TATA NANO: The people’s carGROUP: 6Harpreet SinghOmer RajaAntonio MondragonRobert Karwoski

Guy walks into a bar…….

Motivation

“Dream, dream, and dream, because dream gives vision, vision gives thoughts, and finally thoughts lead to actions.”

Former President, Abdul Kalam Azad Recognized that 1.1 billion population with rapidly

expanding lower-middle & middle class population and a mean age of just under 25 years.

Target market: Lower middle class family and college

students who use two-wheeler vehicle.

Estimated automobile ownership in India ranged from 8 to 25 per 1000. Great potential for growth in market!!

Disruptive Technology

“Hybrid” Disruptive Technology

New Market Disruption: Lower middle class and college students who use two-wheeler vehicle.

Low-End Disruption: Used Market decline when a brand new car with similar price and high fuel efficiency was available in market; decline of 30% used market.

Cheap: USD 2,500

Few Features: No air conditioning, power steering, power windows, air bags etc.

Simple Technology: used simple modular design

Struggled in early development stage: Just met 50% of target customers.

Factors of Profitable Low Cost Car

Thinking out of the box

No air conditioning, power steering, air bags, power windows etc

Used significant portion of Aluminum and bio-degradable plastics to make the car light

Used space effectively to created 21% more seating space than Maruti 800

Open Innovation

Increased modularity (both in products and processes)

Aggressive leverage of third parties to reach rural customers

Smart Car

Smart Car was introduced in Europe to with a different reason.

"The vehicle is attracting an overwhelming number of buyers who want a solution to high gas prices, a way to reduce their environmental footprint, plus a vehicle that offers urban mobility on congested city streets in a package that is fun to drive……“

Dr. Dieter Zetsche, Daimler's Chairman and Chief Executive at Mercedes-Benz.

The price was high ranging from $11,590 to $16,590.

Simple Modular Design

The components can be built and produced separately and then shipped to assemble at various different locations.

All components were designed to be used for multiple functions.

“A bunch of entrepreneurs could establish assembly operations, and Tata Motors would train their people, oversee their quality assurance, and they would become satellite assembly operations for us. ……. We would produce mass items and ship it to them as kits….”

- Ratan Tata, Chairman of Tata Group

What is your answer to the critiques in the press upon launch of the Nano such as an environmental nightmare?

People started to worry about vehicle congestion in the already congested Indian cities by the Tata Nano replacing two wheel vehicles and also by such a low price the control over emissions could not be guarantee to be very effective.

By increasing the number of four wheel vehicles both safety and environmental concerns were raised, it is not just the emissions of the Tata Nano, it is the emissions of all the other vehicles jammed in the traffic due to the increased number of vehicles.

Indians are encouraged not to replicate western’s ecological disasters by rethinking the way the transportation is deployed.

Tata Nano was created from a blank slate in order to come up with creative solutions that will match the quality and safety required in the $2,500 USD car, as expressed by Tata’s executives.

Ratan Tata, insists that the Nano is for the rural masses.

Would Prahalad approve of Nano? What about Karnani? Prahalad’s thesis is based on selling to the poor that

comprise the Bottom of the Pyramid (BOT) and in particular the under $2.00 at purchasing power parity (PPP) a day population.

The Tata Nano may not fit into his scheme since its far above the economical capability of this segment of the population.

Karnani talks about buying from the poor and the idea to have a Tata Nano kit that could be assembled in remote localities by trained people is a good example.

Communities could acquire new technical skills and sell their labor as additional income.

When for example agriculture is not enough to have a fair standard of living in their towns.

This idea could be a contribution to the economy of small towns.

What is the likely competitive response to the Nano?

The Tata Nano is an ideal entry car for families of four that cannot afford the next level which is the popular Maruti 800 at $5,000 USD.

The main competitors are those of scooters, motorcycles and transportation tricycles.

People interested in the Tata Nano want to get out of the rain, dust, noise and maybe heat (since it does not come standard with A/C).

Maruti Udyog Ltd is the producer of the Maruti 800 does not see the Tata Nano as a direct competition due to the lack of features in the Nano when compared to the 800. They agreed that they may have a dent in sales, but the target markets are different.

Hyundai Motors revealed the Santro Xing GL LPG as a response to the Nano’s launch, these cars are in the $300,000 hundred rupees and may not play a direct competition with the Nano.

What is the likely competitive response to the Nano? Another new competitor is the Bajaj RE60 micro-car. The

manufacturer says it is meant to replace the time-honored rickshaw and which could come in at a price even lower than the Nano’s. 

Mahindra & Mahindra is the direct competitor to Tata and has different type of transportation vehicles that may be impacted by the Nano, these are primarily the commercial and personal vehicles.

Tata Nano Competition

Bajaj RE60

Maruti 800

Tata Nano Hyundai Santro Xing GL LPG

Auto Rickshaw

Hero MotoCorp

Mahindra Alfa

What are global implications of Tata’s strategic introduction of the Nano?

• Increase Lower Socio-economic Class’s Ability to Purchase a Car

• Environmental Impact• Population Exploitation• Used Motor Vehicle Market

What are the Generic Implications of the Nano? Is the Nano a Success?

• Margins are Only 2-3%• 80% of Income Goes to Food,

Shelter, and Clothes• Plan to Develop a Electric Car• Produce only 10,000 a month

when target was 25,000• Not an Appropriate Technology

THANK YOU

QUESTIONS?