31 Aug 2015 20:00 IST

What's the future for the Tata Nano?

As Tata Motors' marketing head, make an assessment whether the brand's new strategy will work

At a time when India’s largest selling car company, Maruti Suzuki India Ltd, was devising strategies to discontinue its lowest-priced car — the Maruti 800 — and make Alto its base model, another company was stretching its engineering prowess to produce the world’s cheapest car.

Termed an engineering marvel by many, the initiative became a showcase project for Tata Motors.

More and more foreign brands were entering the Indian market at the time, with much higher-priced cars. The market was also showing a favourable shift towards mid-segment sedans.

The Nano project made many companies, including Bajaj, quickly rework their strategies on low-priced cars, as they felt they should have been the ones to launch this product in the country as a natural transition from being one of the bigger two-wheeler makers.

Passenger car market

The production of passenger vehicles in the country was recorded at 3.23 million in 2012-13 and is expected to grow at a compounded annual growth rate (CAGR) of 13 per cent during 2012-2021, as per data published by the Automotive Component Manufacturers Association of India (ACMA). Passenger car sales stood at 1.89 million units in 2012-13.

Three basic categories in the market are hatchbacks, sedans and SUVs. Recently, this classification has become a lot more fluid as newly-launched models are starting to incorporate aspects of two or more segments; these are called crossovers. This trend is in line with more advanced markets, where crossovers are extremely popular.

The Indian market continues to be dominated by hatchbacks though, within this, the mini-car segment (800cc or lower) has receded in importance. Currently, the mini-car segment makes up 21 per cent of the market.

Maruti’s brands continue to be leaders with the top three slots being led by the Alto, the Swift and the Dzire in 2012-13.

The Table alongside gives an idea of the current market shares of various companies.

Journey of the Nano

After a long delay, the much-awaited Nano hit the market in April 2009. The Rs 1 lakh car was made available to the customer at a little above Rs 1 lakh, on the road. The launch was marked by high-profile media coverage and then came a waiting period, as expected.

Heads turned as soon as people saw a Nano on the road and many wanted to touch and feel the car and look inside the engineering marvel.

Auto magazines got down to analysing the vehicle and why it could be priced at Rs 1 lakh.

One such analysis would throw some light on the issue and also give an idea of what the customer finally got. A series of events in the life of the new baby would chronicle its journey over the next few years.

April 2009: Limited launch

Sept-Oct 2009: Three Nanos catch fire in Delhi, Ahmedabad and Lucknow. Tata Motors orders checks on 7,500 Nanos

July 2010: Tata Motors raises Nano price by 4 per cent

Oct 2010: Price further increases by Rs 9,000

Nov 2010: Six Nanos catch fire, prompting the company to offer free protection. Monthly sales plummet to just 509 vehicles.

Jan 2011: Nano sales become off-the-shelf across India

Nov 2011: Nano gets a facelift, with a more powerful and better fuel economy engine.

March 2012: Nano sales hit the peak of 10,475 units for the month

June 2012: Sales dip to 5,025 units

Positioning, communication

During the same period, Tata Motors tried various positioning and communication strategies.

Initially positioned as a replacement for two-wheelers, it moved towards a safety platform for the two-wheeler families. It was also positioned as the easy car for the wife, and so on. Some of the ads over the years give us an idea of the company’s strategy.

Situation Today

With all the changes to the car, improved features and fuel economy, the car is now priced at above Rs 1.5 lakh, and the sales numbers as low as 1,505 in the month of February 2013.

The company changes its positioning to appeal to the youth with a fresh new campaign “awesomeness unveiled”

The Problem

The strategy team for Tata Nano has various questions on its mind:

Will the new strategy succeed? Is there a future for the product?

Or will the company have to burn more fuel before it figures out the way ahead?

Are there any other strategies missing?

You are the new head of marketing at Tata Motors, responsible for the future of Tata Nano, and have been asked to either endorse the current strategy and fine-tune it, if necessary, or suggest a completely new path that Tata Motors should follow.


(This case was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.)