Indian Market Strategy

New model variants Tata Ace had only ventured in few areas within the Indian market. They
wanted to diversify into production of larger-tonnage cab, a passenger van, and also multiple engine
variants including gasoline and compressed natural gas (CNG).

New regional markets Tata Ace was also considering to expand its presence in other
cities of india But with the current limited production capacity, should Tata Motors saturate the
Indian regions in which the Ace had already been launched or dispatch the limited production run to
a wider market to establish a presence?

Potential competitor response While the Ace had experienced market success, the three-
wheeler manufacturers were unlikely to surrender the market so easily. Piaggio offered a four-
wheeled goods carrier called the Quargo in Italy which had a payload capacity of 0.7 tons. The
Quargo was classified as a quadricycle and, as a result, did not meet the same safety and emissions
standards as the Ace. Piaggio had planned to launch the Quargo in India by the end of 2005 at a price
of Rs. 200,000 ($4,444), but the launch had not occurred as of November 2006. 22 In addition, in April
2006, Bajaj announced its plans to launch a four-wheeled goods carrier by 2009. 23 Bajaj was
developing its first in-house diesel engine for this product. While Bajaj did not currently make any
four-wheeled products, its three wheelers enjoyed a loyal following in India, and the company had
an extensive service network

The Ace’s newfound success could also attract competition from four-wheeled commercial-vehicle
and automobile manufacturers looking to expand into this new market segment. Maruti, India’s
leading car manufacturer, offered a small passenger van called the Omni that was built on the Maruti
800 platform. This gasoline-powered vehicle was sold in cargo (one-ton-rated payload capacity) and
passenger formats and cost Rs. 200,000 ($4,444). The Omni was used by families as a minivan as well
as by small-business owners to transport goods and even as an ambulance. Competition might also
come from Japanese or Korean companies such as Daihatsu or Hyundai, which might introduce their
more powerful and expensive minitruck variants in India. Finally, the Ace’s low-cost position could
also come under attack if a Chinese competitor like Changan introduced a minitruck in India through
a joint venture.

Export Market Strategy

Ace could be successful in export markets and wanted to make sure they did not miss
this opportunity, which could be much larger than that in the Indian market. He classified
export opportunities into three segments: emerging markets similar to India (Sri Lanka,
Bangladesh, Pakistan), emerging markets that were more developed than India (China,
Russia, South Africa, and Thailand), and developed markets (Italy, Spain, and the U.K.). The
current product could be sold in markets similar to India without many modifications and
at a low freight-transportation cost. In contrast, selling into more developed emerging
markets and developed markets would require additional modifications, which would add
cost and require approximately two years. However, selling in developed markets would be
likely to generate higher margins for Tata Motors. Unlike selling in South Africa, where Tata
Motors had a distribution network and strong brand reputation, selling in developed
markets like Italy would require that the company build its presence from scratch .
Additional Considerations
The plant in Pune was running at 100% capacity and expansion would require a new
plant and high capital investment. Furthermore, with no room left on the Pune campus,
a new factory in another Indian city would be required. It was also unclear whether the
Ace’s success with outsourcing could be replicated in another location without a strong
supplier presence. Despite its low price, the Ace was profitable because it was able to
use several existing Tata Motors facilities.

New product development

The Tata Group’s chairman, Ratan Tata, had recently announced that Tata Motors
would produce a passenger car at a price of Rs. 100,000 ($2,222) by 2008 and forecast
sales of 1 million cars per year. The popular media was filled with excitement and
skepticism This was a challenge whether with this new car, Tata Motors could instantly
double the size of the Indian passenger-car market to 2 million units.