Tata Nano: Late but not sorry! (April 2011 sales crossed 10,000 units)

Most talked about car in India….

Tata Nano can be considered as most talked about car in India after Maruti800. Ratan Tata’s dream car was launched in 2008 with a price tag of Rs.100,000.

The car was one of the most awaited and carried huge expectations. However, wrong marketing strategy, supply issues due to Singur controversy created by rift between CPM and Mamta Banerjee and cost pressure leading to price increase resulted in near collapse for the car by mid-2010.

Rough phase….

Nano is a low-cost product. Hence, cost efficiency and volume of sales became really critical. Tata’s suffered heavily both these front mainly due to factors beyond their control.

Capacity addition was delayed driven by adamant Mamta. The corrective action resulted in considerable loss of time. Till Sanand plant was ready, Nano supply was limited. Hence, it could not catch on initial buzz.

Tata Nano is nicked name as “1-lakh car”. However, massive increase in raw material costs led to price increase of car. Eventually, car had to break Rs. 100,000 barrier. Today, car is priced between Rs.1.35 lakh to Rs.2.1 lakh across India.

Biggest mistake Tata’s made was “Lucky Draw” for Nano. They actually overestimated their product and under estimated Indian consumer. Lucky draw could have been great idea in 1990s when market lacked competition. Today’s consumer needs to feel special and can’t stand in an queue for a product like Nano!!!

Secondly, issues such as car catching fire made huge dent in creditability of brand. Eventually, car sales plummeted to meager 509 units in November 2010.

Refocus, Rebranding and Repositioning…..

Thankfully, Tata Motors acted in a way which was desired to save this good product. Tata’s made some minor engineering changes to cleanup quality and reliability issues. They offered 4 years / 60,000km warranty to assure prospective customer. Marketing and advertising was more focused on target segment which is “common man”. Finance for car was made easier and simpler and most importantly, unconventional sales channels such as super markets (Big Bazaar).

Positive results of these efforts became soon visible for the company. Nano was back on Indian consumers’ mind. People started enquiring about the product. The Nano got it’s second life!!!

The car with targeted sales of 25,000 to 30,000 units per month finally crossed 10,000 mark on its way up to recovery path in April 2011.

Road ahead….

Although, Tata Nano has survived initial scare, it has still a long way to go. The positives are low-cost, strong brand power of Tatas, excellent distribution network and lack of competitive product in price band of Rs.1.5lakh – Rs.3.0lakh in Indian markets

Tata Nano also could benefit from the fact that India’s 2 wheeler market is more than 10 million strong. Even if Nano can tap part of that segment, it would create huge market for itself.

Although, Tata Nano is not the most profitable product for Tata Motors; it creates entry point for the company to sell costlier cars in future. Hence, Nano becomes important from long term strategic point of view for Tata.

It is expected that the segment in which Nano exist, monthly sales could reach 50,000 – 70,000 units per month in next 3-4 years. Although, competition from proposed entry of players like Bajaj and Maruti (possibly with Cervo) is expected to intensify ; Nano’s first mover advantage could create an edge.

Tata Nano Diesel…

Tata’s are masters of diesel cars. Tata Nano is also expected to be launched in “Diesel” version with two cylinder 700cc Engine which can offer mileage of 40km/litre. This means running cost of about 1 Rupee per km. This could be real game changer not only for the product but for entire automobile industry in India as well as in emerging markets.

Overseas markets...

Tata Motors is keenly exploring setting up overseas manufacturing base for Tata Nano. Possible regions could be Latin America, South East Asia and Africa. Moreover, the company is planning to export Nano is countries such as Sri Lanka, Thailand, Indonesia and Romania which could boost overall sales.

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