Tata Nano-A Giant Leap for a small car

SDMIMD PGDM-2012-14 16-Oct-13

THE PEOPLES CAR

Mr. Ratan Tata explaining his Vision

"I observed families riding on two-wheelers the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family. We are happy to present the Peoples Car to India and we hope it brings the joy, pride and utility of owning a car to many families who need personal mobility."

SDMIMD PGDM-2012-14 16-Oct-13

Introduction

Indian Automobile Industry

7th largest in the world

Contributes to 22% of Indian GDP Handsome Turnover (` 3.285 Crores) & Export (` 495 Crores) in 2010-11 Fastest growing passenger Car Market in Mid 2011 Luxury Car Market to grow at 10 times whereas passenger vehicle segment to grow 90 Lakh units by 2020 Favorable growth due to low vehicle penetration in the country

SDMIMD PGDM-2012-14 16-Oct-13

Market Share by type of vehicle

16%

4% 4% 76%

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two-wheeler

three -wheeler

commercial vehicles

passenger vehicles

Automotive Economic Ladder:2-Wheeler to Cars

3000000 2500000 2000000 1500000 1000000
140% 333% 45% 136% Nanos Entry at 110% 41%

Price(Rupees)

500000
0

SDMIMD PGDM-2012-14 16-Oct-13

Tata Nano

Idea generation

To have a Safe, Affordable, all-weather form of transport for nuclear Indian family Opportunity at families owning 2-wheelers Price tag of `1lakh

Idea Screening

Upgrading three wheelers to suit the design Reducing the amount of raw material Low cost Indian labor

SDMIMD PGDM-2012-14 16-Oct-13

Contd.

Concept development & Testing

Target- pricing strategy

Innovative idea to deliver value incurring lowest cost for a cost effective car
Bought 1000 acres of land in Singur due to good incentives, resources & ease of transportation

Due to compulsions, shifted to Sanand in Gujarat

Full frontal crash & compact testing

SDMIMD PGDM-2012-14 16-Oct-13

Worlds cheapest car Introduced in March 2009

Product defects & Actions

Before Launch : Issues in air conditioning, pick up & suspension

After Launch : Ruptured fuel lines in cases of full fire & faulty wiring in the combination switch area in case of smoke
This led Tata motors to announce safety upgrades

SDMIMD PGDM-2012-14 16-Oct-13

Sales performance-a bumpy ride

Delhi auto expo in January 2008 created pre-launch anxiety among consumers In mid august 2008, work was ceased at singur & this led to unsatisfactory sales as against good pre-sale orders The highest sales being in April 2010 & lowest in November 2010

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STP

Segmentation

Demographic: Family size & income

Behavioral: benefit

Target Market

Two wheeler segment Second hand car user Middle income people group

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Positioning

Peoples car

Marketing Mix

Product

Good brand name

Small yet comfortable

Better warranty than competitors

Price

Offering lowest price in passenger vehicle EMI payment option with 15000 down only

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Contd.

Promotion

Delhi auto expo platform

Upgrading dealers showroom to create suitable ambience

Positioned as peoples car

Place

Wide distribution network across country Huge network of dealership, sales, Services & spare parts

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SWOT Analysis
STRENGTH Tatas Good brand name with diverse product portfolio Enviable distribution channel WEAKNESS OPPURTUNITY THREAT Dense traffic in Indian cities

No power steering Fastest growing passenger car market in India Team lost momentum because of the lost land Low vehicle penetration in the country

Other low cost alternative cars coming up

Huge network of dealership, sales, Services & spare parts

SDMIMD PGDM-2012-14 16-Oct-13

Current base price is 50% higher than promised price

Inadequate buying behavior analysis of target segment

Growing inflation

Good value proposition

Rising oil prices

Contd.
STRENGTH Unique dashboard design Vast technology know-how of Tata team leading to first innovation Small size All weather passenger car in `1Lakh Price tag being within the reach of 2-wheeler owner WEAKNESS Quality & safety issues High lead time of 6 months initially OPPURTUNITY THREAT Negative media publicity

SDMIMD PGDM-2012-14 16-Oct-13

Reasons for the failure

Lack of buying behavior analysis

Not living to the promise of `1 lakh base price tag

Two-wheelers are still best in peak-hour city traffic

Negative media coverage positioned Nano in a different way Using relatively inferior raw material such as industrial glue & plastic spare parts

The rear mounted engine

Fear of quality & safety issues thinking that best parts are not installed to meet the promise of low-cost

SDMIMD PGDM-2012-14 16-Oct-13

SDMIMD PGDM-2012-14 16-Oct-13