HRMarketing interface, employer branding and innovative strategies for recruitment.

Vision, 16, 1 (2012): 4552

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