Tata Nano: Most Affordable Car in the World

Executive Summary

Tata Nano was the cheapest car in India and also in the world. It is sold in India around 2,500 dollars. It was manufactured by Tata Motor Limited, the largest automobile company in India. The car was designed to become a “People’s car” which is affordable by almost everybody. Tata Nano first launched in April 2009 and it was expected to be in Indian market by July 2009. Since launching, it had created a huge buzz all over the media as well as the rest of the world. Within the first few days of booking 200,000 car had booked. Also Nano was a great idea but practically it never achieved its goal and the sale rate declined over the years and finally management decided to stop the production line. In following sections, we will analyze different parameters involving in Nano marketing. We suggest that Tata change its marketing target to designing a decent and trendy cool car which can target both youth people as well as medium class two wheelers owner.

2012_Tata_Nano_Interior

Situation Analysis

India Automotive market has an amazing grow and it is predicted that Indian auto market exceed the EU and US market very soon. (Company, 2011) (See Exhibit2). Tata Motors limited was India’s largest automobile company, with revenue of 8.8 billion dollars in 2007-08. It was the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments.

Customer Analysis by Category:

India population is about 1.21 billion people, representing a full 17% of the earth’s population. There are three Customer Categories:

  • Three and Two-wheeler owners: who has a family and low income especially those residing in Tier 2 and Tier 3 cities. The Two Wheelers segment, with 81 per cent market share, is the leader of the Indian Automobile market. (Wikipedia, 2016) Three Wheeler owners also has 3 percent of the market share.  People in these two segments have low disposable income. Being Nano a low price car is an attractive feature for this segment. At the same time this segment needs more financial support and if Nano has better financing options it will make it an interesting choice for this segment. As a cultural property of this segment we should consider that this segment has ambition to has a better lifestyle and they don’t like to recognized as poor class. Thus they don’t like using a product which labels them in public as a poor man or low class people. Nano can be attractive for this group if it doesn’t have a “poor people’s car” public image.

 

  • Young consumers: in the range of 25 to 40 years old, this segment consists of young people who has desire for a modern and trendy car. According to census data in 2011, nearly 42% of the urban population was 20–44 years old. (Realist, n.d.) (See Exhibit 1) Generation X (born in the mid-1960s to early 1980s) has known as Tech-savvy generation which has a good sense of branding. They are following western and modern cultures and they are eager to have a modern lifestyle. For this group a trendy design is a more important factor in choosing a vehicle.
  • High income urban areas consumers: with age over 40 years old, this segment has a good income and they already own a good quality car. They would be interested in Nano as a third or fourth car. Considering the higher level of lifestyle of this group they have higher expectation in term of product quality and probably Nano’s lack of quality in some areas will have a negative effect on satisfying this group.

Market Segment Geography:

Generally, Nano is perceived to be a city car rather than be a rural Car. According to census data in 2011, Over 31% of the population was urban. And among those who lives in urban areas we can divide the Indian auto market geographically in these two segments:

  • Tier 1 Urban areas: These segment consist of majora Indian cities which includes New Delhi, Mumbai, Kolkata, Hyderabad, Bangalore and Chennai. (Wikipedia, Classification of Indian cities, 2016) In 2001, India had 35 cities / urban areas with a population of more than one million people. In total, some 108 million Indians, or 10.5 per cent of the national population, live in the country’s 35 largest cities. Mumbai (Bombay) with a population of more than 16 million is now the world’s fourth-largest urban area followed by Kolkata (Calcutta) in fifth place (Statistics, 2001).  Tier 1 Urban cities has 50 million people which is 45% percent of total India urban population. In this segment we see more crowded cities which means it is harder to find a parking spot. Also the distribution channel is more established in these areas.
  • Tier 2 and Tier 3 cities: There about 25 cities in these segment. This segment is highly geographically distributed in country. About 50% of the India urban population lives in this segment. The distribution channel is not as established as major cities. And usually people has less disposable income. Majority of two and three wheeler customers lives here in this segment.
  • Tier 4 to 6 cities: these are small cities around the country with population less than 10,000 people.

 

 

Competitor Analysis:

Direct Competitors:

  • Used-Car market:The main direct competitor was used car market. They slashed the prices of used car by 35 percent when Tata introduced the Nano.

Nano Disadvantages:

  • Bigger Market. The used-car market was five times larger than the new car market.
  • Used cars had the advantage of a better safety
  • More vehicle options.
  • On the Other hand

Nano Advantages:

  • Nano had a modern and trendy design
  • Low fuel consumption
  • Lower Co2 emissions and being eco friendly
  • Brand new product with same price
  • Maruti alto 800: Another competitor was Maruti Alto 800 which had very similar tech specification. Maruti was priced about 4000$ which was the closest competitors in term of the price.

Nano Disadvantages:

  • Maruti alto had a better and powerful engine
  • Nano had smaller Gas tank
  • Maruti alto had more options
  • Maruti had higher Top speed
  • Nano perceived to have safety issues

Nano Advantages:

  • Lower price
  • Nano was more fuel efficient
  • Modern design
  • Lower fuel consumption
  • Lower Co2 emissions and being eco friendly
  • Brand new product with same price

Indirect Competitors:

Two Wheeler manufacturers were indirect competitor of Nano because Tata Nano was focused on capturing their market.

 

resize

SWOT Analysis:

Strengths Weaknesses
 

·   Brand Strength and Awareness (64% of market share in India)

·   First to market advantage

·   All weather vehicle

·   Low Price

·   First innovation

 

 

·   Safety Concerns

·   Inability to produce to meet demand in a timely manner

·   Wrong public image of ”Worlds Cheapest Car”

·   Fiber body

·   Low suspension power

·   Low engine capacity

·   Low Fuel Tank Capacity

·   Delay due to Singuer violation

Opportunities Threats
 

·   Recession, Bad Economies times

·   Bric Economy growth

·   Demand for smaller cars in urban areas

·   Opportunity to expand model to other BRIC economies

·   Bikers can be motivated

·   Auto rickshaw and second hand market can be motivated

 

 

·   Other Competitors (Maruti, Honda ,…)

·   Fuel costs

·   Recession, Hard economic times

·   Government may come with new rule

 

 

tata-nano-map

Evaluation of Alternatives

Cost of being Low Price:

Tata focused on building a low-cost car with a certain target price, these criteria lead them to remove and sacrifice several basic features from original design. While they achieved their goal to build a car with target price of 2500 $ at the designed car had several safety issues which brought this public image that the car doesn’t meet the minimum required safety measures. It is true that being low price is one of the main competition factors in passenger markets but we should also consider that buying a car – even when the price is 2500 $- is still a big investment for most of people. And when people pay that amount of money they expect to own a product with minimum feature set. So if we had this chance to be part of Nano design, definitely we would suggest to change the main design goal to keep the minimum feature set or remove the basic features based on the consumer survey which would guaranty that removing a feature would not have a big negative impact on product public image.

Do it right the first time – First Product Public Image:

People make snap judgements. It takes only 1/10th of a second to form a first impression about a person, and products are no different. For several reasons including the safety issues, late delivery time, no finance options and also low quality materials, Nano was perceived by public as low quality and cheap car. Usually when people make their mind about a product it is really very hard to change that image later. Although Tata took several innovative steps to fix the positioning, marketing and production image later but it was too late to correct the first public impression of the product.

Public Relations:

Tata failed to show a proper action in case of fire incidents. They should recall the defected cars, which would increase the general market confidence in Tata Nano. Also during the first booking delay, company should be more responsive about the delivery delay both by doing a better public relation actions and also by compensating the customers for this inconvenient product delivery.

Not a clear positioning strategy:

Tata changed the target market several times, first they wanted to focus on two wheelers on Tier 2 and 3 cities, then after the initial booking it turned out that the most of their booking was done in major urban areas. Then they switched to Youth people. The Marketing agent was talking about Youth segment while at the same time companies’ managers was sending different signal to consumer market.

These all, made the consumer market confused and market was unsure which segment this car was made for.

No initiative on taking Control over Initial Marketing:

Company didn’t have any special advertising plan for product launch. Lack of strong company sponsored advertisement let the public media to drive the initial product introduction which led to magnifying the product problem and failures. Tata should be prepared with an explicit and clear advertising plan before launching the product. This would help company to have full control product launch and possible product problems.

Lack of Financing Options in product launch:

While Nano was expected to find its way in low income two wheeler owners families, but during the first booking period there were no finance option available for customers. Considering that this segment doesn’t have a high disposable income it didn’t make sense that costumers pay full amount in advance then they wait for more than one year to get their cars. Although company took inactivates to sell the Nano using credit cards but the time company started that plan was too late. And it would have better impact if it was during the first product launch.

The Decision:

Marketing Objectives:

  1. Tato should change Nano’s production objective to be an affordable trendy car with unique modern aerodynamic design.
  2. Build a positive public image about Tato Nano, People should believe that Nano is small, yet powerful, it has chick design and reliable
  3. Nano should attract Young generation by satisfying their expectation to have a cool, colorful and affordable car

005-tata-nano-ev-geneva008-tata-nano-ev-geneva

Target Market:

Tato should focus on both Youth people as well as mid class family people in Tier 2 and 3 cities. But this time instead of focusing on being a “Low Price” car they should focus on being a modern and trendy car. The possible slogans can be “Next Generation Car” or “A New design for modern society”.

Positioning:

Tata should position Nano as fabulous, personal cool car.  One of the best single model car sellers in the world is Volkswagen Beetle, this car has been produced more than 21 million units between 1938 until 2003. There are several similarities between Volkswagen Beetle and Nano. Beetle was also had a goal to be cheap, simple car. But it didn’t lose its market because beyond it is affordable price, people love its design and in social media like Pinterest we see that people is posting pictures of their beetles as a cool car.

Same story can happen for Tata Nano, Company needs to work on exterior and interior design, make it a small lovely car and each person would be proud to own and drive one.

Albeit the engine needs to be more powerful and also Nano need to have more eye catching feature to make more attractive for the young generation.

Marketing Mix

Product:

We would recommend Tata to build three model of Nano:

  1. Nano basic: With basic features for general market
    • Engine 900 cubic centimeters
    • Fuel Tank capacity: 35 liter
    • With Air conditioning, Power Steering and power Windows
    • Top Speed: around 140 Kmh
    • Remote control
  2. Nano lux: all features of Nano basic with more accessories for customers who wants to experience a more luxury car
    • Airbag
    • Sun roof
    • Leather interior
    • Bluetooth Audio system
    • Front and rear cup holders
    • Front door pockets
    • Electric power steering
    • Tilt and telescopic steering wheel
    • Steel wheels
    • Cruise control
  3. Nano Sport: a coupe version of Nano lux which doesn’t have back seats, with more powerful engine targeting young people in families with higher income

Tata Pixel Concept 2

Suggested Price:

Since the focus here is on the car excellence Tata won’t be able to keep the low price but hopefully due to the product unique design people still are eager to buy the product

  1. Nano basic: 4000 USD
  2. Nano lux: 5500 USD
  3. Nano Sport: 6500 USD

03-tata-pixel-concept

??????????????????????
??????????????????????

Distribution:

Joining with Big Bazaar was a good strategy, also F-Class show rooms were a good initiative. This time company should prepare the distribution network before launching the product.

Financing:

Since the target market is Young people and Low income families, they don’t have good saving neither banks trust them for loans. This will make it harder for them to get a new car. Tata should offer easy financing options for customer which let them buy the car with minimum down payment of 1000 USD and easy load approval.

Options Selections:

Tata should give their customer this choose from a wide variety of car body colors or let them to add extra options to their cars, for example a young engineer should be able to order a Nao with alloy rings and his desired color.

Promotion:

Tata should promote the New Nano initially in a pilot market for few months. This will help the company to understand and observe the possible design or parts faults. Also it will help the designers to receive feedback from consumers and give them enough time to add features or fix the problems.

After the pilot, Company Should start a TV adverting campaign in parallel with using other medias like billboards, newsletters and magazines to promote how Chick and modern Nano is.

 

Expected Outcomes:

We expect that market will be interested in this product first by young generation. It will create an atmosphere that introduce Nano as trendy and modern car. Later we predict that the two wheelers will start to buying Nano as they are hearing good stuff about this car. Also the easy financing option also will give them this opportunity to try a decent car.

 

References

Company, B. &. (2011). India Automotive Market 2020 report. Retrieved from http://www.strategyand.pwc.com/reports/india-automotive-market-2020

Realist, M. (n.d.). Market Realist. Retrieved from http://marketrealist.com/2014/11/indias-demographics-geography-population-profile/

Statistics, C. M. (2001). Retrieved from http://www.citymayors.com/gratis/indian_cities.html

Wikipedia. (2016, 2 27). Retrieved from https://en.wikipedia.org/wiki/Automotive_industry_in_India

Wikipedia. (2016, 2 27). Classification of Indian cities. Retrieved from https://en.wikipedia.org/wiki/Classification_of_Indian_cities#Population-based_Classification

 

 

 

 

Leave a Reply