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Launchpad: the Tata Nano

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The Tata Nano is a rear-engined, four-passenger car built by Tata Motors. Capable of  reaching 65mph, it is also very fuel efficient, achieving around 92 miles per gallon. It was launched on 23 March this year. And Wright believes it might just be a tearaway success.What is it?The world’s cheapest car (from £1,300). Designed to make safe motoring accessible for all. Who is it aimed at?The non-car owning masses, many of whom currrently travel on two wheels. This includes 14 million people in India and millions more across Latin America and Africa too. What’s the point?To provide smaller, lighter, cheaper and more economical vehicles whilst demonstrating India’s manufacturing muscle and desire to be seen as a modern industrial nation. Why is it unique?For developing markets, it opens up the joys of motoring that the developed world has enjoyed since the Model T Ford. It will leverage new distribution channels, being available to order in department stores and electronics retailers, where consumers will have to pay for an application form.  For the onlooking developed world, the Nano is the closest thing yet to the concept of a disposable car, capturing the zeitgeist for low impact vehicles. What are the challenges?Market demand is not going to be an issue. The combination of a unique proposition and unprecedented PR means initial applications are expected to top 500,000. This is despite the poor quality of the Indian road network.  However, supply will be a problem. Initially, Tata has capacity to build 50,000 cars a year before the new plant opens next year, increasing capacity to 250,000. The first 100,000 cars will have to be allocated by a ballot. Tata has spent six years developing the Nano and has written off significant investment costs along the way – including the cost of a new plant which had to be abandoned due to land disputes. As a consequence, it will take five or six years for Tata to break even. What about the rest of the world?Plans are a foot for a higher spec, higher priced Nano Europa to enter the European market in a couple of years time. This may be a mistake for Tata, given the audience and the need is quite different. It will require the proposition to be adapted quite significantly. With a higher price tag the Nano Europa would also face stiff competition from the more stylish Smart car and Fiat 500. Will it be a success?   Tata has too much at stake to allow the Nano not to be a success in India. Demand is clearly there but making a profit from the Nano will be challenging. As the business is currently under pressure it is questionable whether Tata can afford the patience to see it pay back. This may result in price increases, which would undermine the core proposition. In any case, Tata should stick to developing markets and leave developed markets to other manufacturers who are already working on their own low cost vehicles.

Justin Wright is a founder of Mangrove Consulting, a specialist innovation consultancy advising companies on how to grow through innovation and entrepreneurship, and is a director of several small businesses. His life has not been the same since the launch of the 5 blade razor – he finds it hard to remember what life was like with only 4 blades…Related articles Business humour and "Inventions of the week" 24-hour pizza vending machine Let’s Pizza launches in Italy No technology is too old for innovation  

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Wednesday, 20 May 2009
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