When the Nano was launched by Tata, an ambitious Indian Conglomerate, in March 2009 the expectations were sky

high. And for good reasons. In many ways the Nano Seemed like a real game changer in the auto industry. A car that could do for cars, what Ikea has done for furniture, Amazon for book retailing or Netflix for video rentals, disrupt an entire industry. Buying a car is a dream of every average middle class and lower class Indian consumer. Mr. Ratan Tata, Chairman of Tata Group righteously recognized this and created this innovative product. There was a simple philanthropic thought of Mr. Ratan Tata to make luxury of a car available to average Indian person with average income, thus the car was priced at Rs. 1 Lakh (1250) and is presently available only for Indian market. This brought the eyes of whole world to Nano, the cheapest car in the world became its main identity. Innovating all aspects of the value chain

Like other disruptive business Nano innovates all aspects of the value chain to achieve its aim of a radically cheaper product. Nano was created with use of frugal engineering principles. Frugal Engineering or Gandhian Engineering is the science of breaking up complex engineering processes/products into basic components and then rebuilding the product in the most economical manner possible. This process helps to build a value-based quality product at a very low cost. Thus, the cheapest but most durable material for production was used for production. Nano has only 24 patents unlike other cars that exceed more than 100 patents. A very economic route was chosen for the supply chain and distribution system, by making the car available in supermarkets like Big Bazaar, electronics store like Croma and retailers outlets like Westside. With very less above line advertising, many innovative & modern marketing techniques like digital and social media were used to position the brand in the market. Being worlds cheapest car, Nano benefited from huge free PR all over the world. The party was over Indias automobile industry is the 7th largest in the world, growing at around 16 - 18 % p.a. TATA Motors is the largest automobile manufacturer of this industry with revenues of 27 billion USD. They have more than 10 car brands in different segments. They also manufacture commercial and defense vehicles as well as own European brands Jaguar & Land Rover. They are often praised and awarded for their technological expertise and design. Despite all this, the product failed. After launch Nano didnt hit its target sales ever. Below is the sales chart of Nano from its launch in March 2009. It is still struggling to reach up to their 20,000 units per month breakeven. This is in contrast to Tatas other car brands like Indica, Sumo, Safari etc. whos sales have been really well in past 3 years. Neither the two-wheeler industry nor the four-wheeler industry as a whole was disrupted by entry of Nano. Also, the closest fourwheeler competitors like Alto, Estilo, Maruti 800 and Santro etc. dont seem to have their sales affected. Why did such a disruptive product fail? What went wrong? What is the learning for other disruptive innovators? My research among Indian consumers point to three key mistakes. Positioning problems From the outset the positioning of the new car seemed self-evident. This was after all the worlds cheapest car, an attractive proposition one would have thought. But no. Worlds cheapest car turned out to be a disastrous positioning for Nano, because it didnt take into account that people dont buy cars solely based o the price and utility, they buy a brand, an identity, a dream. For Nano the car has become a poor peoples car. Indian consumer is complex phenomenon and it has always been a challenge for the consumer researchers. Indian consumers are more value conscious than price conscious. Cheap Chinese brands still struggle to find its place in Indian market. Indian consumer dont have much purchasing power but still

they will wait for their financial positions to get better so that they can buy something better than a Nano. Simple law of branding is that people associate themselves with the attitudes and attributes of the brand that they use. Consumers dont want to associate themselves or their dream with the cheap tag. Car is still a luxury, a biggest status symbol for any Indian person. Why would anyone want to have a cheapest luxury? Even today, in every household puja is performed on the new car. People believe that car is a gift of god to the family. It was never a utility product and probably wont be in near future. Nokias strategy of providing cheap mobile phones in India and making it a basic need for every person was a big success, but after all mobile is a low involvement purchase decision for a consumer. Unlike cars, which is a high involvement purchase decision. The whole family is involved in this decision. Cheap mobiles are available from Rs. 1000, but Nano is available for Rs. 1 Lakh, which is still 3 times the average income of the Indian consumer. Tata motors tried to make Nano, a very generic product. Selling Nano though a Lucky draw and supermarkets has made Nano loose its credibility and seriousness. Technical problems The short circuit in the combination switch led to the burning of some Nano cars in India in 2010. This gave a big set back to whole Nano brand. The news spread like wildfire through all mainstream and social media. A brand may take years to build the credibility but may lose it very quickly. Nano had to face huge amount of criticism and negative comments on their award winning product design. People became skeptical and afraid of buying a Nano. TATA Motors claim that they have fixed the problem and replaced parts of the cars sold before the burnings, but all this has managed to gain a very negative perception in the minds of Indian people. Now, Nano is used as a derogatory abbreviation, its often mentioned as a 4wheeled rickshaw. Rising costs and new competition The main competitors of Nano are not other cars, but the tow-wheelers and second hand cars. Due to ever-increasing traffic and petrol prices in India since 3 years has made it difficult for people to invest in Nano. Instead people still prefer two wheelers, which give almost double the mileage in half the cost and easy for parking. People also prefer to buy second hand Maruti Alto or Santro instead of Nano. And in rural villages, people feel Nano is a very delicate car for the rough village roads. Strong and durable vehicles still rule the rural market. Bullets outsell Scootys and Jeeps outsell city cars. Sounds like Nano is caught in the middle, not attractive to the urban middle class and too expensive to maintain for the rural class. Future of Nano Recently at Auto Expo in Delhi, Tata Motors have announced Nano Plus for 2012. This new car will have improved color options, 90% finance availability, good air conditioning, more space, more mileage, 1000

cc engine, flexible seats and power steering etc. Its predicted that, Tata Motors would probably position it in the urban youth segment, and will be trying to make it more trendy and fashionable. Bajaj also showcased their ultra-low-cost car RE60 at the Auto Expo. They specifically said that this new car wouldnt be competing directly with Nano. Learning from Nano, Bajaj are more looking forward to compete with rickshaw and public transport segment. Key learning The Nano brand problem is more fundamental. In such situation, a brand can revive and survive with some positive advertising campaigns but may not sustain in the long run. As the competition in the low cost car segment will increase, Nano will start loosing its monopoly position and thus Tata motors will have to take some concrete steps for building up the trust for Nano that the TATA corporate brand holds. First of all they need to change the positioning of Nano from a consumer product to a more mass premium product. If TATA motors dont want to make Nano a luxury through change in pricing, then they can position it as a utility, but differently. A second car? Urban customers, who already own a car, can have one more car just for the sake of quick use. Everyone hates to take the big car to the market and places where there is a parking problem, Nano can very well solve that. Also may be by making Nano a niche like BMW Mini did in Europe. Target many different niche customer segments like Youth, women, rural elites, etc. Develop hybrid model, Nano electric and Nano Diesel asap. One thing that Tata Motors can bank upon is the Indian mentality about need for mileage. If they give more sustainable and fuel friendly options, people may be compelled to change their perception about Nano. Better Place, a car company from China is making replaceable batteries available at the fuel stations for their electric car, Tata Motors can be first car brand in India to do the same for its electric version of Nano. Also Nano has received so many different awards for its innovative design. Tata Motors can position Nano as the design marvel. The same way as Ikea did to position themselves as excellent design modular furniture manufacturers. This strategy of value with cost today help Ikea rank in top world brands. Also the most awaited launches of Nano Europa and Nano Pixel and Nano Mega Pixel for international markets will be a crucial opportunity for Nano to regain its momentum. If the car is appreciated and performing well in the international market, it will regain its limelight in Indian market. Today also, Nano has a huge potential to be the game changer brand in car market, most importantly, without changing its price point. Nano's sales chart