The Nano Breakthrough

http://www.nytimes.com/2010/12/10/business/global/10tata.html?emc=eta1

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"Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in public or private life, have been the consequences of action without thought." (Bernard Baruch)

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The $2,200 (or $2,500, or $2,900) car that many thought would change everything hasn't changed anything. When the Tata Nano was introduced in early 2009, it was billed as the modern day "people's car."

The price point for the car was considered the right place for those who were looking to move up from the motorized bike or three wheeler. And, of course, as its sales grew in India, it would then take on the rest of the world.

The only problem is that it hasn't taken off in India. The Indian economy is growing at nearly 9% annually while sales of the Nano have been falling for the last four months. Tata Motors has sold (wait for it!) "509" Nanos to its dealers in November. This would be in contrast to the 9,000 Nanos that it delivered in July.

The largest selling car in India for November was the Maruti Suzuki Alto: 30,000 units sold. It's price point: $6,200.

So, is the Nano at the wrong price point?

Analysts have concluded that it may not be sufficient to make cheaper, smaller versions of existing products. Their conclusion: companies need to make sure the products are widely available and are seen as safe, useful and alluring.

There is a booming car market in India that has passed the Nano by. Total auto sales in India climbed more than 22% in November to 203,000 cars. The most popular cars are small, fuel-efficient hatchbacks that sell for $10,000 or less. Maruti Suzuki (a division of Japanese automaker Suzuki) now sells half of all cars sold in India.

Tata, which started as a locomotive and truck maker, has gradually built market share in the car business over the last 20 years on the strength of modestly priced cars and sport utility vehicles. The Nano was Tata's big bid to shake up the car market in India and then go global.

Unfortunately, the Nano was troubled from the start when it's production plans were thrown off by local protests over where they would be constructing the Nano factory. Tata had to relocate the factory to another state, Gujarat - causing it to take more than a year and a half to fill orders for the first 100,000 cars.

More recently, the Nano has been hurt by reports of "fires" in a handful of cars. This has been a problem with the Nano's image, made worse by the company's explanations for the fires which convinced no one.

Logistically, the company has gone from only taking orders for the cars to making them available for immediate purchase in more sites around the country (which they should have done in the first place).

So "safety" (which may not yet be resolved), marketing and sales strategies appear to be in need of polishing. Given that Tata Motors is the same company that bought Jaguar and Land Rover from Ford, we have thoughts that there are the financial resources there to fix these problems. But, one has to ask why the problems occurred in the first place.

We would guess that there are "quality" and vehicle "size" questions that need to be addressed as against the competition which is selling more and larger cars.

We wonder what's next for the Nano.