Pricing Strategy of Tata Nexon

Step 1- Selecting the Pricing Objectives

 For Fuel Segment

The pricing strategy of tata motors for the brand, Tata Nexon in the fuel segment is Product
Quality Leadership as Tata configured its fuel cars with a lot of additional equipment and added
premium luxuries in the Nexon’s variants to launch the best product in the market that have a
competitive advantage over its competitors.

 For EV Segment
The strategy for the EV segment is to maximize the market share. The company has believed that
the Indian market is price sensitive so lower prices lead to higher sales volume that ultimately
leads to lower per-unit costs and to capture a big share in the automobile market, earning long-
run profit. 
The EV launched in India on 28th January 2020 with three variants at a price range of Rs 13.99
lakh to 15.99 lakh (ex-showroom price). However, the price of its rivals, MG ZS EV and
Hyundai Kona EV ranges from Rs 20 lakh to Rs 23 lakh. So, Tata Motors has an edge over its
competitors due to the low-price range in the segment. 

Step-2-Determining Demand

 For Fuel Segment

The SUV market in India is estimated to grow at astonishing growth rates in the upcoming
decades. As there is a continuous transition of people from a conventional car to a compact SUV
that leads to expected healthy Sales growth. Moreover, nowadays many potential Indian
customers are more inclined to purchase an SUV vis-à-vis hatchback, which will also account for
the growth of this market.
As per the reports of the Society of Indian Automobile Manufacturers (SIAMS), SUVs have
recorded a growth rate of 12.59% in India’s passenger vehicle segment in 2010-11 to 25.01% in
2016-2017. It is also anticipated that in the next decade, SUVs may contribute around 40% of
India’s passenger vehicle segment.

 For EV Segment
The EV market shows increasing demands in India but still, there is a long way from becoming
mainstream in India. As per the 2019 white paper by the World Economic Forum (WEF), the
automobile industry of India is one of the fastest emerging markets, even though it only
contributed 0.5 % of the global EV market.

Generally, In India, the electric vehicles revolution is powered by small commercial vehicles.
According to a report by CRISIL Research, the EV market in India is expected to grow at a
CAGR of 44% during the year 2020-2027, with the annual sales reaching around 63 lakh units
by the year 2027, India is still in the beginning stage of EV adoption.
According to NITI Aayog’s energy policy report, the demand for energy in India is expected to
double by 2040, gears up to attain 30% market penetration of electric vehicles by 2030. The
Indian EV sector could cumulatively add about USD 300 billion by 2030 according to the report.

Step-3- Estimating Costs
 
The cost of manufacturing automobiles is based on these major drivers: -

 Raw material- The major components and materials required for manufacturing Tata
Nexon are-
 steel sheets, iron, forgings and steel castings
 electrical wiring systems, alloy wheels, wheel tires
 fuel injection systems, batteries
 electrical wiring systems, electronic information systems
 interior systems like seats, doors, cockpits, plastic finishers and plastic functional parts,
glass and consumables (like oils, paints, welding consumables, chemicals, thinner,
sealants and adhesives) and fuels. 
 axles, gearboxes and engines

 Direct Labour -The Direct Labour cost to manufacture an automobile generally involves
the following process:-
 Stamping, the initial process to convert the raw materials received in the form of steel
sheets and then turn into body parts.
 Sheet metal, the second step in the production process that involves joining the sheet
metal and aluminium components together to make the box.
 Painting, the third step in the production process that involves protecting the body
against corrosion and giving it its final appearance.
 Assembly, the last step in the production process. At this stage, the body is assembled
with mechanical elements, the driving position, mirrors, and the interior trim of the
vehicle.
·   
 Designing –The designing units of Tata motors lie in India, UK and Italy specialize in the
very latest in designing practices, such as clay modelling, digital modelling, styling,
architecture, packaging. The latest car of the company, Nexon is an example of cutting-
edge, global design. Tata Motors design lab-created and unique colours for the EV line.

 Features- The key features involved in Tata Nexon that attributed to the cost of production
are-

 High-strength steel structure that absorbs impact energy that protects the passenger from
accidents.
 Dual airbags for both Driver and co-driver as standard safety for protection from crashes.
 Anti-lock braking system and electronic brake-force distribution in all 4 wheels
 Height adjustable seatbelts, Reverse parking assist
  Electronic Stability, Electronic traction control, Roll-over mitigation
 Hill hold control, Emergency Brake assist, Brake Disc Wiping.
.
 Volume-Tata Motors is gearing up to increase the production of the SUV and decrease the
average total cost of production. The company has produced more units of the Nexon per
month to avail the benefit of Economies of scale that reduces the per unit variable cost. In
the automobile industry, besides labor, mainly raw material and distribution costs can be
categorized as a variable in the short run. The Nexon has become the second best-selling
car for Tata Motors after the success of the Tiago hatchback.
 Research and Development-Tata Motors is investing heavily in research and
development to become the most aspirational auto brand by 2024. In 2019-20, Tata Motors
has spent around 7 % of its standalone revenues on R&D. While the average R&D of the
company spending has increased by about 20% p.a over the past three-four years (much of
it on upgrades for BS-VI compliance), the financial year 2020 was significant for the
technology spend. Its R&D expense was around ₹3,097 crore or 7.05% of standalone
revenues.

 Dealership commission- According to a recent survey by the Federation of Automobile

Dealers Associations (FADA), the average fixed dealer margin in India is much lower
compared to countries like the US (8-10%); China (9%), Tata Motors charge at 3.75% to
3.9%.

Step-4- Analysing Competitors Prices-

 For Fuel Segment- *For EV segment-

Model Name Prices(ex-showroom, Delhi)
Tata Nexon 5.85 lakh to 9.44 lakh
Maruti 5.26 lakh to 8.43 lakh
Baleno
Hyundai Elite 5.32 lakh to 9.1 lakh
i20  
Volkswagen 5.42 lakh to 9.34 lakh
Polo  
Honda Jazz 5.89 lakh to 9.19 lakh
Maruti Dzire 5.43 lakh to 9.39 lakh
Honda 5.51 lakh to 8.41 lakh
Amaze

Step-5- Selecting a Pricing Method- Tata motors selects the “Value Pricing” method to price its
auto-brands Tata Nexon to win the loyal customer base by charging a fairly low or reasonable
price for high quality and multi-featured compact SUV. 

Step -6- Selecting the Final price-