Wednesday, December 08, 2010

Chronicles of Tata : Voyage of the Tata Nano

When Ratan Tata unveiled the “Nano” in Jan 2008, the whole world stood up and took notice. It was branded the wonder car! People queued up for registering and were ready to wait for long durations to get their hands on a Nano. Suddenly everyone wanted a Nano. It was engineered for a family of 4 on a bike or a scooter and was expected to eat into the two-wheeler sales in a big way.

But the last six months show a very very different picture. Sales of Nano have been dipping mercilessly since July’s record sale of 9,000 Nanos while total car sales in India have been showing a record growth. November, where just 509 Nanos were sold, was the fourth straight month of falling sales for the Nano since July 2010.

So what’s the problem? Is it the car in itself? Is it the manufacturer? Is it the competition? What?

It's not the car. It's spacious and comfortable, the air-conditioning is quick and effective, at 60 kmph it drives smoothly, it’s easy to park; its fuel efficient; and all that for just over a Lakh of rupees! To add to it, the manufacturer, Tata is the most reputed corporate house in India. And where’s the competition? There is no four-wheeler in that price range which can compete with the Nano. So again where’s the problem?

Problem 1: Positioning & Perception
When the Nano was launched, most people who applied for it were from the higher middle class with access to funds, who were just attracted by the glamour and hype of the Nano. Their interest soon waned off when the aura around the world’s smallest car disappeared. They now call the Nano an air-conditioned Auto Rickshaw! We have to remember that the Nano’s main target, are people who own two-wheelers or who do not own any vehicles. These people mostly from the lower middle class or teenagers do not have easy access to funds.

Problem 2: Lack of financing options

Tata officials believe that it’s the lack of financing options available to buyers which is causing a dip in the Nano sales. Banks have been unwilling to lend to most low-income customers on concern that they might default. Dealers claim that almost nine out of every ten prospective Nano customers are also shopping for a loan. Also the rate of interest charged by banks for Nano loans is around 20-22% (equivalent to ROI for two-wheeler loans) which is almost double the rate on other car loans.

Problem 3: Safety Issues

At least six Nano cars have been gutted so far in various parts of the country and this is playing on the minds of prospective customers. Tata Motors has been asking existing Nano customers to bring back their cars to add free of cost safety devices to prevent the vehicles from catching fire, but insist that it is not a "recall."

Problem 4: Waiting period and unavailability of spare parts

Other problems include the long waiting period and also the unavailability of spare parts due to shifting of vendors from Pantnagar to Sanand. People still think the Nano is sold through the booking process, which makes them believe there will be a long waiting period.

Going Forward:
Tata seems to have understood the problems and is trying its level best to get the Nano sales on course. They have been trying to improve the interaction between customers and financiers and have even launched an exchange scheme under which the owner of a two-wheeler can exchange his bike or scooter for a Nano, by paying the differential price. The company is also trying to provide financing for Nanos through its motor finance arm Tata Motors Finance Ltd.

To woo potential rural customers who have neither driven a car nor visited a car showroom, Tata plans to set up kiosks in the countryside. They are also trying very hard to dismiss the perception that advance bookings are still required to buy a Nano.

In addition, most importantly dealers across India are pointing out that existing customers of the Nano are really satisfied with their cars.

So I think once the Sanand plant is fully functional and the financing part is taken care of, we could soon see the Nanos breed like pests and choke our already overcrowded roads!!


  1. L Hariharan11:36 AM

    Good analysis Aniket. I too feel that its the perception that Nano is a poor man's car is keeping the affluent away while the lower middle class do not have the financial strength to buy it without loans. Also from a poor man's perspective, it doesnt stop at just buying the car, then comes petrol, repairs, servicing, washing, etc. Can a poor man (Nano's real customer) afford these recurring costs?

  2. Jathin Mishra1:31 PM

    I have a Tata Nano and I am very happy with it. It's a pretty good in-city car.

  3. Nice car. I really like you're analysis and stats about Tata Nano. But I think it's a bad news for the company. The huge fall of sales was really something.


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