ALKESH DINESH MODY INSTITUTE FOR FINANCIAL & MANAGEMENT STUDIES

ACADEMIC YEAR: 2010 - 2011

PROJECT TITLE: NANO CASE STUDY

SUBJECT: Marketing Application and Practices

Submitted to: Prof. RAVI

SUBMITTED BY: HARSH ACHARYA 01 AMAR CHOUGULE 05 RAJESH UMBARKAR - 52 VIHANG VARWATE 53 PRACHI MORE 59 DHAVAL SHAH 60 PARTH MITHANI - 61

The Tata Nano is a proposed city car

a small, affordable, rear-engined, four first presented by India's Tata

passenger car aimed primarily at the Indian market

Motors at the 9th annual Auto Expo on January 10, 2008, at Pragati Maid an in New Delhi, India Tata targets the vehicle as the least expensive production car in the world aiming for a starting price of 100,000 rupees or approximately $2300 US. Newsweek identifies the Nano as a part of a "new breed of 21st -century cars" that embody "a contrarian philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive personal transportation and potentially, "global gridlock"..The Wall Street Journal

confirms a global trend toward small cars, which includes the Nano The prefix "Nano" derives from the Greek root 'nanos', meaning dwarf as with nanometre. "Nano"

also means "small" in Gujarati, the native language of the Tata family,founders of the Tata Group.

Overview

The introduction of the Nano received media attention due to its targeted low price. The car is expected to boost the Indian Economy, create entrepreneurial -opportunities across India, as well as expand the Indian car market by 65%. The car was envisioned by, Rat an Tata, Chairman of the Tata Group and Tata Motors, who has described it as an ecofriendly "people's car". Nano has been greatly appreciated by many sources and the media for its low-cost and eco-friendly initiatives which includ e using compressed-air as fuel and an electric-version (E-Nano). Tata Group is expected to mass-manufacture the Nano in large quantities, particularly the electric -version, and, besides selling them in India, to also export them world -wide.

Critics of the car have questioned its safety in India (where reportedly 90,000 people are killed in road-accidents every year), and have also criticised the pollution that it would cause (including criticism by Nobel Peace Prize -winning scientist, Rajendra Pachaur).

However, Tata Motors has promised that it would definitely release Nano's eco -friendly variants alongside the gasoline-variant. Due to opposition to Tata's Singur car -factory by Mamta Banerjee, Tata Motors decided to cease operations in Singur on 2 October 2008 and started manufacturing Tata Nano at its Pantnagar plant. On her protests and the consequent pullout, the media heavily critcised her and The Telegraph even said: "India is being raped by thos e who profess to be her soldiers, the guardians of peace." Financial Times reported: "If ever there were a symbol of India s ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the $2,200 ( 1,490, 1,186) Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity. That process has stalled...No big economy has prospered without undergoing a huge, often brutal, shift o f labour from the countryside to cities and from farms to factories...There is a yawning gap with China. India s information technology and service sector, no matter how dynamic, simply cannot absorb enough labour. To truly shine, India will need millions, perhaps tens of millions, more manufacturing jobs. Why has it not created them?" Currently, Tata Motors is reportedly manufacturing Nano at its existing Pantnagar (Uttarakhand) plant and a mother plant has been proposed for Sanand Gujarat. The company is hoping to produce 50 Nanos per day in Pantnagar by January March 2009]. Ratan Tata has said that Nano will be brought within set timelines. Not many dealers will be appointed till March 2009. The company will bank on existing dealer network for Nano initially. The new Nano Plant could have a capacity of 5,00,000 units, compared to 3,00,000 for Singur. Gujarat has also agreed to match all the incentives offered by West Bengal government.

Introduction Conception and design

The project to create the world's cheapest production car began in 2003, under the Chairman of Tata Motors, Ratan Tata, inspired by the number of Indian families with two-wheeled rather than four -wheeled transport. The Nano's development has been tempered by the company's success in producing the low cost 4 wheeled Ace truck in

May 2005. Contrary to speculation that the car might be a simple four -wheeled auto rickshaw, The Times of India reported the vehicle is "a properly designed and built car". The Chairman is reported to have said, "It is not a car with plastic curtains or no roof it's a real car."

To achieve its design parameters, Tata has refined the manufacturing process , emphasized innovation and sought new design approaches from suppliers.The car was designed at Italy's Institute of Development in Automotive Engineering with Ratan

Tata requesting certain changes, such the elimination of one of two windscreen wipers. The Nano has 21% more interior space and an 8% smaller exterior, when compared with its closest rival, the Maruti 800. The car will come in different versions, inc luding one standard and two deluxe variants. The deluxe version will have air conditioning, but no power steering. The car was expected to be produced in the Singur plant in West Bengal, but due to politically-motivated agitations instigated by the Trinamool Congress, mother plant has been shifted to Sanand in Gujarat. The initial production target set by Tata Motors is 250,000 units per year. Reasons why Ratan Tata conceived this Idea (An idea pioneer by Ratan Tata) Increased in two wheeler accident frequency Study says Over 1,20,000 head injuries caused because of bike accidents Two Wheeler riders 5 times more likely to killed than car or bus passengers Low cost car for Indian consumers with safety being predominant factor Possible becau se of the presence in the automobile industry Estimated price and affordable price at 1,00,000 i.e. USD 2500. Development Process Earlier plan was to have a four wheeler version of auto Rickshaws specifically targeting the rural market Models considered were two wheelers, Ace(Three Wheeler), Auto Rickshaws, Tata s low cost model Indica A lot of pride attached to Indian engineers to complete the project Three wheeler owners were looked down Four wheeler owners were looked upon

Four wheeler owners have social and emotional appeal rather than rational appeal Inspiration from Mini truck Ace became a roaring success TATA company sold one lakh vehicles in the first 20 months Steps of product development - Engine requirements -Mule (is a vehicle that comprises the engine and transmission, driving a mock -up addled with electric sensors. It moves like a vehicle but only for testing purpose.) - The first Mule had a marine engine of 20 bhp which was not sufficient - Second mule was increased to 27 bhp that increas ed the engine capacity to 554 cc - The process continued until 586 cc was reached - Styling design and car engineering

- Consulting by Italian design house IDEA for the task of styling (same company for TATA Indica) - First proto type model alpha ( was having a 586 cc the car was found below par) - Concerns after testing - After testing second mule performance was below par - Increase length was required - Changes in styling, body design, increase in safety measures were required

- Building the heart of the dream car - 150 thermodynamic simulation were done , each of them stretching 8 to 10 hours for engine designing - Oct 2006 optimal design was conceived of 34 bhp i.e. 624 cc compared to first maruti 800 which was 37 bhp - The real engine was conceived in Jan 2007 and it was first tried

- Was developed the multipoint injection system Pre production concerns Cost of components and negotiation with vendors Used E Balasubramhanyam an individual was greatly respected by vendors His strategy was to use speed relationship to negotiate with vendors for getting the maximum less benefit (Speed relationship- vendors have to pare their margins and produce at substantially low cost) Breakevens were expected after 2 or 3 years In designing and reengineering product c ost becomes a primary concern

Singur Nano Factory Getting vendors to shop for parts was difficult because vendor base was scattered across delhi, mumbai, pune, Chennai. This increased the investment of a component manufacturer, in same case by 40 50 percent

Result of creative thinking and reengineering (cost cutting for each component) By reducing the number of components for each part Engineers found out that the door handle had 70 % less parts than one of the cheapest European car Hallow steering shafts reduced cost and weight MRF tyres to bear extra weight Environmental Challenges Major concerns for Tatas were as follows Pollution Quality of roads available Excessive cars on the roads causing traffic jams

Conforming to the pollution control norms Handling cost by synchronizing the logistic and supply chain

(Converting distributers to entrepreneurs) The plan is to develop assembly kit for distributers who would stock completely knock down kits of the cars at the warehouses and assemble them at the si te. Transporting Completely Knock Down cars is much more cheaper assembly at the distributors end, some parts of the car would be glues together than being welded. Overwhelming response for TATA NANO at the launch International and national media reporting this event as innovative TATA NANO s goodwill increases Much hype for TATA NANO therefore consumer awareness increases Free publicity High rush for bookings Attracted international buyers from Latin America, ano ther Asian countries Became a talking point at various international auto expos Competition faced Risk of losing its two wheeler and three wheeler market segment Risk of competition for maruti 800 and other hatch back cars Big cars manufactures moving to fuel efficient and hatch back cars segment Opportunities for NANO Exponential growth in the middle class segment Rising income increasing consumption Rapidly growing economy in the world One of the youngest population in the world High saving rate Rapidly changing socio-economic environment Expected to be 5 th largest market by 2020-25

Migration of population from rural to urban area Development of small Towns on the strength of retail revolution, BPO service entrepreneurship and education has also influenced consumer aspiration

Consumer in India are price sensitive Exploiting opportunities at the bottom of the pyramid Factors impacting growth of automobile industry in India

Rising oil prices Poor quality of roads Lack of parking facilities High Taxation of the automobile particularly for four wheelers Managing supply chain and distribution Absence of trained service personnel