Tata Nano or “The People’s Car”, as Tata called it, manufactured by the Indian automaker Tata Motors in 2008, was an inexpensive and compact car that aimed to act as a substitute for the two-wheelers. At a base price of one lakh rupees (US$2500 at that time), it received a lot of attention and generated a lot of curiosity for being “The World’s Cheapest Car”. Nano’s attention was enormous and it acted as a “Khusiyon Ki Chabhi” (Key to Happiness), for the Indian middle class who then had the luxury and prestige of owning a car.
IDEA BEHIND NANO
The source of the idea to manufacture a cost-efficient car appeared before Mr. Ratan Tata when he saw a family of four drenched, on a rainy day in Bengaluru. He instantly planned to manufacture a tiny car, enough for a family of four and affordable to a scooter driving family. He felt it was an important step as each family in Indian societies wanted to own a car. Critics believed he could never do it but Tata Motors achieved the impossible task in January 2008.
HYPE AND RISE OF NANO
As soon as Nano was launched in 2008, about two lakh people paid the initial deposits for the car. Everyone from housewives to IT professionals to auto-rickshaw drivers booked a Nano. Contrary to the expectations that only first-time car buyers would buy Nano, people already owning a car ordered for Nano. People started praising Nano for its style and compact design. It marked India’s dramatic rise from an economic laggard to a technological dynamo. The hype of Nano is witnessed by the fact that former President of the U.S.A, Mr. Barack Obama expressed his desire to see and have a personal look at the car that revolutionized the auto industry in India.
MEASURES ADOPTED TO MANUFACTURE NANO
Tata Motors moved to cost saving on all aspects ranging from design to engineering to production. It redesigned all essential parts to lower cost and maximize functionality. Low-cost Indian labor had a significant contribution to reducing the production cost. The suppliers who made the essential components for the product were positioned close to the assembly plant.
Nano was launched in both standard and a deluxe model. While the deluxe model had A/C, power steering and electric windows, unnecessary and non-functional parts were stripped from the standard model. The interior was made simple and the exterior had only one wiper with no left side mirror. The bodywork was made of plastic and some parts such as door handle and bumper were not painted. There was no A/C or radio system. The car had manual steering, hand-driven windows, and no airbags. The compact and lightweight car was fitted with a lighter engine. Nano had the 624.6cc, 33PS, 48Nm twin-cylinder aluminum engine that was mounted transversely under the rear seats. It had no fuel filler cap and had only three lug nuts per wheel.
DOWNFALL AND ITS REASONS
Despite being the “People’s Car” and “The most affordable car in the world”, Nano faced downfall soon after it was launched. As of 2019, Tata Motors has not produced a single unit of Nano in the first nine months and sold only one unit in February in the domestic market. Tata has not officially announced the end of Nano. However, the company has admitted that in the current scenario Nano will not continue for long. There lies a long list of reasons for Nano’s pathetic condition.
- SINGUR CONTROVERSY
Originally, Tata Motors decided to build its Nano plant at Singur in Hooghly district, West Bengal. It planned to invest around Rs.2000 crore and turn Singur into an auto city. The then government of the Communist Party of India-Marxist (CPIM) sought to take over 997 acres of multi-crop fertile farmland, leading to the severe backlash by farmers. Tata Motors was not able to create jobs for compensation to farmers who unwillingly gave up their land. Protests broke out across the state, leading to the fall of communists after three decades. Mamta Banerjee who played a lead role in the protest and “Save Farmland” movement, became the first woman Chief Minister of Bengal.
Due to this political disturbance, Tata Motors had to shift its Nano factory to Sanand in Gujarat. This delayed the production process by around 18 months. Troubles began as soon as Nano was released. The company was not able to forecast the huge number of pre-bookings. As a result, there was a delay in the waiting period since the factory in Gujarat had the capacity to produce only sixty thousand units per year. During the waiting period, safety concerns and poor marketing strategy came into play.
- SAFETY CONCERNS
Tata Nano had serious safety concerns right from the beginning which contributed to its negative publicity. The basic model was unsuitable for airbags. The structure of the vehicle proved inadequate and collapsed to varying degrees leading to high risks for the passengers. According to the 64 Kmph NCAP test, Tata Nano achieved a 0-star rating for its adult and child occupant protection. It did not meet the basic UN safety requirements and was not as safe as Tata had claimed it to be.
Fire incidents with at least six Nano’s were reported in Mumbai, Gujarat, Delhi, and other parts of India. Tata Motors attributed the initial cases to the melting of localized parts caused by faulty combination switches. But as the number of fires increased, they lacked an explanation. Experts believed that the rear engine didn’t have a proper cooling system. The car battery was placed under the driver’s seat, with no protection to the driver in case of a problem with the battery. Tata extended the period of warranty for both new and existing cars but the reputational damage was done.
- POOR MARKETING STRATEGY
The marketing strategy of Tata Nano terribly failed as it could neither reach the lower nor the higher-income segments.
In India, people buy products to showcase their power and emotions. In such a market, how could Tata forget that car acts as a status symbol and prestige for millions? In the 2000s, everyone didn’t have access to the internet, and Ola’s were not common. Car was considered a critical success factor. In such a scenario, the stigma of buying the “cheapest car” stood with the buyers of Nano. Nobody wanted to drive the cheapest car. The world misinterpreted the tagline of “Most affordable car in the world” as “Cheapest car in the world”. The word “cheap” and “lakhtakia” used for promotion all over India disrupted its image. Nano failed to create “Aspirational Value”.
The marketing team was not able to generate a positive rebuttal. People in India have a concept where low price is directly associated with low quality, unreliability, and lack of trustworthiness. Further, Nano aimed at marketing the tier two and tier three cities. In such cities, families are large with poor road conditions in contrast to the nuclear family and good road conditions in big cities. Therefore, demand from such cities remained low.
- HIGH COMPETITION
Nano faced strong competition with the second-hand market. Initially, after the announcement of Nano, the second-hand market faced a drop of 15 to 20% but at the time of release, things got different. People had the option to buy a high-end second-hand car at the same price as that of a Nano. 5-year-old versions of Ford Ikon, Maruti Esteem, Opel Corsa and Fiat Sienna priced around one lakh, lower than the Nano price. People believed that it was better to invest in a second-hand car or a Maruti Suzuki Alto 800 rather than risking their money with a Nano that had a poor market image and could get burnt up at any time.
- REALITY VS. EXPECTATIONS
Nano fell short of its expectations after the initial hype. The idea of Mr. Ratan Tata was to manufacture a car for a family of four. But since many cities in India have roads full of pits and bump, it proved to be comfortable only for three adult members.
Nano’s target was to replace the two-wheelers with a car but it consumed three times more fuel than a normal two-wheeler. Further, it required parking space, the luxury which many families buying their first car doesn’t have. Nano had a maximum speed of only 70 Mph and proved inconvenient to drive when it was fully loaded.
- INCREASE IN PRICE
Tata Nano never remained the one-lakh car. The launch price and later price was different. The current price of Tata Nano falls between Rs. 2.26 lakh to Rs. 3.20 lakh in contrast to the initial one lakh figure. There was a steep increase in input and material costs over time. The company had to maintain stricter emissions standards. Inflation had a hit on rubber, steel, and raw material. The political disturbance caused in West Bengal forced Nano to shift to Gujarat. The almost complete plant at Singur was closed and a new plant was set up that increased the production cost. Over time the price gap between Nano and other cheap cars in the market narrowed.
Tata Motors tried rectifying its mistakes and made changes with Nano. Nano Twist was launched for the college kids. In 2015, Tata Nano GenX was launched with a lot of changes. It had better fabrics on seats and a functioning hatch door. Changes were made to the front and rear bumper to make the car look more attractive. It was done to target youngsters. The car provided a high fuel efficiency of 21.1 KMPL. Nano came with lots of benefits too. It was convenient for heavy city traffic. It had very good ground clearance and had been taken to Ladakh at 10000 feet plus altitude. It was fuel-efficient. The leg space in Nano was more due to its rear engine.
However, the unnecessary attention that Nano received proved to be the reason for its downfall. It required a hidden marketing strategy. It failed to create performance value, relational value, emotional value, and financial value. In the current scenario of the auto sector crisis and economic slowdown in the country, the revival of Nano seems impossible. Therefore, the road for the “World’s Cheapest Car” seems to have reached its end.