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SML-745 Operation Management Akash Karak

2009CET2834

TATA nano:A True Value engineering

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It was January 10, 2008 Millions of
aspiring Indians and the el
D
y,
international auto markets
watched in awe and eagerness,
o g
the launch of world’s cheapest car
o l
– Tata Nano.
n
‘Since it’s unveiling on ech
f
January 10, 2008, the Tata Nano T
K o
has evoked an unprecedented
A te
R
interest in the country, with its
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website having recorded over 30

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million hits in the past one year

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and the creation of over 6,000
interest groups and communities.’1
n
AK dia ‘Tata Motors is making
In arrangements for the widest
possible network to book the car,
so that prospective customers can conveniently avail of booking facilities at their
locations, across the length and breadth of India. The booking process and other details
will be announced on March 23, 2009.’2

Ratan Tata, the 70-year-old chairman of the Tata group, gave sleepless nights to all
rival companies, when he drove this world’s cheapest car from the Tata Motors pavilion
and unveiled this cute little yet powerful TATA Nano, believed to be a people’s car, and
might have set the stage for a revolution in the global auto industry.

Consumers are familiar with the price of electronic products falling, whether it is digital
cameras, wide-screen televisions or DVD players and even passenger cars have
reduced in price in real terms over the past decade. But launch of
How did TATA make the car ‘TATA Nano’ in India, India, priced at just 100,000 rupees
it possible?
(around €1720), has come as a shock to many people.

Everyone appreciates that labour costs are lower in India than in Europe, but material
costs are similar. How can a car cost less than we are used to paying for good quality
motor scooters here in Europe?

When the Nano was unveiled the senior managers fr from


om Tata made it clear that this is a
‘proper’ four-door family car, not a motorized quadricycle or four-wheeled moped. Given
that the two-seater ‘Smart Fortwo’ costs around €9000, it is worth taking a closer look at
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the Nano to see how it has been designed so as to achieve such a low showroom price.
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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

First, however, Tata acknowledges that there is really no profit margin on the
base model; profits will come from customers specifying the deluxe models with air
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conditioning, electric windows, colour-coded bumpers and other options. And this
el
highlights one way in which the Nano costs have been held down – the standard model
is very basic by modern standards.3 D
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l o
Nonetheless, care has been taken to ensure that the car has adequate
performance, meets current emissions standards (EuroIV), is fuel-efficient (20km/litre)
n o
and is safe thanks to crumple zones, intrusion-resistant doors, seat belts and other
features.
ech
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K
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The Tata Group is one of the oldest groups in India, perhaps over 100 years old. It is
R
very difficult for a 100 year old person to be nimble, fast, and innovative! What's truly
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remarkable here is that an old line company has fundamentally transformed itself in its

S H ns car
quest to make its vision a reality.

A I
Truly People’s
Ratan Tata explains his vision: "I observed families riding on two-
K n
a of him, his wifewheelers
A difront – the father driving the scooter, his young kid standing in

In whether one could conceive of a safe, affordable, all-weather form of transport for such
seated behind him holding a little baby. It led me to wonder

a family. We are happy to present the People’s Car to India and we hope it brings the
joy, pride and utility of owning a car to many families who need personal mobility." Tata
knew who his customer was from the very beginning.4

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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

Indeed, the Nano will inevitably be considerably safer than the popular mode of family
transport in India today, consisting of a motorbike or scooter with the father driving, his
child standing in front, and the mother seated behind, holding a baby.
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el
D
SWOT analysis
g y,
Price, mileage, style, brand name,all
Strength
l o
n o
weather vehicle, innovation.
Fiber body, low suspension power,low
Weakness
ech
engine capacity,light vehicle,not suitable for

f Thilly areas,delay due to Singur violation


K
A te o
Opportunity
Bikers can be motivated, auto rickshaw &
R u
seconad hand market can be motivate

KAThreati t Other competitors (Bajaj, Maruti , Tara etc),

S H nst Govt can come on the way regarding

A I pollution.
n
AK diThe
a car design team first looked at alternative ways of constructing a vehicle. Many
In concepts were explored and inspiration was sought from existing small cars.
The team also debated whether doors were necessary, whether plastics could be used
instead of metal, whether interiors could be cut to a minimum, whether a low powered
engine would suffice. The focus was always the cost factor and so different
technologies were tried. But one question was a consistent driving
How it all started factor: 'What is the bare minimum a customer will accept'."

While it was sure that the design could never go down the auto
rickshaw route, the team looked at other concepts: a door-less car with a bar as a safety
measure, having soft doors in vinyl with plastic windows, a cloth roof, two big doors
(instead of four). But all these kept getting turned down by Mr Ratan Tata; he was very
clear that it had to be a complete car.6

Girish Wagh,the Head of Small car project for TATA Motors, headed the team of almost
500 people that developed the Nano over a four-year period. And although some of the
vehicle’s production processes may seem ‘low-technology’ when compared with the
heavily automated plants found in Western Europe, a great deal of digital analysis was
carried out during the design and development phases of the project.

In addition, Tata empowered and encouraged everyone in the company to contribute


ideas and suggestions, on the basis that collective thinking – and a vast pool of
common sense – would benefit the design and engineering, as
Value Engineering well as helping to save costs.
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Tata’s dedicated panel of engineers and scientists explored new and new possibilities to

Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

bring the cost down. The cost of the car has been reduced not by compromising at
quality, performance and safety, but chiefly through design, technical innovation,
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reducing advertisement cost, improving supply management and of course by reducing
the volume of the car itself.
el
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y,
Sometimes the cost reduction was so drastic that it surprised the engineers
g
o
themselves. "We found that the door handle of the car had 70 per cent less parts than
l
o
one of the cheapest European cars," says Mital, a senior in TATA R&D.7
n
ech
Take a quick look what Nano offers as a car to the entry level car customer, to whom
T
buying four-wheeler was like a dream before its launch.
f
K o
A ecar keeps in the tradition of the Fiat 500, Nissan Micra and the
Smart. AR ut
Looks: The snub-nosed

K 3.1
Dimensions:
t itmetres (10.23 feet) long, 1.5 metres wide and 1.6 meters high. Can
S Hfourntosfive people
seat
A Engine:I A two cylinder 623 cc, 35 horsepower rear mounted, all aluminium, multi-point
ninjection petrol engine can power the car to top speed of 105 kilometers per hour
AK difuel
a
(65 miles per hour).
n
I Fuel Efficiency: 20 kilometres per litre, or 50 miles per gallon is claimed.
Pollution: Exceeds Indian regulatory requirements and can meet strict Euro IV emission
standards. In terms of overall pollutants, Tata says the car is better than two-wheelers
manufactured in India currently.

1. Enough use of one of the most important element of promotion mix, publicity
reduces the necessity of other promotional devices for nano. Nano got publicity in
the following ways
• Publicity as “One lakh car” by mouth to mouth.
• Auto expo 2008,New Delhi & Geneva
• Publicity through print & electronic media
• Singur violation

2. For other type of promotional activities ,cost factor that is


Value engineering one lakh price tag is to be keep in mind, TATA is going to launch
through innovation its nano mobile for indicom user, nano watches , nano T-shirts
available in Westside stores.

3. TV & other mass media will be less effective for advertisement; thus too much
money will not be invested in this regard. Mainly word of mouth advertising will get
more emphasis.

4. Internet will be a major media for advertising.


4

5. So far we know TATA, it’s business has been extended to the overseas i.e. to the
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Europe, Africa, U.S & Australia.

Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

6. Hence it has n-number of showrooms in India & outside of India.

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7. The exclusive showrooms are the best distribution channels for TATA itself.

8. As Tata is going to provide this car with rupees one lakhD


el
y,
only, so it may not give the
same service like it’s other vehicles.
• But it’s post purchase services will be better o g
than a costlier bike.
• Customers may get minimum three services l
o from Tata in any of it’s servicing
center, all over the country. n
h hope for additional services from TATA
• We the future customers, can e calso
group.
f T
A K o
R t e Nano as a family car for four or five people, but the company
KA tthat
9. Tata has
concedes
u Nano is no limousine, with its dimensions of 3.1m long by 1.5m
launched
itthe
the

S Hwidenand
s 1.6m high. Once again, though, the compact compact dimensions help to keep
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costs down, as the smaller the vehicle is, the fewer materials are required for its
n
AK dia construction– specially when the cost of steel and other metals are touching the sky.
In 10. A small, lightweight car can also be fitted with a smaller, lighter engine. In the Nano’s
case, the 624.6cc, 33PS, 48Nm twin-cylinder aluminium engine is mounted

transversely under the rear seats, ahead of the rear axle line and mated directly with
the four-speed transaxle which reduces the rotor axle length that connects the
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conventional front-loaded engine to the rear wheel axle. As the cost of a car is
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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

mostly dominated by the price of Steel, use of less steel will ensure remarkable
reduction in cost.
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11. Because the Nano was being designed to be such a low-budget e l car, all components
had to be designed from scratc scratch,
, D over from Tata’s other
h, with nothing carried
y
vehicles.
o g
12. The clean-sheet-of-paper approach enabled o l the company to use production
technologies that were appropriatehto n the Nano’s specification and projected
c
e that hydro-forming is being used for tubular
volumes. For example, it is reported
structures, and roll-forming is T
K o f being used in place of stamping.

R A te
KA titu
S H ns
A I
AK dia n
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13. The manufacturing team also introduced ‘pokayoke’, a Japanese term for mistake-
proofing. Mirasdar, who made the prototypes, almost always had a suggestion that
would end up reducing costs and simplifying processes.8

14. Other design features have contributed to the lower weight thus reducing pressure
on engine, such as a ribbed roof that adds stiffness and enables
enables thinner steel to be
used which reduces both weight and cost of steel.

15. While designing, great care has been taken to minimize tooling and production
costs. One small example of this is similar handles and mechanisms for the left- and
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right-side door windows are not power windows rather to be downed by hand.
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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

16. In preparation for exporting the Nano, it has also been designed with a central
instrument binnacle instead of mounting the instruments in front of the driver – which
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is a concept seen on other ‘people’s cars’ such as the Morris Minor and
Morris/Austin Mini around half a century ago.
el
D
g y,
17. Rear wheel drive: manually actuated 4-speed trans axle that gives the car better fuel
efficiency.
l o
n o
ch
18. TATA wanted the wheels to look different but alloy wheels were too expensive. The

T e
final design is called Stylein- steel wheels - a concept that looks like alloy but is
made of pressed steel; and the cost is almost the same as a normal steel wheel.7
K o f
R A tande the scoop (air way) required to cool the engine, which became
19. a central exhaust
part ofA
itu part of the door feature.
7
K thetdesign,
S HNo Radio,
20. n s Power windows, air conditioning, anti lock brakes, air bags, remote locks
I
A nor power steering.
K a
A di21.
In
Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph but
would quickly wear out at higher speeds.

22. Analogue speedometer, odometer and fuel gauge have brought reduction in cost.

23. Wiper for the driver is only essential - so single windscreen wiper.

24. Cost of metal sheeting has been reduced by maximizing use of fiber and plastic,
which is not only light-weight, but reduces the cost of screws and welding also.

25. Less number of components results less cost, so here comes car-seats with
integrated head rest.

26. Sona Koyo and Rane Group came up with hollow steering shafts, saving cost and
cutting weight. 8

27. Sharda Motors and Emcon designed the exhaust system and MRF tweaked the
tyres to bear extra weight on rear wheels. 8

28. Furthermore, plastic exterior parts of the standard model, such as the bumper and
the door handle, are not painted.

29. People drive on the right in left-hand drive cars in India so no left side mirror is
provided, which is seldom used.
7

30. Most importantly, it has been reported that around 90 per cent of the car’s
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components will be outsourced, with some 75percent coming from single-source

Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

suppliers that have received long-term contracts and high-volume commitments in


exchange for even lower component prices.
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31. High volumes are an important element in low-cost products,eal nd Tata wants to build

y , Dbased
one million Nanos per year. Tata has looked at a distributed manufacturing model, in

manufacturing unit that offers a low break-eveno g


which entrepreneurs can establish manufacturing facilities on Tata’s low-cost

o l point.

The all new TATA Nano, though looks tiny n in size but not in performance or safety
hearlier-now
e c
parameters, as told see it yourselves.
Real challenge:
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The Comparison
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8 Page

Source: TATA Motors

Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

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Source: TATA Motors

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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

h i
el
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KA titu
S H ns
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AK dia n
In Source: TATA Motors

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Source: TATA Motors

Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834
SML-745 Operation Management Akash Karak
2009CET2834

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Bibliography:
el
D
y,
1: http://www.mytatanano.co.in/nano-technical-specifications.html
g
2: Wikipedia: http://en.wikipedia.org/wiki/Tata_Nano
l o
Comparitive-Study-on-Maruti-800 n o
3: http://www.scribd.com/doc/18340710/A-Study-on-New-Product-Development-With-Tata-Nano-and-

4: Business standard
ech
5: Asian Engineer - Automotive-Design
f
6: TATA Motors Website
T
K
A te o
http://tatanano.inservices.tatamotors.com/tatamotors/index.php?Itemid=210&id=184&option=com_cont
R
ent&task=view
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7: TATA Motors Blogs
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8: TATA Motors- Nano Diaries
S
A I
http://tatanano.inservices.tatamotors.com/tatamotors/index.php?option=com_content&task=view&id=21

AK dia n
6&Itemid=207

In

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Construction Engineering and Management Indian Institute of Technology, Delhi


Akash Karak 2009CET2834