Will Tata Motors End Production Of Nano?
Back in the 1930s, Germany’s Adolf Hitler dreamt of a cheap and good car for his country's new road network and eventually contracted Ferdinand Porsche to design and build what was later christened ‘Beetle’. The result was the creation of a masterpiece as the first people’s car by Volkswagen raked in 20+ million units worldwide without going for any makeover.
About 75 years later, Ratan Tata envisioned a similar product christened ‘Nano’ for Indian people to upgrade from two-wheelers to a car which would be available at a dirt cheap price. However, his vision could not be realized as this model's sales nosedived and the product is almost on the verge of extinction. Moreover, safety and emission norms are expected to drive up vehicle prices by Rs. 1 lakh-1.5 lakh making it commercially unviable for Tata Motors to continue its sales.
A senior executive from a leading tier-1 auto component manufacturer supplying critical parts to Tata Motors for its Nano stated on condition of anonymity, “We have not got any heads up from Tata Motors for the Nano. The current orders have also not been impressive and it looks unlikely that they (Tata Motors) would be interested to upgrade the model to comply with BS-VI norms.”
A leading business daily has reported that Cyrus Mistry, the ousted Tata Sons chairman, has estimated cumulative loss from the Nano project to the tune of Rs. 6,400 crore.
Tata Motors’ dealer sources have revealed on condition of anonymity, “We have not got any intimation on the Nano. But Tata Motors is now focusing on the next-generation products, which will also create new segments for the company. The current-gen models will be either phased out or replaced progressively. The company has not revealed any plans for the strategic revival of Tata Nano for FY18.”
The official spokesperson of Tata Motors, when contacted by BW Businessworld, stated, “As we have stated earlier, the hatchback segment is very important for us and the regulations and customer preferences are going to play a major role in defining various sub-segments within this segment. We already have a well-defined PV strategy in place that will look at not only the best way of addressing the segments’ requirements but an overall perspective of the portfolio. With regards to plans for Nano, we do not comment on product wise future plans.”
Puneet Gupta, South Asia Manager -Vehicle Sales Forecast, IHS Markit, stated, “Tata Nano looks to be a sad story and is almost at its fag end. In a market like India, car penetration is still 30/1000 household and the two-wheeler market is 18 million every year. So there is clearly a white space and Tata Nano was a perfect answer and fit. Unfortunately, the product didn’t click due to known reasons but this doesn’t mean this gap will always remain empty. We may see Tata and any another player who may try to fit a product in-between may be with some different strategy. I think potential remains huge but after Tata Nano failure, it’s a mammoth task to first convince internal management to introduce the product in a similar segment as fear of failure scores more than chances of success.”
An emailed questionnaire sent to Ratan Tata, Chairman Emeritus, Tata Group remained unanswered till the time of publishing the report.
Made and sold in India, the Nano was initially launched (in 2009) with a price of Rs. 1 lakh (approx US$1,600), which was revised upwards over time when it was upgraded. Designed to lure India's burgeoning middle classes away from motorcycles, the minicar garnered whopping bookings in the initial phase (surpassing the 200,000 mark in May 2009). Its sales peaked during 2012 after which the numbers dropped massively.
With the launch of GenX Nano, the company somewhat managed to revive its numbers during FY16 by selling 21,012 units from lower sales of about 16,901 units in FY15. However, the company couldn’t maintain the momentum as its sales reached rock bottom at 174 units in March’17 (vis-à-vis 732 last year). Its sales for the last two months have also been pretty dismal at 350 units (vis-à-vis 1,100 last year) in April’17 and 355 units (856 last year) May’17. The financial year 2016-17 saw only 7,591 units of Tata Nano being sold, registering a whopping decline of 63 per cent in its annual sales.
Abdul Majeed, partner at PwC India and a sector expert, “Tata filled in the white space as many people wanted to upgrade from a two-wheeler to an affordable small car. First off, Tata Motors couldn’t create a mother plant (for the Nano) which was necessary to roll out the product. As a result of that, the product was plagued with quality issues which ultimately hampered its sales. Eventually, the price tag was further increased thus pitting it directly against competitors coming up with low-cost variants of its existing entry-level cars (like Alto). Also, the positioning of the model as the cheap car did not go down well with prospective Indian buyers as owning a car is considered a status symbol in the country.”
It may be recalled that the Nano had to grapple with multiple issues throughout its life-span. The car was supposed to be built at Tata’s Singur plant but its production was eventually shifted to Sanand in Gujarat due to political backlashes. Thereafter, there were several incidents of the vehicle catching fire which ultimately hampered its image. As its output dropped to a mere 20% of the overall capacity, other new models like Tigor and Tiago started rolling off the production lines at the Sanand plant.
