The Tata Nano has been one of those products you just cannot ignore. While it got media coverage around the world, the reactions, though mixed, flowed easily. On the one hand there has been pride in the “World’s cheapest” tag, as a great achievement for Indian industry. The “People’s Car” tag has been well received with the hope that a whole new category of people can look to buy a car now. On the other hand environmentalists have claimed nightmares of increased urban congestion and pollution.
Again, all these topics have been beaten to death in the media. Here we will take a quick look at how it should seriously disrupt the status quo in the Indian car market and the potential to replicate that abroad.
An indigenous car industry is considered the crown jewel of a nation’s manufacturing ability. Governments have put in great efforts to promote local car manufacturers. Today, most nations’ car markets are dominated by foreign companies.
A New Car Segment in India
The Tata Nano will create a new passenger car market segment in India. This will quickly become the biggest segment and will likely be dominated by Tata. This, combined with the strength of its existing portfolio, should make Tata Motors the biggest passenger car manufacturer in India. It will be the first time an Indian company will occupy that pole position with indigenously developed products. India will then be one of the few countries in the world where a local car manufacturer(s) dominates a market open to international manufacturers.
The Nano’s price pits it against products from Bajaj Auto, which has made a reputation for itself as India’s premier product development company in the two-wheeler space. Having already unveiled a prototype for a small car Bajaj has indicated that it will compete with the Nano. This will increase Indian presence in the new segment. The only other auto maker to have committed product competition to the Nano is Nissan-Renault and they might just collaborate with Bajaj.
Is there a World market for the Nano?
The “World” is actually a pretty disparate set of markets. However there are some common factors that are needed for success in any market.
First is cost of ownership. The Nano obviously does well on initial cost and fuel economy aspects. The third aspect of cost is determined by quality. Here the competition matters. Having cut its teeth competing against Suzuki and Hyundai in the Indian market, Tata Motors is obviously not going to achieve Toyota status in quality overnight. But that will not matter in the short term as neither Toyota nor any of its quality peers from Japan, Germany or the US are likely to provide product competition any time soon. And the Tatas sure are good at learning.
Second is compliance with government regulations on emissions and safety. The Nano might fail safety standards in some developed countries, but the low price provides a huge buffer to beef up on that front. And Tata Motors has made cars that meet the most stringent security regulations in the world, so they can do that for the Nano too – at a cost affordable for markets that require it.
Third is visual appeal and comfort. By most accounts it does look cute (Italian design does at least that much). It might suffer on the comfort perception in countries where it could be seen as cramped, but for four. Two-door hatchbacks (that seat two or five) are all the rage among economy minded buyers in the West. It should fit in that space – somewhere. Power might be a concern, but then replacing a 600 cc engine with a 1200 cc engine will not multiply the final price too much.
In summary, the Tatas look set to become the dominant player in the Indian car market via the new market segment established by the Nano. If allowed to compete on fair terms they should take this new segment to other developing countries too.
Will the price USP help it in developed countries though? In the United States there is a huge market for cars costing less than $10,000. Small cars were always popular in Japan and are catching on big-time in Europe too. There are lots of people even in the first world who cannot afford new cars. So there is a huge market in the biggest car markets in the world for a strong price warrior. The Nano was not made for these markets but the huge price difference it has with the cheapest cars in those countries offers plenty of room for redesign. Do you hear someone say that is impossible? Really – “impossible”?