Tata Nano Case Study

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CASE BRIEF – TATA NANO

DESCRIPTION
Tata developed and started manufacturing Tata Nano, “the cheapest car in the world”, and has to decide the level of production capacity. Should Tata be conservative risking to cede market to competitors or should they make an aggressive commitment?
EVALUATIONS
Tata worked years to develop a ULCC (Ultra Low Cost Car) targeting the bottom end of the pyramid of the Indian population. The development of Tata Nano was based on 3 main targets: cost lower than Rs 1 lakh, meet Indian domestic regulations, and performances meeting the minimum customer acceptance.
The Indian potential market for such ULCC is estimated to be 380,000 units/year, and initial sales shows most of the requests coming for the top Nano model
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• POLITICAL: Various Indian states offered incentives to set the production in their land. Export of car is growing especially in Asia and Africa. Tax reduction are applied to specific vehicle such as UV and MPV.
• ECONOMICAL: Asia is the fastest growing automotive market. Global recession impacted the industry and limited the available founding. Pricing and exchange rates impact the production and would set barriers to export in other countries, such as Africa.
• SOCIAL: India population is more than 1 billion and the focus of Nano is to target the bottom of the pyramid, which is around 300 million. By 2020 the average and disposable income will grow significantly and there will be a substantial growth of the middle class. Farmer protests due to subtracted land in Singur led Tata to move the production.
• TECHNOLOGICAL: 4 million Tata’s vehicle are running in the Indian roads. The infrastructure are not at the top but are present, and with the economic growth have potential to improve and make the industry grow. Indian engineers were focusing on R&D internal and external activities in order to build innovative solutions and
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However, Tata should get rid from the etiquette “the cheapest car” the Nano has. In fact, the ambition of the low-income population – first target – is to climb the social ladder, hence owning “the cheapest car” won’t help their goals. In the same way, the middle class – second target – is not going to buy the cheapest car in the market. Therefore, Tata should reposition the Nano from being “the cheapest car” in the market on being a “small and dynamic car for all days”. This can be reached by reworking on the promotional campaign but also allowing more options and/or car models, hence extending the pricing range up. Doing so, will help to capture part of the growing middle class population which is looking for a second car, or a comfortable car still not expensive. Additionally, even if the Nano’s price is low, for most of the potential customers is a high reach. Therefore, Tata should make financial options available for those people in order to boost the sales and reach or pass the 250,000

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