Tata Motors, the General Electric of India is a conglomerate with a commanding presence in a vast industries across India and globally. In January 2008, Tata introduced to the Indian public it’s ultra cheap car “Nano”. The expected retail price for the Nano was expected to be as little as USD2,500 and would cater for the fast growing middle class segment of the Indian population. Tata Motors was set to change the face of the automobile industry in India. This was however met with some challenges, given the economic environment of India and thereby causing a delay of the launch by six months. The introduction of the “People’s car” created a new category/ trend of ultra cheap cars which then led to other auto makers following in hot pursuit to roll out their own brand of vehicles in this category.
What inspired Tata Motors to build the Nano? Why was there a need for an inexpensive car in India?
In India there were fewer then 10 cars for every thousand people in 2007. Middle class household incomes in India start at roughly USD6,000 – USD3,000 per annum. While only 8 million Indians at that time owned a car (Crisil) another 18 million have the means to buy one.
The idea of Nano–The People’s Car was inspired by the middle class Indians who bought and transported their entire families on scooters. To most middle class families in India owing a car is a far cry. Rattan Tata, Tata Motor’s Chairman said that the tiny car is aimed at keeping the families of India’s growing middle class from having to travel with as many as four people on a scooter. It led him to wonder if a safe, all weather form of transport for a family can be conceived at an affordable price. It took Tata motors four years to realize this concept which today is a People’s Car, which is affordable and yet built to meet safety requirements and emissions. The advent of Nano has seen an increase of about 65 percent of Indian families who can now afford to purchase a car.
What innovative steps did Tata undertake to design the Nano in a way that would meet the $2,500 price tag? Do you think tht the low price automatically means poor quality? How did Tata Motors address the quality issue while developing its budget car?
Tata Motors addressed several key characteristics that Indian families would place importance on when considering a car low price, adequate comfort, fuel efficiency and safety. Applying the ‘Ghadian engineering’ principle Tata started working from scratch taking into account accessories and certain features that most Western consumers take for granted. With the customer at the center of their consideration Tata took into account the customers needs, wants and affordability. Tata set USD2,500 as the price that it thought customers could pay and then worked backwards. Working with less and using the lean design concept, engineers and suppliers worked together to redesign many components. This coupled with reduction in the amount of steel in the car and the use of lightweight steel reduced the cost tremendously.
The most innovative aspect of the Nano is it’s modular design, which has reduced cost significantly for the supply chain and distribution network for Nano, where it can be sold in innovative kits approach in which their components can be build and shipped separately to be assembled at various locations. This has, in turn opened up business opportunities for local entrepreneurs.
Adhering to safety and environmental regulations, Tata did not compromise on the quality of making a car. Tata Motors took innovative, creative and cost effective route to redesign existing parts of a normal car and thereby lowering the cost leading to 34 patents associated with the design of the Nano. Example, Nano has a smaller engine because more horsepower would be a waste in India’s jam packed cities where cars travel at an average speed 10-20 miles an hour thus making the airbags a redundant feature of the car. The Nano’s...
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