Consulting Report Writing

The TATA Nano: What went wrong?

Submitted to: Submitted by:

Dr. Rahul Kumar Shukla Agam Gaba - BJ22165
Harshita Saraswat - BJ22176
Partho Pratim Kar - BJ22186
Saurav Jha - BJ22197
Tarun Kumar Singh - BJ22207
Ankit Bhaskar - L22017
Executive Summary
Tata Nano gathered all the attraction in the world when it was unveiled as the cheapest Car of the
World. It was supposed to take the fortunes of Indian Automobile Industry and Tata Motors itself to
never to be seen heights. An average Indian Consumer could now think of buying a car and living the
dream life, but this was not to happen. A number of reasons downplayed its affordability and
hampering its business in a manner no one expected.

We have carried out a multi-objective analysis for TATA motors to continue their operations
emphasizing to get a clarity on positioning of the product and effective communication to the target
audience.

On evaluating a selection of alternatives, we recommend TATA motors to create an ecosystem of nano

in order to capture the total consumer surplus where the entry model should be targeted at cab
drivers followed by the hatchback segment with IC engines and a premium offering of an EV model.
We also recommend them to employ and demand stricter quality control from suppliers irrespective
of their selection of alternative.

Problems Faced by Tata Nano

Pre-sales
1) Production-Beginning with the violence in Singur, West Bengal, a shift in manufacturing plant to
Gujarat was responsible for low production capability of 50,000 units from around 300,000 units per
year. This led to a pile-up of advanced booking and unsatisfied customers with a waiting period up to
1.5 years.
2) Poor Positioning – Despite being thoughtfully priced, the target market for Nano seemed to be
blurred with a visible rift in perception of the executive management and the advertising agency.

Competition
Anticipating the ultra-low price of an incoming car, both the Used-Car industry and Two-Wheeler
Industry slashed their prices sharply to compete in the new environment. This led to indifference in
Consumer choice leading to lower expectations of Sales Figures.

Post-Sales
1) Manufacturing Shortcomings: There were negative reports on safety issues, engine specifications,
operational inefficiency among others. The negative perception created in the mind of the customers
by this news in media heavily hurt their growth potential.
2) High Price and Maintenance Costs: The Price of Nano was gradually increased due to costly raw
materials and by the time it launched a newer version in 2014, it was at par with the prices of other
prevalent cars during that time. The Maintenance costs associated with NANO were also relatively
very high.
3) Distributional Problems: Tata had failed to develop a dealership network before launching Nano
and were unable to reach out to their customers in Tier 1 and Tier 2 cities.
4) Bad PR: Owing to its price, it was dubbed a “cheap” car, something that is against the perception of
what a buyer in India wants for himself the society. Additionally, it also did little to fight the negative
media coverage against safety concerns.
Performance on Basis of 4 A’s
Acceptability: Tata Nano’s poor positioning and negative PR contributed to the negative psychology
of the consumers making it less acceptable than it was presumed. The image of a low quality and a
name-sake car without adequate safety and efficiency discouraged people from buying it.

Affordability: The sole purpose of launch of Tata Nao was its Affordability. Initially, it impressed the
industry and the consumers when it was launched at a price no one could really imagine. But the new
version of Tata, was indifferent to some other brands in the same segment in pricing.

Accessibility: Low production capability and improper dealership network made it hard for even the
customers who were genuinely interested in it. This happened even when the company claimed to
serve the target group of youth population.

Awareness: Owing to the grand presentation of Tata Nano, it was discussed by all media houses and
very soon, a very large part of the country came to know about the new launch.

Segmentation Targeting and Positioning for Tata Nano

The Segmentation, Targeting, and positioning for the Indian population followed Tata Motors
Segmented and targeted the following groups of the Indian population:

1. The Middle class: Mainly the lower middle class and Upper lower class
2. Usually, the two-wheeler users
3. Families consisting of 3 to 4 members having troubles while traveling on a 2-wheeler.

The Indian population was segmented basis income groups and automobile usage. Tata Nano was
targeted to upper and lower middle-class sections. They decided to also focus on the two-wheeler
users and Indian households that've trouble traveling on a 2-wheeler. So, the target section of Tata
Nano was: Lower- and Upper-class Indian households (and individuals) who own two-wheelers and
cannot afford cars. It was targeted at motorcycle and second-hand car owners and other families in
the lower middle-class group.

Reference: https://www.linkedin.com/pulse/analysis-marketing-strategy-tata-nano-kumar-utkarsh/

The following slogans were used to position the car in the Indian Market:

• One lakh car to fulfill all your dreams!

• Cars are not just for the rich!
 • The world's cheapest car!

It was positioned and marketed as the cost leader in the automobile market to attract the Indian
middle-class population. Tata Motors felt that launching Tata Nano in the Indian market would fulfill
the common Indian man's dream of owning a car.

The emotional content of the advertising and media portrayals was accentuated by the excitement on
the faces of the family members who represented a middle-class group as well as children's happiness
when they see a car coming home. The struggling Indian class constituting more than 110 million
households, also got the encouragement to dream of buying a car.

Tata Nano was also anticipated to bring about a radical lifestyle change, particularly in terms of
transportation for the average person, and to represent the lower class in India, much like Bajaj
Scooter did for the middle class in the past. In previous news conferences, Ratan Tata had stated his
intention to market the Tata Nano as an "affordable, all-weather family car."

So, there was a distinct mismatch in the positioning that Ratan Tata had in his mind and how it was
positioned in the media. So even though there was an excessive buzz around 'Tata Nano,' instead of
becoming the smart car, it became the 'The Cheapest Car' of the Indian Market, which did not go well
with the Indian consumer.

Tata Motors believed they had understood the needs of the Indian market when they created Nano.
Still, it turns out that they had not interpreted consumer behavior and minds correctly. During the
promotion and positioning of the Tata Nano, an important psyche of the Indian Consumer was missed
out by the marketers: A car for an average Indian consumer is not just a necessity but a luxury. The
Indian consumer focuses on what their neighbors will think of the car, about their associated status
symbol and representation in society. The car's positioning and marketing effectively killed the
aspirational and luxury value that Indian consumers associate with a car.

Impact Measures
1. They launched new varian­­­­­t named ‘Twist’ targeting young users in big cities. Twist had power
steering developed by ZF & Bosch with luxury features and was priced below other low-cost
competitors [1] [2]. (Also, they are currently working on electric version)

Impact: Buyers in young age group increased by ~30 percent. Overall, not much difference.

2. Gave easier and rapid car loan options -including No cost EMI after collaborating with NBFCs and
banks.

Impact: Pleased customers and they felt convenience but Insignificant difference in sales

3. Collaborated with Future group to reach customers in tier 2 and 3 cities, first of a kind distribution.
They opened mini showrooms in tier 3 cities [2].

Impact: Moderate impact with 5% sales came from Future outlets. In starting months, the overall
sales increased significantly by >10 percent from mini showroom.

4. Extensive online advertising portraying Nano as ‘awesomeness’ giving customization of car options
to people, along with posting blogs, search engine ads, etc.

Impact: Could not reach its target Audience.

Objectives:
With respect to the identified problems the following decisions need to be taken by Tata Motors to
continue operations post May 2018:

• Clarity on positioning the Product

• Effectively communicate to the target audience

Alternative 1: Position Tata Nano as a Taxi

Environment Analysis for the Alternative

• Strength: The Tata Nano has the following advantages over traditional Taxis:
➢ Much More Economical (upfront+ maintenance costs) than traditional Intercity Mobility
Solutions
➢ Better Fuel efficiency, lower maintenance costs and Low emissions
➢ Effects of weather can’t be felt, unlike Autos
• Weaknesses: Tata Nano as a Taxi would have the following weaknesses:
➢ Product Quality issues: Head Light water entry, Rusting, Safety Concerns. Poor Build quality
➢ Product Capability Issues: Can’t Travel at speeds higher than 72 kmph thus can’t be used on
highways. 2 Cylinder Engines limit the performance to only intercity travel. Safety features
are unavailable. Smaller size implies lower cabin and luggage space
• Opportunities: With ride-sharing platforms like Uber/Ola gaining more traction in not only
tier 1 and tier 2 cities and with the consumers now shifting their preference from Owning
Vehicles to using ride-sharing services the demand for Taxis is going to go up. Currently Tier 1
cities have close to 150,000 cabs each by 2025 the number could be as high as 300,000. Tier
2 and. Cities like Delhi have already announced Policies for scrapping old Vehicles which would
mean additional demand for replacement, other cities are bound to follow suit
• Threats: The perception of Tata Nano as a failed car might make the buyers averse

The Marketing Tactics to address the concerns and leverage the strengths:

• Product: Offer Tata Nano as a small car for Intercity Travel. Provide CNG and Hydrogen kits as
mods since the Government is pushing for stricter pollution controls. Offer additional safety
features like Airbags for drivers and Passengers and Value Additions like AC and Stereo.
• Price: Price the Tata Nano below the closest alternative Maruti Alto 800/ Datsun Redi Go and
Renault Kwid. Offer incentives like Finance options for Easy Payments so that drivers needn’t
pay huge upfront costs
• Promotion: Tie up with Insurance Companies to bundle Insurance packages at lower rates.
Offer Vehicle exchange offers to capitalize on old vehicles that need to be scrapped. Offer
extended warranty services for 4 years or 1,00,000 km to customers
• Place: Come into exclusive tie-ups with Ola/Uber/State Transport Authorities to sell directly
to them. This would give us a better idea of the demand lowering our wastage due to holding
inventory. Sell in Tier 1/ Tier 2/ Tier 3 cities using the current Dealership Network of Tata
Motors Commercial and passenger vehicles. Tata Motors has the largest Commercial Vehicles
network in the country
Alternative 2: Reposition Tata Nano in the entry-level hatchback segment
Environment Analysis for the Alternative

• Strength: Tata Motors is the largest selling Commercial Vehicle manufacturer in India with a
strong presence in Passenger Vehicles Segment. Tata Motors has manufacturing and design
capabilities.
• Weaknesses: Tata Nano as a product has weaknesses with respect to poor product quality
and limited capacity due to 2-cylinder engines and lack of modern safety features. It is
perceived as a cheap car and doesn’t appeal to the aspirational value that is associated with
a car. The distribution network for Tata Nano is not established
• Opportunities: The Hatchback market in India is still the largest segment with approx. 3 million
units demanded every year.
• Threats: The perception of Tata Nano as a failed car has created a negative perception
around it. The 2 Wheelers are becoming better every year and second-hand market is
booming as well, with better finance, insurance services and organized players like Trubil,
Cars24 entering the market.

The Marketing Tactics to address the concerns and leverage the strengths:

• Product: Introduce the product with new added features like remote unlocking, Modern
infotainment system, AC, Heater, Power steering, windows along with added safety features
like ABS, Airbags.
• Price: Increase the starting price to approx. INR 3.5 Lakh and offer multiple variants with
better features like Allow wheels, LED Lamps.
• Promotion: Use the existing channels like TV/ print ads/ social media to revamp the product
• Place: Sell through the existing well established dealer network of Tata Passenger
Vehicles.

Alternative 3: Tata E Nano (Electric Vehicle): With the Tata E Nano, the environmentally
conscious consumers who want to purchase an Electric Vehicle but can't afford to spend 15
lacs on a tata Nexon EV could be targeted.
The environmental analysis remains the same as repositioning in the hatchback segment. Moreover,
in the opportunities, the push by the government (e.g.: FAME policies, PLIs) is added. The ecosystem
developed by Tata Motors with the launch of Nexon EV and with Tata Chemicals developing batteries
acts as strengths for the E Nano.

The Marketing tactics for Tata E Nano:

• Product: The Tata E-nano would be a feature-rich top of line E vehicle with all features like
AC, Power windows, Power Steering, Infotainment System, Premium Interiors, safety features
(ABS, Airbags) and premium build quality on the tata Alfa platform used in Tata Nexon. The
product retains the Tata Nano dimensions to make it an entry-level compact EV.
• Price: The Tata E-nano would be priced at 6-7 Lakh. FAME discounts and Production Linked
incentives could be used to deliver a feature-rich product at this price point. Finance
schemes and insurance discounts will be icing on the cake
• Promotion: Since the Tech Savvy young consumer is targeted the promotion should be on
digital platforms instead of traditional platforms. Use of Augmented reality to enable the
consumer to feel the car.
 • Place: Apart from the existing retail channels consumers should be able to book their cars
online with the nearest dealership serving their order.

Recommendation:
The quality issues need to be addressed first like stricter controls at suppliers who provide plating
parts to avoid rusting and implementing Poka-Yoke’s and Leak Testing machines at Headlight suppliers
to eliminate the water entry issues. This needs to be done irrespective of the alternative picked. After
looking at all possible alternatives and understanding the environment and the marketing strategies
it is recommended that Tata tries to create an ecosystem of Tata Nano’s. This would be done in order
to capture the total consumer surplus by employing a First-degree price discrimination strategy. The
entry products would be targeted at the cab drivers followed by the hatchback segment with IC
engines. Finally, the premium offering would be the Electrical vehicle which would still be an entry
product in the EV segment.

References:

1. https://1drv.ms/w/s!AkDntXa2gd0uwwpchq7iAvIy7tQ4?e=0B3o7n
2. https://www.peppercontent.io/blog/why-tata-nano-branding-was-a-failure/
3. https://gomechanic.in/blog/tata-nano-what-went-wrong/
4. https://thewire.in/business/tata-nano-why-did-the-people-not-want-the-peoples-car
5. https://www.businessinsider.com/what-went-wrong-with-tata-motors-nano-2013-6?IR=T
6. https://www.passionateinmarketing.com/case-study-tata-nanos-downfall-unable-to-
attract-customers/