Saving Nano

7/28/2019 Saving Nano

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Saving Tata Nano

byAshish K Mishra

The fate of thePeoples Car hangs in balance, with its prospective

customers giving it a miss. Now, Tata Motors has mounted a massiverescue act

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Image: Dinesh Krishnan

Ravi Kant has always had a formidable reputation as a marketing whiz. In themid nineties, he helped Titan emerge as one of the most powerful brands inthe country. Under him, LML was able to put up a spirited fight againstBajaj Auto. And the story of how Tata Ace came to dominate the mini-truckmarket under his leadership is part of company folklore.

But none of these achievements may have quite prepared him for thebiggest challenge at the fag end of his professional career. Today, as vice
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chairman of Indias biggest automotive company, Tata Motors, Kant hasthe onerous responsibility of reviving an iconic brand that completely

veered off course: The Tata Nano.

The Nano was always more than just a car. It was Tata group supremoRatan Tatas dream project to bring an affordable transportation solution

within reach of the masses. The promise of a small car priced at Rs. 1 lakhhad fired the imagination of an entire nation and the global automotiveindustry. Yet, in August 2010, 18 months after its launch, Kant has now

been forced to take over the wheel to salvage a dream that has gone badlywrong. It was only once the November sales figures came out that the worldrealised the enormity of the crisis.

Nano sales that month, widely considered to be a peak festival month for

sales, had plummeted to just 509, its lowest ever, which also included 68units bought by its own employees at a company loan scheme of 2 percent.This was despite the fact that the car was available off-the-shelf in at least10 major states across the country.

One has to distinguish between the bookings that took place in 2009 andopen sales, started since August 2010 in phases. The reported sales of theTata Nano in the month of November are what has been supplied todealers, and not retail sales, during the month as per plan. Sales willincrease as we go on expanding, says a Tata Motors spokesperson.

So far, 71,000 Nanos have been sold, representing only about 40 percent ofthe projected sales target. Tata Motors has invested Rs. 2,000 crore in theNano project, including a 2,50,000 units-a-year plant in Sanand, Gujarat.But sales have simply not taken off.

For the past three months, Kant has led a review inside Tata Motors alongwith Global CEO Carl Peter Forster and managing director P.M. Telang onthe Nano project every day.

For starters, the Nano marketing team has been completely reshuffled,following the exit of Rajeev Dube, the head of its passenger car businessand Nitin Seth, who headed the car product group. New brand teams havetaken over. The distribution strategy has been redrawn, confidence

boosting measures like an extended warranty and Rs. 99 a monthmaintenance contracts have been introduced, and a new advertisingcampaign on television and outdoor has been launched to boost awareness,particularly in tier II and III towns. Evidently, Tata Motors is strainingevery sinew to breathe new life into the Nano. And insiders say Kant is

monitoring every aspect at the daily reviews: How many customers havewalked into outlets post an ad campaign? How many of the walk-ins was


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the dealer able to convert into sales? How many new outlets were opened inthe last one week?But in the automotive world, there are few believers in the Nano story. Isthere anybody in the country who does not know the Nano? It was ahousehold name even before the launch of the car. It is not clear what will itgather from a few crores of advertising, said a competitor, on condition ofanonymity. Some believe that the sales drop to 509 units in Novembersuggests that the product has been rejected outright

by customers.

Kant and his team seem to be in no mood to give up though.

The Supply-side WoesEarly last month, Tata Motors organised an all-India vendor meet to

restore confidence among the vendor community and discuss the future ofthe Nano. Managing Director Prakash Telang, a Tata Motors veteran, madean impassioned presentation assuring everybody that necessary action

would be taken and that Nano sales would gradually increase to about15,000 units by March 2011. He implored suppliers to focus on the long-term relationship and hang in there. In a suppliers meet people will give

you the confidence. But when you are back in your office alone and startthinking, that is when you realise that the fire is much more than you hadthought, says a director at a sizeable vendor for the Tata Nano.

Early in the product planning stage, Tata Motors had promised himvolumes upwards of 1.75 lakh units a year for his component, which forms avery crucial part of the car. Right from the start, the project was highly costintensive and we spent a lot on the technology learnings and setting up thefacility. So volumes were the only way we could have made money. Today

we are nowhere near that, adds the supplier.

It is pretty much the same story for a lot of suppliers to the project. Worse,quite a few are still supplying for the Nano based out of Singur, WestBengal. Either they do not have the required funds to invest near the newNano plant at Sanand, Gujarat or they are sitting on the fence, waiting for aclear picture on the Nanos future. There is no subsidy from the WestBengal government for the people who have been left behind in Singur. Andthe export potential which was another opportunity has still not come in.So, I dont think we will be able to make any money on this and right nowquite a few of us are bleeding, says the supplier.

With more than Rs. 1,000 crore of their investments stuck in the Nanoproject, suppliers have no way out, other than to hope that Tata Motors is

able to turn the tide.


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Questioning the AssumptionsWhen bookings opened on April 9, 2009, Tata Motors dealers expected asurge of customers. The company printed over 20 lakh booking forms andexpected bookings to be more than 5 lakh.

State Bank of India bought several thousand forms from the companyexpecting a rush to buy the peoples car. Yet with each passing day, the

disappointment was palpable. Showroom floors were empty and many hadto coax existing customers to come and look at the Nano. On April 25,2009, when the bookings were closed, Tata Motors announced it hadreceived a total of 2,06,703 bookings. But only 1,00,000 lucky customers

would get the delivery of the car till the last quarter of 2010. We wereexpecting more than twice or thrice the number of bookings we actuallyreceived, says an insider at Tata Motors.

By all indications, the decision to opt for the booking route for the carcompletely backfired. We asked customers to pay the full amount of the

car upfront and not see or drive the vehicle for more than six months. Thatkilled the interest straight away and the real two wheeler customer who was

your target didnt come up at all because he never had such a big amount incash in any case, says a dealer. Over June-August 2009, Tata Motorsreceived a spree of booking cancellations amounting to more than 50percent of the original short-listed applicants.

These setbacks have focussed the attention on the key marketingassumption: That two wheeler owners would upgrade to a car whenpresented with an affordable option. A significant number of senior citizensand existing car owners would also opt for a second or third car for shortrides.

A two-wheeler is a necessity, while a four-wheeler is looked at as a luxuryin India, says a competitor, who did not want to be quoted. Then kicks inthe running and maintenance cost of a four-wheeler. Later on, we didcalculate that it would be three times that of owning a motorcycle and that

would make the transition very difficult, adds the marketing executive.Add issues of parking space and security of the vehicle. You have to

understand that the average two wheeler fellow lives a very humbleexistence, probably in spaces where the car would not even reach his
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doorstep, says the competitor.

Initially, Tata Motors did nothing to communicate the pride of ownershipin the Nano. It simply assumed that customers would walk in, swayed bythe concept of a Rs. 1 lakh car. And to top it all, once incidents of fire in theNano began trickling in during the September-October 2009 period, itfurther dented the image of the Nano. Throughout this period there wasabsolutely no communication from Tata Motors to the public. Wepresented Tata Motors with a complete [communications] package toensure that the customer who is waiting for his Nano should feel the wait

worth his while but nothing was implemented. The attitude within thecompany seemed like the world is waiting for us to talk, says a senioradvertising professional who has worked on the Nano project.

The Fightback

Key to Happiness A major outdoor campaign together with a fast trackloan scheme is expected to lure the elusive buyerTata Motors has now put all its cards on the table to lure the elusive buyer.Percept Out-of-Home has been roped in for a major outdoor campaignacross 104 towns in five states. Our brief was to make people aware,primarily in the tier II and tier III towns, that hey the Nano is nowavailable in showrooms. The idea was to talk to the masses, new car buyersand also those looking to upgrade from a two wheeler to a car, highlightingthat finance is available for the brand, says Sanjay Pareek, the head ofPercepts outdoor business.


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Buying a Nano has been made as easy as perhaps window shopping. Now, acustomer can just walk into a Tata Motors showroom, test drive the car andstraightaway buy the Nano with almost 90 percent financial assistancefrom banks that Tata Motors has tied up with. Fast track loan schemes have

been announced. If the customers documentation is clear, SBI will financethe buy at an interest rate of 8 percent for the first year and 10 percent forthe second and third year. In case the documentation isnt clear, then TataFinance steps into the game offering a fixed rate of interest of 13.5 percent.Such a scheme is unheard of in the automotive industry.

Insiders believe that this is perhaps the best way to tackle the problem ofthe Rs. 1 lakh sticker price misconception in peoples minds. It [The truecost of the Nano] is as high as Rs. 1.7 lakh on road for the basic stripped

down model. So in turn you sweeten the affordability factor by playing onthe financing aspect, says a senior Tata Motors official.

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Saving Nano