Reference no: EM132184968
The country of India has the second largest population in the world, which represents an opportunity for car manufacturers.
Read: "Nano Goes Nowhere1 IN 2005, CHAIRMAN RATAN TATA of India’s Tata Group announced with great fan- fare that Tata would introduce a new budget- priced automobile that would get Indian families of four or five off their motorcycles and scooters—not the safest of ways for a family to travel together—and into the new Nano. The Nano, priced at an unheard-of price point of 100,000 rupees—about $2,000, half the price of a Maruti Suzuki Alto, a low-priced leader in India— would revolutionize the way Indian families get around. Fast forward to November 2010, nearly two years after the Nano’s launch, when only 589 Nanos were shipped to dealers, marking the bottom of a steady slide in Nano sales from 9,000 units in July of that year. What had gone wrong? For starters, there were political pressures that forced Tata to abandon its planned plant in West Bengal and move production temporarily while a planned plant for the Nano was built in Gujarat. These delays caused supply problems that limited Tata’s ability to fill the advance orders that it had already taken. Then there were quality and safety issues. In mid-2010, there were fires in several Nanos, not exactly reinforcing the safety ben- efits that moving families off motorcycles and into auto- mobiles was supposed to deliver. Finally, due to the hype and T ata’ s overwhelming number of advance bookings—200,000 cars were prebooked, of which 100,000 were planned to be delivered by the end of 2010—there was a general perception that there was no point in trying to buy a Nano. Y ou couldn’ t get one any time soon. Marketing Missteps But was the problem one of supply, or was it lack of demand? Gautam Sen, editor of India’s Auto India, says the real issue was “A total marketing failure. (Tata) thought the car would sell itself because it was the Nano and (because of) the kind of coverage it received around the world. They just took their eyes off the ball.” Observers say that Tata simply didn’t get its mar- keting act together. The Nano targeted rural and other Indian consumers of modest means—first-time auto buyers whose current transportation was a two- wheeler—but early promotional efforts featured a special Nano website, the use of social networking on Facebook and Orkut, blogs, and online advertis- ing. Given India’s very modest online penetration at the time of the launch, this was clearly a mismatch, as most low-income consumers simply weren’t online. Worse, the positioning of the car was entirely wrong, according to Professor Sudipt Roy of the Indian School of Business. In India, “A car is an aspirational product. You can’t say, ‘Here is a car that’s cheap, so buy it.’ The car has to connect with the right segment emotion- ally. They have to win the battle of the mind.”
Tata Responds
To address its quality and safety issues, Tata added features—a heftier engine, power steering and win- dows, even an airbag—but the price rose correspond- ingly, to about $4,000 for high-end models and $2,700 for the base model. This sort of pricing put it nearly on par with the larger and more comfortable Alto or even a used Toyota, thereby putting it into a highly competitive market segment and creating a disconnect with the target market the Nano was intended to reach. Tata also introduced a variety of financing incen- tives, though it’s not clear that its target consum- ers, many of whom could not easily document their income in India’s informal economy, could comply with lenders’ credit requirements. As Tata fought to regain the Nano’s footing, General Motors, which had been planning a new model to com- pete with the Nano, announced in June 2011 that it was shelving its plans, as the project was deemed not to be viable. Can Tata recover from its early missteps and make the Nano live up to its hype? Sales in 2011 began to recover from the Nano’s November 2010 low point, reaching a cumulative 16,527 units through May, more than double Nano’s prior-year figures, but still far below Tata’s lofty original goals. Kevin Freiberg, coauthor of Nanovation, a book that touts the Nano as a vehicle for helping the developing world “think big,” says, “We don’t know. But we do know this: Tata Motors is a great company with a deep culture of commitment to the needs of the customer. We can’t wait to see how they handle this situation.”
Questions
1. What were some of their marketing missteps?
2. Was Tata's response to quality and safety issues adequate?
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