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FEATURES/Boardroom | Jan 4, 2011 | 43713 views

Saving Tata Nano

The fate of the ‘People’s Car’ hangs in balance, with its prospective customers giving it a miss. Now, Tata Motors has mounted a massive rescue act
Saving Tata Nano
Image: Dinesh Krishnan

R

avi Kant has always had a formidable reputation as a marketing whiz. In the mid nineties, he helped Titan emerge as one of the most powerful brands in the country. Under him, LML was able to put up a spirited fight against Bajaj Auto. And the story of how Tata Ace came to dominate the mini-truck market under his leadership is part of company folklore.

But none of these achievements may have quite prepared him for the biggest challenge at the fag end of his professional career. Today, as vice chairman of India’s biggest automotive company, Tata Motors, Kant has the onerous responsibility of reviving an “iconic brand” that completely veered off course: The Tata Nano.

The Nano was always more than just a car. It was Tata group supremo Ratan Tata’s dream project to bring an affordable transportation solution within reach of the masses. The promise of a small car priced at Rs. 1 lakh had fired the imagination of an entire nation — and the global automotive industry.  Yet, in August 2010, 18 months after its launch, Kant has now been forced to take over the wheel to salvage a dream that has gone badly wrong. It was only once the November sales figures came out that the world realised the enormity of the crisis.

Nano sales that month, widely considered to be a peak festival month for sales, had plummeted to just 509, its lowest ever, which also included 68 units bought by its own employees at a company loan scheme of 2 percent. This was despite the fact that the car was available off-the-shelf in at least 10 major states across the country.

“One has to distinguish between the bookings that took place in 2009 and open sales, started since August 2010 in phases. The reported sales of the Tata Nano in the month of November are what has been supplied to dealers, and not retail sales, during the month as per plan. Sales will increase as we go on expanding,” says a Tata Motors spokesperson.

So far, 71,000 Nanos have been sold, representing only about 40 percent of the projected sales target. Tata Motors has invested Rs. 2,000 crore  in the Nano project, including a 2,50,000 units-a-year plant in Sanand, Gujarat. But sales have simply not taken off.

For the past three months, Kant has led a review inside Tata Motors along with Global CEO Carl Peter Forster and managing director P.M. Telang on the Nano project every day.

For starters, the Nano marketing team has been completely reshuffled, following the exit of Rajeev Dube, the head of its passenger car business and Nitin Seth, who headed the car product group. New brand teams have taken over. The distribution strategy has been redrawn, confidence boosting measures like an extended warranty and Rs. 99 a month maintenance contracts have been introduced, and a new advertising campaign on television and outdoor has been launched to boost awareness, particularly in tier II and III towns. Evidently, Tata Motors is straining every sinew to breathe new life into the Nano. And insiders say Kant is monitoring every aspect at the daily reviews: How many customers have walked into outlets post an ad campaign? How many of the walk-ins was the dealer able to convert into sales? How many new outlets were opened in the last one week?
But in the automotive world, there are few believers in the Nano  story. “Is there anybody in the country who does not know the Nano? It was a household name even before the launch of the car. It is not clear what will it gather from a few crores of advertising,” said a competitor, on condition of anonymity. Some believe that the sales drop to 509 units in November suggests that the product has been rejected outright
by customers.

Kant and his team seem to be in no mood to give up though.

The Supply-side Woes
Early last month, Tata Motors organised an all-India vendor meet to restore confidence among the vendor community and discuss the future of the Nano. Managing Director Prakash Telang, a Tata Motors veteran, made an impassioned presentation assuring everybody that necessary action would be taken and that Nano sales would gradually increase to about 15,000 units by March 2011. He implored suppliers to focus on the long-term relationship and hang in there. “In a suppliers’ meet people will give you the confidence. But when you are back in your office alone and start thinking, that is when you realise that the fire is much more than you had thought,” says a director at a sizeable vendor for the Tata Nano.

Early in the product planning stage, Tata Motors had promised him volumes upwards of 1.75 lakh units a year for his component, which forms a very crucial part of the car. “Right from the start, the project was highly cost intensive and we spent a lot on the technology learnings and setting up the facility. So volumes were the only way we could have made money. Today we are nowhere near that,” adds the supplier.

It is pretty much the same story for a lot of suppliers to the project. Worse, quite a few are still supplying for the Nano based out of Singur, West Bengal. Either they do not have the required funds to invest near the new Nano plant at Sanand, Gujarat or they are sitting on the fence, waiting for a clear picture on the Nano’s future. “There is no subsidy from the West Bengal government for the people who have been left behind in Singur. And the export potential which was another opportunity has still not come in. So, I don’t think we will be able to make any money on this and right now quite a few of us are bleeding,” says the supplier.

With more than Rs. 1,000 crore of their investments stuck in the Nano project, suppliers have no way out, other than to hope that Tata Motors is able to turn the tide.

This article appeared in the Forbes India magazine issue of 14 January, 2011
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Comments (7)
Kanakasabhai Jan 7, 2011
Thanks a lot for writing what the media in this country esp. auto mags did not want to - the truth about Nano. The booking was horrible as forms were sold at Rs.400, full amt. to be paid w/o bank loan tie up and the customer was not allowed inside the show room in peak summer. The car kept outside was to be seen not even started and tech. details to be taken from the net.The dealers had no interest and the company refunded money to 50% of those who booked with 100% payment. The fire in 6 cars were not investigated and explained to and Mr.Ravi kant is inaccessible to customers - try writing a letter to him. Tata Motors made a mess of Nano project as senior people sit in their cabins. Let us hope that the car catches up now at least as it is not a bad product.
Response to Kanakasabhai:
Prahalad Jan 26, 2011
Hi I bought one Nano and it's great. i am going to buy this month another for my wife. I don't know about all this but it' simply perfect.
Abhijit Anand Prabhudan Jan 4, 2011
I read earlier that tata motors also considered distributed assembling for nano, but didn't because of quality issues.

Running costs of car are more important than purchase price for most customers.
I think tata motors should create entirely different business model for nano.

Recently, Gordon Murray's istream car assembling tech and Riversimple open source fuel cell car are making a lot of buzz, in addition, riversimple is planning car-as-service business model.

Tata motors should incorporate both distributed local assembling and car-as-service in future.
Also tata motors is also investing in new propulsion tech such as compressed air engines.
So, what tata motors need's for nano's success is entirely new paradigm for automotive business.
Response to Abhijit Anand Prabhudan:
Lucas Pb Dec 27, 2011
Abhijit is right!
Especially about the compressed air technology.
It works, I have driven it in another car already.
Running cost is then down to some Rs 60-70 per 100 kms.
At the same time this technology will clean up India's mega's, and they need it!
Ashish K. Mishra Jan 4, 2011
Thanks for your feedback Gowthaman. I did a test drive of the Nano myself. The salesperson at the dealership was clueless about the fuel efficiency and tank capacity of the car. Somehow she seemed very confused. For just about anything she said; I will ask my superior to speak with you. And that never happened. On the safety bit she said Tata Motors has put an additional 'safety kit' in the Nano worth
Rs. 3,000. But she had no idea what it was! And once I got the price list there was no follow up.
Gowthaman Jan 4, 2011
Please, please talk to the customer, i once had the impulsive mind to buy a nano, the dealer was soo uninterested in giving me details, i just quit it.
Please talk to every one who looks at the car, everywhere people are still wondering how it might be while riding the car, offer test drive to anyone who even looks at it, thats the only way you can make the customer feel special, and then you can worry about converting it to sales.
Vvnraju Jan 4, 2011
You may have to opt. to give on yearly rental basis.
Reason 1. Continuously increasing fuel cost.
2. Availability of used better quality cars.
3. Attitude of people.
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