Case Analysis of Tata Nano

Submitted to:

Mr. Ashish Tiwari

Submitted by:

Saurij Regmi
(EMBA, Second Semester)
Q1. Explain the challenges and issues faced by TATA Nano and the reason for the
downfall. Why do you think the target segment earlier rejected Nano?

Tata Nano, dubbed as the “People's Car” and also known as the world's cheapest car was
introduced in January 2008, by Tata Motors. The car was launched in March 2009 which created
a significant impact in the Indian automobile market. Priced just a little over an iPhone this car
had an attention seeking potential.

The challenges faced by Nano leading to its downfall are as follows:

1. Due to hype of the car after its launch in India, it took TATA Company 22 months to deliver
the first one lakhs pre booked vehicle.

2. As Nano was given the tag ‘world’s cheapest car’, which was its Default branding in every
media and also the branding was happening by chance, not by choice. Thus the word cheap
created a rub off effect which portrayed the vehicle as fragile and unreliable. Price was the
strength but positioning was the weakness.

3. As Nano was priced aggressively and without any close competition, the design was not
appealing to most. Initial hype was created due to its price but once people got to see the
aesthetics of the vehicle they started to make assumptions like it was an auto with 4 wheels.

4. Initially 4 Nano caught up in flames due to technical issues and few accidents happened which
showed the damage after impact / accident that it can withstand, competitors and media made a
big news out of it adding the tag of cheap and unreliable (the rub off effect). After those incident,
the marketing team of Nano failed to gain the positive rebuttal for the vehicle.

5. In cities, families are leaner and roads are cleaner. Whereas in villages, families are bigger and
roads are full of challenges. Tata aimed middle to lower class families as their primary target
segment. Most of these segment stayed in villages, so even if a family buys Nano, neither the
whole family could fit in nor they could have a smoother riding experience.

6. The so called price of Nano was the price of base model. India being a hot and humid country,
AC is essential. If an individual would opt for it then it would cost around 1.35 lakhs and top
model would go upto 3 lakhs. In 3 lakhs there were other various competitor brands that was
better and also people had option to buy in 2nd hand market which would offer a great deal than
that of Nano.

7. Nano lacked aspirational value. People from urban area who used to ride a bike refused to
upgrade to Nano and people who drove 2nd hand vehicle didn’t preferred Nano due to its
aspirational value. People riding a bike were seen as smart and confident whereas one driving a
Nano were seen as driving something unsafe or had a compulsion. In India, the car you drive is
linked to your professional success which was seen nowhere with the Nano owners/drivers.
8. The shift of plant from Singur to Gujrat made an impact. Due to inflation the price of Nano
rose up from 1 lakh to 1.2 till 1.5 lakhs. Thus they were not able to give the financial value to its
customers.

9. As the vehicle was targeted for middle to lower class of people, banks and financial
institutions did not sanctioned loan or financial service to the needy family who looked forward
to owning a Nano due to reasons like unavailability of proper documents and also the booking
deposit was on the higher side. And research says that the initial 80% of the buyers were from
upper class of family who were one time buyers and already had at least one vehicle back at
home and did not cared to drive Nano after they have driven it once.

Q2. Discuss and debate what effect the increasing price of Nano and the new entrants in the
low – cost car segment will have on the Nano’s sales.

The shift of plant from Singur to Gujrat made an impact. Due to inflation the base price of Nano
rose up from 1 lakh to 1.2 till 1.5 lakhs. Thus they were not able to give the financial value to its
customers. On the same price bracket people had an option to buy an used vehicle such as santro,
alto, ritz or they can even add few rupees more and go for Maruti 800 which was marketed as a
safer and feature loaded package than other in that price range. As the vehicle was already
termed as cheap in the market leading to be portrayed as unreliable and as an incomplete car also
it had less aspirational value to it. Due to these reasons the sales of Nano started to decline
gradually. It went down so drastically that in the year 2018, only one unit of Nano was made in
the entire year.

Q3. Do you think that the revival attempts for Nano will work? Explore ways in which
Tata Motors can overcome the threat of increasing competition.

If TATA tries hard enough, it might work but as per my opinion revival attempt for Nano will
not be a logical approach. The market has shifted to more of a SUV and hatchback segment.
People will demand for SUV rather than either for a large or for a small vehicle. Nano will
forever remain that small car that was priced at one lakh. It made such an impact in the mind of
the consumer that even if they hear the name Nano, the first image that will come to their mind
will be of that small vehicle. It will take TATA quiet a lot of time and money to remove the
existing brand equity from the minds of the consumer. So, revival attempt of Nano will be best if
it is kept untouched. Instead they can focus upon those products that are doing well in the
market.

Ways in which Tata Motors can overcome the threat of increasing competition are as follows:

1. Competitor analysis
Having a close eyes on the moves of the competitors is a good idea. Having an updated
information on competitor can be beneficial as well as they can hint the trend of market scenario.
They can be a source of information with proper analyze.

2. Consumer survey

Knowing the likes and dislikes of consumer can give an insights to company to work for product
development for future purpose. This might even give them a chance of having a head start if
they are able to tap into the consumer’s mind properly.

3. Customer feedback

One happy customer = 10 happy customer and 1 unhappy customer = 100 unhappy customer.
Feedback from the customer must be taken well care of and customer’s complaints must be
handled in a professional manner in shortest time possible provided that the customer and their
issues/complaints are genuine.

4. R & D on existing as well as new Products

If products are not updated then they will become obsolete soon. So R & D should be carried out
for existing as well as for new product to keep the customer interested in future. Eg new colour
scheme, new engine updates, software updates etc.

5. Marketing communication

TATA is the name we rely for heavy vehicles especially commercial vehicles like bus and
trucks. Slowly they entered passenger vehicle category and are coming up with interesting
products. TATA needs to communicate to the world that TATA does not only makes buses and
trucks but it also makes passenger vehicles as well as luxury vehicles that are suitable for small
families to those high achiever and high spenders.