Tata Nano: design, production, and market impact

Tata Motors

Tata "Nano"

Tata Motors: Case study

Case summary

Tata Motors is a low-cost Indian car manufacturing firm, which has made cars affordable for average Indian consumers

Its so-called 'People's Car' is inexpensive, safe, and fuel-efficient

Tata has enabled members of the Indian middle class to become drivers, which would have been impossible without its focus on keeping prices low.

Tata has expanded internationally, outside of India, and is seeking to expand to the U.S.

Its cars can be assembled anywhere, created from pre-fabricated parts. The cars are minimalist, designed to keep costs as low as possible (for example, the cars have no air-conditioning or power brakes) and thus the company can pass the savings on to the consumer.

Q2. Major issues

Keeping quality high and cost low

Competing with other fuel-efficient, small, budget vehicles

Launching the product into the lucrative but very different U.S. market, which also has different safety standards than India

Q3. Identify the international management and business concepts/topics that are relevant to the case

Differentiation, economies of scale, globalization of business

Q.4 Relate the main issues (step 3) to the concepts (step 4) with explanation.

Differentiation: Tata has differentiated itself mainly on price. Its price-point is extremely low and the engineering and features of the Nano model were solely designed to keep the model within a certain price limit.

Economies of scale: The Nano was designed to be profitable for the company by producing the vehicles at a low profit margin, which would stimulate increased sales in a rapidly-developing market.

Globalization of business: The Nano must meet different national safety standards in light of its international expansion, many of which are considerably more stringent than in India.

Q5a. Do you agree that there is a future for low budget cars like Nano in other markets besides India?

It is possible that demand for ultra-low priced vehicles in China and other areas of the developing world may increase, although Chinese middle-class consumers can increasingly afford larger and more luxurious models. Certain aspects of the vehicle, such as its lack of air conditioning, are unlikely to be popular once consumers gain even a minimum amount of income.

Q5b. Do you think Tata Motors is going in the right direction by trying to develop its low-cost Nano models adapted to European and U.S. markets?