People's Car Tata Nano Financial Political and Essay

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People's Car Tata Nano

Financial, political and marketing/business commentators alike seem to agree that the Tata Nano, the planet's cheapest car, was a perfect match between an idea and a need when it was introduced -- or at least as a manufacturing idea. Making the smallest of small cars could happen because the timing was right for pairing just such an idea with the quickly emerging appreciation of frugal engineering innovations, or using sophisticated technologies and motivations to make a product that is affordable and helpful to the global economy and ecology. [1: "Stuck in low gear." The Economist. Aug. 20, 2011. accessed January 15, 2012. ] [2: Sadanad Dhume. "Unloved at any speed." Foreign Policy. October 7, 2011. accessed January 15, 2012. ]

It was for this reason that the project came to life as quickly as it did. It seemed to be the perfect mix of "homegrown engineering" and contemporary business intelligence that could be put within reach of a world full of people (in countries like India) who could not afford traditional automobiles. But it quickly turned out that even frugal engineering could not stand alone. Successful innovations that expected to capitalize on this marriage of opportunities had to learn how to utilize "frugal marketing" as well. The people of the world couldn't just want a new, cheap car; they actually had to be able to get one and to trust in the car's many promises. [3: "Stuck in low gear." The Economist. Aug. 20, 2011. ] [4: BBC News. "India car boss Ratan Tata admits Tata Nano 'mistakes.'" January 5, 2012. ]

CREATION AND DEVELOPMENT: The Tata Nano has a story that is pretty well-known in many parts of the world. Its imaginer, Ratan Tata, is said to have seen a family of four crunching itself together on a two-wheeled vehicle, which inspired him to believe that it ought to be possible to move people in that position into a four-wheel option in an affordable way without too much difficulty. That was basically how he set the company's goal toward making a practical vehicle that cost no more than 100,000 rupees, or one lakh (which converts to about $2,200US). A man of wealth and incredible cultural credibility -- though hardly a global automotive tycoon -- Mr. Tata set about putting his clever concept on the road in just a few year by unleashing his engineers and manufacturing team with sufficient support to make the project happen by about 2008, though it would be in 2009 before they actually succeeded, with an estimated 200,000 fully paid initial orders. [5: Ben Wajdyla. "The $2,500 Tata Nano, Unveiled in India." Jalopnik. January 10, 2008. accessed January 15, 2012.] [6: Sadanand Dhume. "Unloved at any speed." Foreign Policy. October 7, 2011.]

From the start, the vehicle was very well received, even with its limitations and a number of severe design and construction flaws. Though it has now been improved to fix its many problems, the care remains essentially the same as it was when it garnered major media attention: a tiny vehicle made by and for The People. As one news account described its characteristics, [7: BBC News Asia. "Revamp for India's Tata Nano -- the world's cheapest car." November 21, 2011. accessed January 15, 2012.]

"The four-door Nano is a little over 10 feet long and nearly 5 feet wide. It is powered by a 623cc two-cylinder engine at the back of the car. With 33 horsepower, the Nano is capable of 65 miles per hour. Its four small wheels are at the absolute corners of the car to improve handling. There is a small trunk, big enough for a duffel bag." [8: Richard Chang. "Tata Nano: The World's Cheapest Car." The New York Times. January 10, 2008. / accessed January 15, 2012. ]

But even the best of dreams doesn't always work exactly as expected. The early production models had serious deficiencies. In particular, the early Tata Nano had a number of high-profile production and operational challenges -- some of which seriously hurt its bottom line and might well have been able to derail other products that were not as committed to success. The first, most serious of these challenges was a political battle over the location of its factory. The company was attacked by some critics who did not like it receiving government assistance, and it was forced to move its production facilities just before assembly began, resulting in more than a one-year delay. Once cars did begin to be delivered, it turned out that they had some nearly unforgivable first-model problems, such as parts that didn't work (the trunk was sometimes welded shut), and serious electrical malfunctions. The entire safety of the vehicle was questioned as fires broke out and destroyed some of the early cars, and many people expressed concern about the lack of airbags and other safety devices. [9: "Stuck in low gear." The Economist. Aug. 20, 2011. ]

These set-backs seriously reduced customer appeal and cause sales orders to plummet. Even with the high volume of initial purchases, it would not be long before purchase orders were dropping from thousands of orders per month to just a few hundred in 2010 and 2011. Only with a revamping of its car and marketing efforts with the latest releases (for 2012) would sales steadily increase again and give hope that the company might be able to live up to its dreams. Though the founder Ratan Tata is now preparing to retire, he believes that the company is on the fast track for the success he first dreamed of, even though he recognizes the serious mistakes and missed opportunities of their early years. [10: Hormazd Sorabjee. "A bumpy ride for the world's cheapest car." BBC News Asia. Dec. 1, 2011. accessed January 15, 2012.] [11: BBC News. "India car boss Ratan Tata admits Tata Nano 'mistakes.'" January 5, 2012. ]

LESSONS LEARNED: The founder's optimism continues to prevail, and it may be one of the most important lessons of the early years of the Tata Nano. This attitude is present in the company's latest financial assessment. They continue to have faith in what they are doing to get an expensive item into the hands of many. It should also be remembered that the car has succeeded even though it has moved away from its founder's original idea of being essentially a "build one at home" engineering package. The company was able to basically move back toward a regular production model as a way of returning its focus toward giving local and lower income consumers something to opt for. The car is quite different from other fuel efficient vehicles made by traditional car manufactures and it stays committed to that fact. It remains small and has few luxuries and even fewer safety elements as standard options. [12: Tata Motors Limited. Q2FY12 Review. November 2011. ]

In undertaking this evolution, the company has demonstrated that a "cheap" car could be produced, though not exactly at the lowest cost envisioned. It has also demonstrated that building a good, affordable car is not enough. There also needed to be local sales and financing mechanisms to enable its targeted consumers to get their hands on the products, since even 100,000 rupees is still a significant amount of money. As the Tata Nano would ultimately demonstrate, these marketing and promotional elements could not be fully ignored on the hopes that a larger consumer need was enough. The business model still had to work hard to ensure that the product was in reach to those who could realistically buy it. While it might be nice to sell cheap cars to the poorest of people, in reality it is those just above this level who are…

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