Lut12575_cs03_388-418.indd Page 399 2/7/11 7:27 PM user-f494 /Users/user-f494/Desktop/TEMPWORK/Feb/07:02:11/new In-Depth Integrative Case 3.1 Tata “Nano”: The People’s Car Nano, India’s first “People’s car,” may soon earn a place which is affordable and yet built to meet safety require- in history alongside Ford’s Model T, Volkswagen’s Beetle, ments and emission norms, to be fuel efficient and low and the British Motor Corp.’s Mini, all of which made on emissions. We are happy to present the People’s Car automotive travel within reach of millions of customers to India and we hope it brings the joy, pride and utility who had previously been locked out of the car market. In of owning a car to many families who need personal January 2008 during India’s main auto show in New mobility.” 6 Delhi, Tata Motors introduced to the Indian public its Middle-class household incomes in India start at ultra-cheap car “Nano” that was expected to retail for as roughly $6,000 a year, so a $3,000 car is the kind of little as the equivalent of $2,500, or about the price of the innovation that could create millions of new drivers. Eight optional DVD player on the Lexus LX 470 sport utility million Indians currently own cars, according to the vehicle. 1 This event had driven unprecedented public Mumbai-based credit-rating agency Crisil. Another 18 mil- attention, since Tata’s new vehicle was projected to revo- lion have the means to buy one. However, the Nano could lutionize the auto industry. 2 increase that pool of potential auto owners by as much as The emergence of Tata Motors on the global auto scene 65 percent, to 30 million. “This goes beyond economics marks the advent of India as a global center for small-car and class,” says Ravi Kant, managing director of Tata production and represents a victory for those who advo- Motors. “This crosses the urban-rural divide. Now a car cate making cheap goods for potential customers at the is within the reach of people who never imagined they “bottom of the pyramid” in emerging markets. Most of would own a car. It’s a triumph for our company. And for all, the car could give millions of people now relegated India.” 7 to lesser means of transportation the chance to drive cars. 3 In India, there were fewer than 10 cars for every thousand Designed with a Family in Mind people in 2007, compared with 40 per thousand in China, Though Nano’s design triggered different comments from and 450 in the U.S. Far more middle-class Indians bought the public—some people called it handsome; 8 others and transported their entire families on scooters. 4 called it egg shaped 9 —overall Tata Motors was very According to some analysts, Tata Motor’s Chairman proud of the design, which was developed with a family Ratan Tata hopes to use the Nano to become the Henry in mind. 10 From Tata’s perspective the new Nano addresses Ford of emerging India, in part, by offering a car at a several key characteristics that Indian families would fraction of the price of rival products. The company is prize in a car: low price, adequate comfort, fuel-efficiency, gambling that its tiny price tag will make it appealing to and safety. Indians who now drive motorcycles and scooters. According to Tata, Nano has a roomy passenger com- While India’s population is more than 1 billion people, partment with generous leg space and head room, and it only around 1 million passenger cars were sold in the can comfortably seat four persons. Four doors with high country in 2007, one-tenth as many as in China. By con- seating position make ingress and egress easy. With a trast, more than 7 million motorcycles and scooters were snub nose and a sloping roof, the world’s cheapest car can sold. Mr. Tata said the tiny car is aimed at keeping the hold five people—if they squeeze. 11 Nano’s dimensions families of India’s growing middle class from having to are as follows: length of 3.1 meters, width of 1.5 meters, travel with as many as four people on a scooter. 5 and height of 1.6 meters. Tata suggests these compact Speaking at the unveiling ceremony at the 9th Auto dimensions should allow the car to effortlessly maneuver Expo in New Delhi, Ratan Tata said, “I observed families on busy roads in cities as well as in rural areas. Its mono- riding on two-wheelers—the father driving the scooter, volume design, with wheels at the corners and the power his young kid standing in front of him, his wife seated train at the rear, enables it to combine both space and behind him holding a little baby. It led me to wonder maneuverability. 12 At 10 feet long, the Nano is about whether one could conceive of a safe, affordable, all- 2 feet shorter than a Mini Cooper. 13 weather form of transport for such a family. Tata Motors’ The car is available in both standard and deluxe ver- engineers and designers gave their all for about four years sions. According to the company, both versions offer a to realize this goal. Today, we indeed have a People’s Car, wide range of body colors and other accessories so that 399 Lut12575_cs03_388-418.indd Page 400 2/4/11 9:37 PM user-f494 /203/MHBR222/Lut12575_disk1of1/0078112575/Lut12575_pagefiles 400 Part 3 International Strategic Management the car can be customized to an individual’s prefer- December 2006 Tata earned $116 million on revenue of ences. 14 But reviewers called the basic version spare: $1.55 billion. Annual revenue grew to $5.2 billion for the There’s no radio, no air bags, no passenger-side mirror, fiscal year ending in March 2006. 20 Now Tata Motors and only one windshield wiper. If you want air condition- Limited is India’s largest automobile company, with con- ing to cope with India’s brutal summers, you need to get solidated revenues of Rs.70,938.85 crores (US$14 billion) the deluxe version. in 2008–2009. It is the leader in commercial vehicles in According to the company, Nano has a fuel-efficient each segment, and among the top three in passenger vehi- engine powered by the lean design strategy that has helped cles with winning products in the compact, midsize car, minimize weight, maximize performance per unit of and utility vehicle segments. The company is the world’s energy consumed, and deliver higher fuel efficiency. 15 The fourth largest truck manufacturer, and the world’s second final design stands at 1,322 pounds, 528 pounds lighter largest bus manufacturer. The company’s 24,000 employ- than the flyweight Honda Insight. To power it, the engi- ees are guided by the vision to be “best in the manner in neers settled on a 33-horsepower, 623-cc, two-cylinder which we operate, best in the products we deliver, and engine housed in the rear; to service it, the mechanic must best in our value system and ethics.” 21 remove a set of bolts in the 5.4-cubic-foot trunk. The pay- Established in 1945, Tata Motors’ presence cuts across off: an uncommonly efficient 47 miles per gallon running the length and breadth of India. Over 4 million Tata vehicles at top speed (65 mph). But that doesn’t mean Nano own- ply on Indian roads, since they first rolled out in 1954. The ers won’t spend a lot of time pumping gas—the minuscule company’s manufacturing base in India is spread across tank holds just 3.9 gallons. 16 Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow According to the company, the People’s Car’s safety (Uttar Pradesh), Pantnagar (Uttarakhand), and Dharwad performance exceeds current Indian regulatory require- (Karnataka). Following a strategic alliance with Fiat in ments. With an all-sheet-metal body, it has a strong pas- 2005, it has set up an industrial joint venture with Fiat senger compartment, with safety features such as crumple Group Automobiles at Ranjangaon (Maharashtra) to pro- zones, intrusion-resistant doors, seat belts, strong seats and duce both Fiat and Tata cars and Fiat powertrains. The com- anchorages, and the rear tailgate glass bonded to the body. pany is establishing a new plant at Sanand (Gujarat). The Tubeless tires further enhance safety. Tata also placed company’s dealership, sales, services, and spare parts net- emphasis on environmental friendliness. According to a work comprises over 3,500 touch points; Tata Motors also corporate press release the People’s Car’s tailpipe emission distributes and markets Fiat branded cars in India. 22 performance exceeds regulatory requirements. In terms of Tata Motors has also emerged as an international auto- overall pollutants, it has a lower pollution level than two- mobile company. Through subsidiaries and associate com- wheelers being manufactured in India today.17 panies, Tata Motors has operations in the U.K., South Korea, Thailand, and Spain. Among them is Jaguar Land About Tata Motors Rover, a business comprising the two iconic British brands Tata Motors is a part of the Tata Group. The Tata Group that was acquired in 2008. In 2004, it acquired the Dae- is considered the General Electric of India, a sprawling woo Commercial Vehicles Company, South Korea’s sec- conglomerate with a commanding presence in media, tele- ond largest truck maker. The rechristened Tata Daewoo com, outsourcing, retailing, and real estate.