Business

Tata Nano – Why Did the People Not Want the People’s Car?

Was it a bad idea, a good idea wrongly executed, or a great idea before its time?

Ten years after it was launched, Tata Motors’s Nano is dead, waiting to be formally buried.

In June 2018, only one Nano was produced and the company admitted two weeks ago that the car cannot continue in its present form after 2019.

When it was launched in 2008 it won a plethora of international awards based on its defining features – high fuel efficiency, low weight, designed to incorporate all international safety regulations then applicable and having the lowest emission level among all cars then being made in India – offered at the cheapest price in the world.

What went wrong and what lessons can be learnt?

First, several Nano cars caught fire in the first two years. Tata Motors rectified the glitches and offered an extended warranty for both new and existing cars but the reputational damage was done. Second, there was a production delay (having to shift from Singur, West Bengal to Sanand, Gujarat) of 18 months which was acutely felt because of high expectations created by the hype over the car. Third, it was low on riding comfort, lacking the stability that greater weight gives.

Fourth, the biggest initial selling point – the cheapest car you can get – boomeranged. Value-conscious Indians, particularly those who would like to switch from a scooter to a car, should have embraced it with open arms but didn’t. This reaffirmed the widely-held notion that a car does more than taking you from point A to point B. It is an aspirational symbol. Prospective buyers felt that to be seen owning the “cheapest” was to acquire a lowly social status. Instead of being a people’s car it actually had a niche appeal among the trendy for being cute and almost funky, like the now-dead Matiz of Daewoo.

Finally, Nano was never the “one lakh” car, as was originally indicated by Ratan Tata whose brainchild it was. Over time the gap between the Nano and the cheapest car in the market narrowed. Right now, the lowest on-the-road price of a Nano in Delhi is quoted at Rs 2.59 lakh, compared to the cheapest Alto 800 going at Rs 2.88 lakh.

Nano was Ratan Tata’s brainchild. Credit: Reuters

Compared to this, several positive features remain. One, for a car that small, it is unbelievably roomy inside. The leg space in front is huge, enabled by the engine being at the back of the car and space in the rear is about the same as in other small cars. Two, the car is extremely robust and holds up very well in cross country long distance travel. It has a higher clearance than the competition and has been taken successfully across Ladakh through 10,000 ft plus altitudes.

Three, perhaps the biggest plus is its fuel efficiency and correspondingly low levels of emission. This factor becomes more and more important as global concern grows over the ill effects of burning fossil fuel on global warming and climate change. Fuel efficiency and emissions were an issue when the Nano was launched and oil prices hit $100 per barrel. Most recently, oil prices have again risen sharply, putting an end to the complacency created earlier with growing US production of shale oil.

Car emission issues are being currently addressed by the rapid mainstreaming of electric cars. Tata Motors is known to be developing an electric version of Nano. Even without going electric, a smaller car scores by using fewer non-renewables like metals. The notion of “small is beautiful” has still miles to go before becoming mainstream and over time the smallest car should win, other things being equal.

With this kind of a pros and cons balance Nano should not have lost out but why did it? Was it too early for its times? A key lesson from failed start-ups is: Worse than being wrong is being early. Many ideas and ventures that died when the dot-com bubble burst at the turn of the century have been revived by being refashioned.

People in developing countries with growing incomes increasingly go for bigger cars. Witness the growing number of big cars on India roads, not to speak of China. It is the developed countries, particularly those in Europe, which have stopped being fascinated by big cars. Across the developed world personal demand for large cars is being affected both by increasing policy focus on public transport and the success of ride-hailing services like Uber.

Maybe Indians would have liked the Nano better somewhere down the line when big cars mattered less to them.

The issue of arriving too early holds very well for cars. General Motors put out the first electric car, GM EV1, in 1996, that is, after both the first and second oil shocks in 1973 and 1979. But the car sold poorly and was discontinued. Then came along Tesla with all the hype generated by its founder Elon Musk. Tesla has just crossed the cumulative sales milestone of 200,000 cars (after this US tax concession will cease) and GM is following behind.

A Tesla Model S charges at a Tesla Supercharger station in Cabazon, California, US, May 18, 2016. Credit: Reuters/Sam Mircovich/File Photo

Take the case of AltaVista, founded in 1995, which brought the “magical” service of coming up with answers to questions keyed into a computer. But the service was then not much used for it to make a difference to its owners. Being something that few wanted, it passed through the hands of successive owners and Yahoo finally killed it in 2013. Despite being a failure, AltaVista laid the foundations of that is currently one of the most used services of modern life – “googling” to find an answer, the word spelt with a small ‘g’ as the action has gone generic.

Or take the case of “same day delivery”, made possible today by Amazon, Google and the smartphone and also the sea changes that have taken place in logistics. But Kozmo.com and Webvan.com failed during the dot-com bubble burst.

Thus ideas that die are often reborn by being transformed. A Harvard Business Review study of why Nano failed makes the general point that a “novel” product (Nano was one) has to address the following questions: is it wanted, who wants it and under what circumstances will people use it? The answer to these will help formulate a value proposition, differentiating the product from the competition, which will have to be clearly targeted. The targeting of the scooter owner was wrong as he was more keen on social mobility and less worried about climate change.

By making a big pre-launch global splash and low cost being tied to volume, Tata Motors launched Nano as a volume car with large production capacity. It could not and did not want to think small – begin small and learn, change and adjust as it went along.

It will take time before the unbearable pollution in Indian cities will make people realise that it will be best not to own a car and rely on efficient public transport. Or if you must have a car then a small car will be preferred. Then, perhaps, the day for an electric Nano will come.

Subir Roy is a senior journalist and the author of Made in India: A study of emerging competitiveness (Tata Mcgraw Hill, 2005) and the forthcoming Ujjivan: The microfinance frontrunner (OUP).

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