Positioning the TATA Nano

By A.Arputha Selvaraj , APMP IIM C

Case Overview

• In 2009, launch of Nano from TML• Problem in front of Ratan Tata - How best to

position his new brand – ultra low cost cars

• Option One – Family transport

• Option Two – Usage situation

• Which option to choose ?

The TATA Group : Company History

• Founded by Jamsetji Tata in 1868 as trading company

• First steel mill, power utility, luxury hotel and international airline

• By 2011, 98 companies over 7 sectors.• Company seen as Inspired trust & a strong

commitment to ethics • By TATA Code of Conduct, TATA promised to

improve the quality of life and Nano is a prime example.

The automotive industry in india• Automobile industry flourished with an average growth rate

of 17 percent annually post liberaliszation• In 2009 industry produced more than 11 million vehichles

• Despite growth, per capita ownership of automobile is low compared to developed countries

• Estimated 12 car owners per 1000 people, versus 765 per 1000 in US and 426 per 1000 in UK

• Two wheelers dominate Indian market due to fuel efficiency , low purchase, and low maintenance cost

• About 76 % of all vehicle sales in India are of 2 wheelers and remaining are passenger vehicle

Segmentation of passenger vehicle

Segment Description Price range

A Entry level hatchback(ex- Alto , maruti 800)

Under 3.5 lakhs

B1 Hatchback(ex - Tata indica)

3.5 to 6 lakhs

B2 Hatchback 6 to 7.5 lakhs

C1 Sedan Under 8 lakhs

C2 Sedan 8 to 9.5 lakhs

D1 Premium sedan Under 15 lakhs

D2 Luxuty sedan Under 25 lakhs

THE NANO• 2007 Geneva auto show - “world’s smallest

and cheapest car” and most fuel-efficient which would be known as “ people’s car” at Rs. 1 lakh price.

• To reduce the costs associated with parts and manufacturing without compromising quality, Tata partnered with different suppliers including GKN Driveline India (driveshaft)

• The development of the NANO’s engine i.e. two cylinder 624 cc ,was left to Tata motors

• 3 models : The Nano, The Nano CX and The Nano LX

• The Nano met Rest. 1 lakh goal by omitting many features like power steering, power window, ac etc. Whereas The Nano CX and The Nano LX offered more luxurious car at higher price

• First year, TML planned to produce 3,50,000 Nanos at a plant being built at Singur, WB.

• Conflict at Singur

• In September 2008, shift to Sanand, Gujarat – with delay in production of 18 to 24 months.

• By not postponing the much anticipated launch, TML started to produce 50,000 Nanos temporarily at Pantnagar plant, Uttarakhand.

Competition

• Maruti 800 : most affordable car in India until the release of Nano

• Current major competitor : Maruti Alto• Future competition : ULC cars from Hyundai, Maruti, Habib

Motors, Renault Nissan, Toyota and Ford• Two wheeler segment – low price, fuel efficiency, easy

maneuverability, low maintenance cost compared to Nano• Consumer behavior – more value for money

slightly more cost, but better engine, safety features and more space – Wagon R, Santro Xing, Chevrolet Beat,

Alto etc

Distribution Channels

• A 17-day booking window, of which customers would be selected via lottery

• Booking options :Online bookingTata DealershipOffline booking at SBI branches and various

Tata stores• Deposit payment must

• Dealerships214 dealerships across 28 statesDealer margins cut down from 4-10 % to 2-3%1% discount if dealer paid cash upfront

• Toyed with the idea of using entrepreneurial engineers as local retailers

• Idea scrapped due to potential warranty and liability issues.

Positioning of Nano

2009

• In April 2009, out of the initial bookings of 2,03,000 Nanos, 1,00,000 were selected using lottery system

• Half bookings were for Nano LX, 30% for Nano CX and 20% for the basic Nano

• The new Sanand plant provided a capacity of 2,50,000 units per year

• Open Sales through Tata Dealerships began from a single state in 2009

2010 onwards..

• Monthly sales grew peaking at 9,000 units per month in July 2010

• In November 2010, when the car sales grew 22%, sales of Nano plummeted to a mere 509 units

• This was due to two causes:– Rising safety issues– Rising raw material costs

Fire fighting

• Tata motors conducted an investigation. TML issued a statement that the fires were a result of “foreign electrical equipment” and not due to any safety issues in car

• TML took measures and improved the electrical system of the car

• TML also increased the 18 months warranty to 4 years or 60,000 Kms

• By December, the sales rebounded to 5,784 units

Thank you