N Madhavan
When Ratan Tata unveiled the Nano in 2009 at the New Delhi Auto Expo, the car propelled India's global standing in the sphere of frugal engineering and
reinforced his image as a visionary business leader.
The "People's Car", as it was called because of its Rs 1 lakh base price, was supposed to transform the auto sector in India and rest of the developing world. In a 2009 report, rating agency CRISIL, in fact, predicted that the
Nano could expand the Indian car market by as much as 65 per cent.
Four years later, the story is very different.
In the festive month of November, just about 3,500 Nanos were sold as against the monthly production capacity of 21,000 units. In the April-November period, total sales were at 39,646 units.
A fair share of India's two-wheeler owners - about 12 million get purchased a year - who were expected to upgrade to a Nano failed to turn up at Tata Motors's showrooms. The company has cut back production at the
Rs 2,000 crore Sanand plant in Gujarat. Many vendors supplying components to the Nano have begun laying off workers as their volumes have shrunk too.
As Ratan Tata
hung up his boots as Chairman of the Tata Group in December, the Nano project ended up as a blot on his otherwise impeccable performance record.
A lot went wrong with the Nano, say experts. Its product development was top down as against the well proven bottom-up approach, where the car's specifications are fixed through market feedback and the price then arrived at. In the Nano's case, the product development team (which also designed the highly successful Tata Ace mini truck) had to work with a huge limitation - a price cap of Rs 1 lakh.
B.V.R. Subbu, automotive entrepreneur and former President of Hyundai Motor India, feels an obsessive focus on costs may have done the product more harm than good.
"My personal view is that the vendor management team at Tata Motors may not have been completely open with RatanTata on cost issues. They brought down the cost of components by squeezing vendor margins to achieve the 'promise', rather than through innovation in design and materials."
Some vendors began to cut corners and in the end the car was not built as well it should have been. This led to safety and other issues - at least three instances of Nanos catching fire were reported - putting off first-time car buyers.
Jagdish Khattar, the man who led India's largest carmaker, Maruti Suzuki, for five years until 2007, is more categorical. "No one can make a car for Rs 1 lakh," he says.
Khattar, a former managing director of Maruti Suzuki, is Chairman And Managing Director of Carnation Auto, a car service and resale chain. "In 1993, when I joined Maruti, 80 per cent of the cars sold were without air-conditioners. In the next eight years this number had dropped significantly to 15 per cent. Power steering also saw a greater adoption among small cars," he says.
The base model of the Nano was launched without air-conditioning and power steering, to keep the price within Rs 1 lakh.
There were communication issues as well. The Nano was projected as a cheap car rather than an innovative car. "In a country where car ownership is aspirational, it was not the right brand statement. It was like saying I can't afford anything else, so I bought a Nano," says Subbu.
Then there was the massive delay between the announcement and product rollout on account of problems at Tata Motors's proposed
production site in Singur, West Bengal. "The excitement that built up at the time of the announcement faded by the time of the launch. Ideally, it should have been converted into sales," says Khattar.
Tata has admitted that the company failed to capitalise on the initial excitement.
"I don't think we were adequately ready with an advertising campaign and a dealer network," he told journalists in January 2012 at the biennial Auto Expo event. "I don't consider it a flop. I consider that we have wasted an early opportunity," he said.
What is the future of the Nano? Can it be revived?
"A whole lot of things need to be set right for the car to become a long-term commercial success. Karl Slym's long experience in GM India will surely come in handy," says Subbu. Slym joined Tata Motors in August 2012 as Managing Director.
Tata Motors needs to engage in an intense stock taking to come up with a clear plan, suggests Khattar. A starting point might be a chat with K. Mahesh, a Chennai resident and CMD of Sundaram Brake Linings Ltd, a TVS group company. Mahesh is an avid fan of the Nano. "A gun, a camera and a car should be an extension of oneself. This car behaves exactly the way you want," he adds.
Mahesh drives a Nano to work, leaving his Toyota Camry in the garage. He has modified the small car with tweaks to the dashboard, among other things, and shared some of his experiments with Tata Motors, a long-time client of Sundaram Brake Linings. Mahesh is in the process of converting his second Nano into a coupe. "In a country where there are youngsters with a lot of disposable income, a coupe priced at even Rs 3 lakh will sell," he says.
Big changes may indeed be what the Nano needs. The question is whether Cyrus Mistry, the new Tata Group chairman, has the same passion for the "People's Car" as Ratan Tata.
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