Failure of the Tata Nano

by
Michael Berger
Maor Englander
What is the Tata Nano?
Tata Nano is a micro car model designed to transport
four passengers. Produced by the Cars and Engines
division of Indian conglomerate Tata. Tata Nano
originally developed and produced for the local urban
market in India and is considered the world's cheapest
car manufactured in serial production.
Tata Motors
No. 5 carmaker in the world, was established in 1961. Appeals primarily to the Asian,
UK and some of the U.S. market. In the past exported trucks and jeeps to Israel.

In 2010 ranked number 39 on the list of world's leading companies.

In 2011-2012 was estimated to be worth 34.7 billion.

Ranked fourth in the world in the production of trucks and fifth in production of
buses.

Owns more than 4500 engineers and 60,000 workers, in India alone.

To date produced more than 8 million private vehicles.

More than 6600 points of sale and service worldwide.

Since 2004, being traded in the New York Stock Exchange.

Only on September this year, sold 50427 private vehicles, of which 46000 only in
India.
Historical overview of the Tata Nano
In 2003 the Tata company began development of car with four wheels
designed to replace two-wheeled vehicles that used as family car in India.
The first basic condition for the development was that the price would be
within reach of the average urban Indian family. To meet this target, the
very low price of the final product , it was decided to give up all non-
essential components in the manufacture of the vehicles and of course all
the luxury features and comforts which increase the costs of the baseline
cost . Commercial launch of the Nano model for the Indian market took
place in early 2011 , and received high exposure by the international
media.
Preliminary market researches conducted before launching the new
international model anticipated a great commercial success and one of
the research institutes in India predicted that the Nano will control about
65% of the Indian market.
Why the Tata was meant to succeed?
Very cheap vehicle (about 2500$).

Marketed as "car for the people".

The name Tata. The Tata Corporation is a huge corporation
in India (controls the cellular market, energy,
telecommunications, textiles and beverages).

The vehicle is designed to replace the motorcycle and the
rickshaw. Currently being sold in India about 1.2 million
motorcycles annually. Also, India is known as a country with
high precipitation and therefore a transition from the bike
to a closed vehicle is logical.
So why the Tata has failed?
Raw materials:

The car was manufactured with cheap materials which broke
after few months.
Moreover, there were many cases of car fires as well as many
technical and mechanical problems.
The best incident that demonstrates the failure of the Tata
Nano occurred at a vehicle exhibition in New Delhi, when
one of the presenters tried to open the car door and was left
with the handle of the door in her hands.
Non-compliance with European standards:

On the one hand, the company's engineers were
required to reduce costs for mass production of the
vehicle. To meet the requirements are waived
compliance with standards and thereby lowered the
cost of production, causing an increase in sales in India.
On the other hand, non-compliance with European
standards meant that they could not sell the car for an
external market and thereby reduced market share
range.

So why the Tata has failed?
Use of diesel:

India gasoline subsidized by the state, there are
subsidies of 50% of its value in the market. The
engineers designed two models of Nano: gasoline
and diesel. The vehicle that designed for the
larger segment of the Indian market, designed to
operate on diesel and therefore the cost of using
it rise above of what the target costumers could
afford.

So why the Tata has failed?
Indian roads infrastructure:

Tata was intended to replace the motorcycle and rickshaw in India.
The road infrastructure in India is poor, there are numerous of off-
roads.
Motorcycle and rickshaw can stand along the difficult road of India,
however Tata's low-slung chassis combined with substandard raw
materials that make up the vehicle did not meet the required life-
long and fell apart when traveling on these roads.

So why the Tata has failed?
Tata's business model fits to push type model, mass
production. According to this model the sequence is:
design-make-sell. Tata failed at the design stage. We have
seen that all the reasons for failure are already at this stage
(raw materials, European standardization, the use of diesel
and non matching infrastructure). Once planning fails, the
sequence is broken, causing a drastic drop in sales and the
failure of Tata Nano project.

Summary & Conclusions
THE END