Failure of the Tata Nano

byMichael BergerMaor Englander

What is the Tata Nano? Tata Nano is a micro car model designed to transport four

passengers. Produced by the Cars and Engines division of Indian conglomerate Tata. Tata Nano originally developed and produced for the local urban market in India and is considered the world's cheapest car manufactured in serial production.

Tata Motors• No. 5 carmaker in the world, was established in 1961. Appeals primarily to the Asian, UK

and some of the U.S. market. In the past exported trucks and jeeps to Israel.

• In 2010 ranked number 39 on the list of world's leading companies.

• In 2011-2012 was estimated to be worth 34.7 billion.

• Ranked fourth in the world in the production of trucks and fifth in production of buses.

• Owns more than 4500 engineers and 60,000 workers, in India alone.

• To date produced more than 8 million private vehicles.

• More than 6600 points of sale and service worldwide.

• Since 2004, being traded in the New York Stock Exchange.

• Only on September this year, sold 50427 private vehicles, of which 46000 only in India.

Historical overview of the Tata Nano

• In 2003 the Tata company began development of car with four wheels designed to replace two-wheeled vehicles that used as family car in India. The first basic condition for the development was that the price would be within reach of the average urban Indian family. To meet this target, the very low price of the final product , it was decided to give up all non- essential components in the manufacture of the vehicles and of course all the luxury features and comforts which increase the costs of the baseline cost . Commercial launch of the Nano model for the Indian market took place in early 2011 , and received high exposure by the international media.

• Preliminary market researches conducted before launching the new international model anticipated a great commercial success and one of the research institutes in India predicted that the Nano will control about 65% of the Indian market.

Why the Tata was meant to succeed?• Very cheap vehicle (about 2500$).

• Marketed as "car for the people".

• The name Tata. The Tata Corporation is a huge corporation in India (controls the cellular market, energy, telecommunications, textiles and beverages).

• The vehicle is designed to replace the motorcycle and the rickshaw. Currently being sold in India about 1.2 million motorcycles annually. Also, India is known as a country with high precipitation and therefore a transition from the bike to a closed vehicle is logical.

So why the Tata has failed? Raw materials:

The car was manufactured with cheap materials which broke after few months.Moreover, there were many cases of car fires as well as many technical and mechanical problems.The best incident that demonstrates the failure of the Tata Nano occurred at a vehicle exhibition in New – Delhi, when one of the presenters tried to open the car door and was left with the handle of the door in her hands.

Non-compliance with European standards:

On the one hand, the company's engineers were required to reduce costs for mass production of the vehicle. To meet the requirements are waived compliance with standards and thereby lowered the cost of production, causing an increase in sales in India.On the other hand, non-compliance with European standards meant that they could not sell the car for an external market and thereby reduced market share range.

So why the Tata has failed?

Use of diesel:

India gasoline subsidized by the state, there are subsidies of 50% of its value in the market. The engineers designed two models of Nano: gasoline and diesel. The vehicle that designed for the larger segment of the Indian market, designed to operate on diesel and therefore the cost of using it rise above of what the target costumers could afford.

So why the Tata has failed?

Indian roads infrastructure:

Tata was intended to replace the motorcycle and rickshaw in India.The road infrastructure in India is poor, there are numerous of off-roads.Motorcycle and rickshaw can stand along the difficult road of India, however Tata's low-slung chassis combined with substandard raw materials that make up the vehicle did not meet the required life-long and fell apart when traveling on these roads.

So why the Tata has failed?

Tata's business model fits to push type model, mass production. According to this model the sequence is: design-make-sell. Tata failed at the design stage. We have seen that all the reasons for failure are already at this stage (raw materials, European standardization, the use of diesel and non matching infrastructure). Once planning fails, the sequence is broken, causing a drastic drop in sales and the failure of Tata Nano project.

Summary & Conclusions

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