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Introduction

Tata Nano car is actually a rear-engined, four passenger city car built by Tata

Motors, aimed primarily at the Indian market.

The Tata Nano car which is often called as the “people’s car” was launched on

March 23, 2009. The sales of the Tata Nano car kick-started from July 2009.

Priced at a mere Rs.1, 15,000 which is equivalent to $2,421, the Tata Nano car has

been a hit amongst the middle class till date, for whom the car was quite

affordable.

The introduction of the Tata Nano car received attention mainly because of two

specific reasons. The car being priced relatively at a lower rate than other cars

drew attention from the commoners.

The other reason was the prolonged Singur (West Bengal) agitation, which the

company Tata Motors had to face while setting up a factory in the area. Charges of

land acquisition were drafted against them by the farmers and the company

forcefully had to stop putting up the plant in Singur as a result of chaos and

disturbance in the area.

The introduction of the Tata Nano car was entirely planned out and designed by

the chairman of the Tata Motors, Mr. Ratan Tata. Although several speculations

regarding the Tato Nano car being a “four-wheeled auto-rickshaw” with no ample

space or whatsoever did rounds in the media, still the Tata Nano car proved itself

of being a properly built car. The Tata Nano car possesses extensive cost-cutting

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features that include a single wind screen wiper instead of a double one, it has no

power steering, and the door opener was simplified et.al.

After removing its base from Singur, Tata Motors had decided to set up a plant in

Gujarat. No wonder the arrival of the Tata Nano car has stirred up a lot of news for

a couple of years, but yes, the Tata Nano car is launched and is already gathering

mixed reviews from the buyers.

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Research objectives

o To study about how a new product- Tata Nano was developed based on

marketing theory of “new product development.”

o To study about what made possible for Tata to develop and produce a car for

just Rs. One lakh.

o To study the objectives and target customers of Tata’s one lakh car

o To study on customers buying behavior and preferences and views about

Tata Nano by various methods of data collection.

o To study and compare between Tata Nano and Maruti 800

Limitation of Study:

o There were lots of difficulties in getting the data. But utmost care was taken

to maintain the quality aspect in the data.

o The study is limited to time and cost

Research Methodology:

o Research methodology deals with the various methods of research. The

purpose of the research methodology is to describe the research procedure

used in the research.

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o Research methodology helps in carrying out the project report in by

analyzing the various research findings collected through the data collection

methods.

New Product development

Meaning of Product

E.g.:- Milk, Computer, Shoes, Service after sales, Railway services etc. a product

can be divided into two categories:

o Tangible goods

o Intangible goods

Tangible products are known as goods that can be touched, felt and seen.

E.g.:- computer, mobile phone etc

Intangible products are known as services that cannot be touched and seen as the

customer can feel and experience only after utilizing it.

E.g.:- service after sales

A product can be considered new under the following situations:-

New-to-the-world products

New product lines

Additions to existing product lines

Improvements and revisions of existing products

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Repositioning

Cost reductions

Stages of New Product Development

Before the introduction of a product into the market, it goes through several stages

of development. These stages are known as stages of new product development. It

includes the following:

Idea Generation:

Companies seek new ideas to enhance the performance of the existing products

and to innovate new ideas. This stage is called idea generation stage. There are

many sources for idea generation. It may be from customers, dealers etc.

Employees throughout the company can also be a source of idea. Toyota claims

that its employees submit two million ideas annually over 85% of which are

implemented.

Companies also find good ideas by researching competitor’s products and services.

They can find out what the customers like or dislike about their competitor’s

products. Ideas can also come from investors. External research, surveys industrial

publications research and development etc.

Idea Screening

The main purpose of idea generation is to collect a larger number of ideas.

However, not all ideas can be commercially viable. Therefore, the companies filter

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the less viable ideas with the help of systematic process. Companies can use

various parameters to screen the ideas such as market size, technical capabilities,

potential competition etc.

Addressing the following issues will also help the companies to analysis the

attractiveness of ideas.

Whether the product idea match the existing products of the company.

The degree to which the new product can cannibalize the sale of the existing

product.

Company’s ability to produce and market the product.

Buying behavior and the probable changes in the environment.

While screening the ideas, an organization may commit two types or errors.

Drop error where the firm rejects a very good idea.

Concept Testing And Development:

All ideas that survive in the process of screening will be studied in details. They

will be developed into mature products. At this stage, the idea is submitted for the

external evaluation to get a feedback from the market. It helps a firm are

organization to collect important information like customers initial reactions

towards the product development. During this stage, new product idea is described

in the form of one or more benefit that is then presented to a sample of potential

customers for reactions.

Marketing Strategy:

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Following a successful concept test, the new product manager will develop a

preliminary strategy plan for introducing new product in the market. The plan

consists of three parts.

The first part describes the target market size, structure and behavior for the

first few years.

The second part outlines the planned price distribution strategy and

marketing budget for the 1st year.

The third part of marketing strategy plan describes the long run sales and

profit goals and the marketing mix strategy over time.

Business Analyses.

After management develops the product concept and market strategy, it can

evaluate the business attractiveness. Business analyses are the first in-depth

financial evaluation of new product to be developed. Here management needs to

prepare sales cost and profit projections to determine whether they satisfy company

objectives. If they do, then concept can move to the development stage. SOWT

analysis will be conducted at this stage by the organization. It also includes the

following:

Total sales estimation:-

These are the sum of estimated first- time sales, replacement sales and repeat sales.

Its method depends upon whether the product is one time purchase(an engagement

ring), an infrequently purchased products like toaster, auto mobile etc. or a

frequently purchased products like consumer and industrial non durables.

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Estimation costs and profits.

The R&D, manufacturing, marketing and financial departments estimates the costs.

The profitability of the new product is estimated through various financial tools.

The simplest technique is the breakeven analysis in which the management

estimates how many units of the product the company would have to sell to break

even with the given price and cost structure. If the management believes that sales

could easily reach the break even number, it is likely to move the project into

development stage.

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Product Development

In this stage, detailed technical analysis is conducted to know whether the product

produced at costs is low enough to make the final price attractive to the customer.

Here a working model or a prototype is developed to disclose all tangible and

intangible attributes of the product. A product protocol is prepared which is a

detailed downiest containing the important attributes that are expected in the

product. Once the protocol has been developed, it is handed over to the research

the development department to develop the prototype of the product.

Test Marketing:

The test marketing is the stage where the product is introduced in a few selected

cities. During this stage, the company has to fate the following expense:

High advertisement

High manufacturing cost.

High distribution cost etc.

For testing the product, marketer needs to make the decision on the following

issues.

The no. of cities in which the product is to be tested.

Geographic location of the cities.

Time to carry ort test marketing

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Through this exercise, company can know the customer response, feedback,

suggestions, complaints and any other changes required to be done for product

modification.

After successfully laughing the product in selected cities the company launches the

new product in all other cities.

There are certain methods of product testing:-

Alpha Testing:

In this method, a group of target audience is selected from the employees of the

company.

Beta Testing:

It is carried out at the customer’s site. Generally, it is applicable for industrial

products where the customization takes place.

Gamma Testing:

It is carried out on a long term basis where the customers uses the product

extensively and gives response after a long period of time. Say six months.

Commercialization:

The results of the test marketing help marketers to decide the changes that are

needed in the marketing mix before entering into the market. It also helps the

marketer to decide the amount of production distribution strategy, selling efforts

and other issue like providing guarantees, service after sales etc. the product enters

the market during the commercialization stage.

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Introduction To Tata Motors

o Tata Motors was established in 1945, when the

company began making trains.

o It has its manufacturing base in Jamshedpur, Lucknow,

and Pune and soon one more plant is going too established at Singur, West

Bengal.

o Product Manufactured - Passenger Cars and

commercial vehicle

o Installed Capacity - 350,000-400,000 vehicles a year

o Investment - Rs 2,500 crore (Rs 25 billion)

o Turnover - $21.9 billion (Rs 967,229 million)

o Employees - 2,46,000/22001

o Tata Motors had created the wealth Rs. 320 billion

during 2001-2006 and stood among top 10 wealth creators in India.

New Product Development And Nano

As seen before, A product can be considered new under the following situations:-

New-to-the-world products

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New product lines

Additions to existing product lines

Improvements and revisions of existing products

Repositioning

Cost reductions

As far as Nano is concerned, it falls into new to the world products in the context

that it has made a history for the cheapest car ever made without compromising on

quality. I.e. best way value analysis.

It can also be considered as new product in the since of cost reduction as it’s the

first time in the history that such a cheap car is produced.

The story of the Nano is not confined to its impact on the auto industry. It's a tale

that illuminates the India of today—an eager, ambitious nation with a combination

of engineering talent, a desire for low costs and value.

Idea Generation And Nano

A dream is born –

Says, “I observed families riding on two- wheelers -- the father driving the scooter,

his young kid standing in front of him, his wife seated behind him holding a little

baby. Add to that the slippery roads & Night time too. It is downright dangerous. It

led me to wonder whether one could conceive of a safe, affordable, all-weather

form of transport for such a family.”

So when Tata Motors needed someone to take charge of the company's most

ambitious plan yet to build the world's cheapest car ever Ravi Kant, who by then

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had become the company's managing director, again turned to Wagh. Wagh

remembers what he learned marketing the little truck. "People want to move from

two-wheelers to four-wheelers," he says. "Today they can't afford it."

More and more can, but Indian car buyers today represent a tiny slice of a

potentially giant market India has just seven cars per 1,000 people. India's auto

industry has grown an average of 12% for the past decade, but just 1.3 million

passenger vehicles were sold in India in the fiscal year ending March 2006. That

means a billion Indians buy about the same number of cars in a year as 300 million

Americans buy in a month.

If four wheels cost as little as two wheels, that could change fast. About 7 million

scooters and motorcycles were sold in India last year, typically for prices between

30,000 rupees and 70,000 rupees, about $675 to $1,600. Tata is targeting a price of

100,000 rupees one lakh, in Indian terms of measurement or about $2,500 at

current exchange rates, for its small car. That sounds impossibly cheap in the West

but remains three times higher than India's annual per capita income. The average

pay for factory workers at Tata Motors is just $5,500 a year.

Idea screening

The next step was the screening of idea. How is this dream possible? What should

they make?

A scooter with two extra wheels at the back for better stability?

An Auto-rickshaw with four wheels?

A three wheeled car like a closed auto- rickshaw??

A four wheeled car made of Engineering Plastics?

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A Four wheeled rural car?

Rolled up Plastic curtains in place of windows?

Openings like Auto rickshaws from the side

A four wheeled open car with safety side bars?

But the market wanted a car and if they build a people’s car it should be a car and

not something that people would say,“ Ah! That’s just a scooter with four wheels

or an auto-rickshaw with four wheels & not really a Car.”

Trying to build a car cheap enough for motorcycle buyers seems to make sense

now but seemed crazy several years ago when Rattan Tata, longtime chairman

of Tata Motors and scion of the nation's giant Tata Group conglomerate, first

mentioned his dream of building a one-lakh car in 2003. "They are still saying it

can't be done," he says, insisting that it can and will.

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Concept Testing And DevelopingBefore starting the project, Wagh did something no one at Tata Motors ever had:

He talked to customers. The three-wheeler men inevitably insisted on a cheap,

dependable truck that could go from village to market carrying, say, a ton of

onions or potatoes, one night, as sunset approached, Wagh stuck with one rickshaw

driver. He says, "I kept asking the question. Why? Why? Why do you want a four-

wheeler?" Wagh remembered. Finally, he got the real answer. It turned out it

wasn't really a problem of transportation of vegetables “If I had a four-wheeler, I

would have better marriage prospects in my village," the young man said. Drivers

of three-wheelers are looked down upon in India. Wagh realized that four wheels

had emotional, not just practical, appeal.

Thus the new product was now to be developed.

But what type of product?

The car to cost Rs. 1 lakh on road.

The car should be built on a different platform than conventional ones.

It must be meeting all the safety and regulatory requirements.

It has to be built on a scale which shall be more than double the earlier

launches of similar products and the ramp up must be smooth.

The car has to be designed so that it can be exported to other countries as the

domestic demand may not materialize as per projections.

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The car must be a beacon for the Indian Automobile industry and prove to

the world that we are capable to take any challenge and come out worthy

winners.

That quest to build the world's cheapest car hasn't ended. The Nano should be

available this fall, but the mission began back in 2003, when Rattan Tata, chairman

of Tata Motors and the $50 billion Tata conglomerate, set a challenge to build a

"people's car". Tata gave an engineering team, led by 32-year-old star engineer

Garish Wagh, three requirements for the new vehicle: It should be low-cost, adhere

to regulatory requirements, and achieve performance targets such as fuel efficiency

and acceleration capacity.

The design team initially came up with a vehicle which had bars instead of doors

and plastic flaps to keep out the monsoon rains. It was closer to a quadricycle than

a car, and the first prototype, even a bigger engine, which boosted the power by

nearly 20 per cent, was still dismal. "It was an embarrassment," says Wagh.

But failure didn’t stop them they quickly realized it was necessary to bring

everyone on board, "else it leads to last-minute heartache and delays". Every

morning, he would spend an hour or two on the floor of the Pune factory, insisting

that everyone involved—designers, manufacturing teams, and vendor development

people—be there to accelerate decision-making and problem-solving.

Over time, Wagh's team grew to comprise some 500 engineers, an impractically

large group to gather on a daily basis. So instead, a core team of five engineers

gathered every day at three pm to discuss the latest developments. Each engineer

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represented a different part of the car: engine and transmission, body, vehicle

integration, safety and regulation, and industrial design.

The body had to be changed because Ratan Tata, over six feet tall himself, wanted

it to be easy for tall people to get in and out of the car. "Imagine the plight of the

body designer—he went through hundreds of iterations, then at the last minute the

car length was increased by 100 millimeters!" Wagh says. The attention to detail

paid off: When the car rolled onto the dais at the Auto Show in New Delhi in

January, and Ratan Tata stepped out of the driver's seat with ease, it made an

immediate impact.

What shook the automobile world most was the fact that the designers seem to

have done the impossible: The sleek, sophisticated Nano doesn't look flimsy or

inexpensive. If it had been an upgraded scooter on four wheels, Tata still would

have been applauded for making a family of four safer on Indian roads. The Nano,

however, affords both safety and status. "The innovation wasn't in technology; it

was in a mindset change".

Details of Nano

Specs:

Engine: 624 cc /

33 bhp

4 doors,

5 seater (and yes 4 Wheeled too)

Rear Engine

Weight: 600 kgs

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Mileage - 22-23 km/liter

Variants:

Standard

Deluxe (with AC)

Future:

Diesel Variant Exports outside India or assembly plants outside

Comparison

8% less in length (bumper to bumper) with respect to Maruti 800 21% more

in inner space with respect to Maruti 800

Looks:

Front side looks more like Matiz (or Spark as we now call it) back side looks

more like India with those long tail lights.

Insight:

People often criticize something that is making waves everywhere. This has

also been the case with Tata Nano. Competitors, safety regulators,

environmentalists and most others conceived the problems that India will

face, when such a car is available, much before the actual launch of the car.

This will result into:

OLD GENERATION NEW GENERATION

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SWOT Analysis

STRENGTH

Brand name TATA

Cost price low

Fuel efficient

Safe

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WEAKNES

Low power

Not a status symbol

Delay in manufacturing

Limited features

OPPORTUNITIES

Large market for selling

Awareness in the market

First car in low range

Can hit in global market

THREATS

Company rival

Not sure to hit in rural and semi-urban areas

Business Analysis

Cost :

Since the car had to be built within a cost of Rs. 1 Lac, no conventional design

would work as the costs shall be higher and so the entire car has to be redesigned.

What makes Nano so less expensive can be well understood from the following

diagram:-

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The design has to question the need of each and every component from the point of

view of its necessity of existence and also the minimum requirements of its

functionality. Value Engineering concepts have to be deployed to finalize the

minimum requirements.

Disruptive Technology:

Is a Technology that brings radical change by introducing new ways of doing

things usually at a Technology that is:

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Significantly cheaper than existing Technology.

Is much higher performing?

Has greater functionality and

Is more convenient to Use.

Brings to market a totally different Value proposition than the one available and

can change the Paradigm about a product.

The Guiding factor was that the cost has to be minimized for each component yet

maintaining its basic functionality.

The Alternatives are:

Reduce Consumption of Material being used.

Alternate Suppliers to get same material at fewer prices.

Use alternate materials.

Eliminate use of Material.

Eliminate a process Or a Combination of the above.

The design was outsourced to Italy's Institute of Development in Automotive

Engineering, but Tata himself ordered changes along the way. Most recently he

vetoed the design of the windshield wipers. His solution: a single wiper instead of

two, giving the car a cleaner look.

THE COST REDUCTION PARADIGM Value Engineering Alternatives:

The target was very clearly defined that within the given cost structure of 1 Lac all

the components have to be allocated a maximum price and the same had to be

achieved using the available alternatives.

The Guiding factor was that the tax structure, on materials and manufacturing,

must support the final cost of Rs. 1 Lac

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The Decisions were:

Establish factory in a tax free zone.

Get the tax advantages on infrastructure development.

Get the suppliers to establish base near the factory.

Get special concessions from State Govt.

In short select a manufacturing location where all the advantages could be

achieved.

In short select a manufacturing location where all the advantages could be

achieved.

Total sales estimation

Now the question was, “how much to produce”

It was estimated that the demand for the people’s car shall be at least twice

the demand for Maruti 800, the lowest end car. Initial projections were at

about 500 K cars per year.

The basic reason was the conviction that the target price shall redefine the 4

- wheeler segment.

The price decision of Rs 1 lakh is definitely going to make a lot many

people transit to 4-wheeler fold and that shall explode the demand.

F only 10% customers of 9 Million two wheeler market transit to 4-wheelers

it shall amount to 50% of the passenger car market share.

It was decided to set up plants with 5 lacs cars per annum capacity and ramp

the same up in stages, in line with increase in market demand.

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Product Development

And finally the product was developed with the following features.

Engine Capacity Bosch 624 c.c. twin cylinder

Low capacity, Lighter, sufficient with better Power Rear Engine to reduce

the transmission length using a balancer shaft.

4 Speed Manual Gear Box

All Aluminum Engine

Higher thermal conductivity than cast iron, Lighter and so better mileage

Engine Management System by Bosch

Superb control over emission and smooth acceleration.

Dimensions L: 3.1m, W: 1.5m, H: 1.6m

Less length but more inner cabin space due to height. Comfortable leg room.

Independent Front & Rear Suspension McPherson Strut in Front & Coil

spring & trailing arm in rear.

Better ride than Maruti 800.

Single piece ribbed steel body with safety features such as crumple zones,

intrusion resistant doors, seat belts, strong seats & anchorages.

Safety requirements are adequately met.

Single Wiper in place of two.

Cost effective yet functionality is met

Tube less Tires

Instrument console in the centre

Elegant to look at and can be used both in Left Hand & Right hand version.

The list goes on and on.

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The Final verdict.

THE CAR COSTS Rs 1 lac

Test Marketing and Commercialization

Nano is soon going to launch by the end of April. It will be commercialized in

whole of India. It is mostly targeted to the middle class and lower middle class

people. The effects of Nano and its commercialization will be soon known after it

comes into the market.

Some myths about NanoWhen Nano was introduced, it surprised everyone. It had so many features but the

cost was as low as Rs. 1 lakh. This was really amazing. Due to this, many

competitors, governments and others opposed Nano. Moreover, it’s not a new

thing that whenever a new concept is developed, people oppose. They find more

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limitations then seeing the benefits. Following are some myths about Nano. But

these are then proved to be wrong.

Myth no 1

Nano is an unsafe car

The car has an all steel body.

It meets the mandatory Frontal Impact requirements.

It also meets the Side Impact requirements although they are not mandatory

in India.

Myth no 2

Nano will greatly increase the Pollution Level

The car is Bharat IV and Euro IV compliant although these norms, which are

stricter than the present Bharat III norms, are yet to be introduced.

It has lower carbon footprint, 20 mg / Km of Carbon Dioxide emission as

compared to 45mg / Km, emitted by most of the two wheelers.

Its Multi Port Fuel Injection system is controlled by an intelligent Bosch

Engine Management system which controls the combustion cycle precisely

to ensure compliance to all emission norms.

Myth no 3

Nano will struggle to perform

Although the car has 33 bops as the maximum horsepower it has a low kerb

weight of 550 Kg and so has a higher power-to – weight ratio when

compared to many existing cars running on Indian roads.

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The car has a matching acceleration to Maruti 800 and also a good top

speed. Although the manufacturers have estimated 90 Kms as the maximum

speed the car can go up to 105 Kms per hour top speed.

Myth no 4

Nano has very little leg room

Although the car is 8% smaller than Maruti 800 it has lot of extra leg room

at front as there is no engine compartment. This also leaves sufficient knee

room at the rear.

The car has a tall boy type design so there is lot of head space and also

enough Shoulder room.

The mono volume design and the wheels having been put at the corners have

freed up lot of in- cabin space and although the car may be registered as a

four-setter, three slim adults can sit comfortably at the rear.

Myth no 5

Cheap means Uncomfortable

More comfortable than some of the cars selling at even twice the price.

Leaves sufficient knee room at the rear.

Easy to get in & out of the car because of perfect seat height from the

ground.

Suspension systems are good and the trailing arms with coil springs are not

found in cheap cars. Rear.

Myth no 6

It’s very difficult for a rear - engine car to work.

Rear engines work in many cheap as well as expensive cars.

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Auto-rickshaws at one end and Formula One cars on the other extreme all

use rear engines.

Maruti Omni too has a rear engine, under the seat and no one has been burnt

due to that.

Cooling is easier in Nano as compared to some vans and there are the air

ducts on either side behind the edge of the doors, which allow air to seep in

for both cooling & for intake.

Myth no 7

There is a shortage of storage space.

There is some storage space although not much.

The rear seat with parcel shelf folds to allow accommodating a large

suitcase.

Small articles can be placed under the bonnet also.

Myth no 8

Cutting Corners is evident everywhere

Cost cutting is done by smart designing rather than taking out the essentials.

One wiper has been taken out but the functionality is intact. Wind shield

washer fluid jets are mounted on the wiper itself rather than the body.

Wheels are held by three bolts instead of four.

Impasse at westbengal

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The slogans on signs in Singur -- the West Bengal site

where Tata Motors plans to manufacture the Nano, its

$2,500 small car -- say it all. Most are in Bengali, but the

few in English capture the overriding sentiment. "Nano

No No," reads one. "Atta not Tata," says another. Atta,

which is flour made from whole wheat, refers to the core

question of the dispute, Should fertile farmland be requisitioned for industrial

purposes? Does food get priority or factories?

According to faculty at Wharton and the Indian School of Business, the impasse

over the plant in West Bengal threatens to increase the Nano's production costs and

could delay its entry into the domestic market. Moreover, they say, it will likely

impact investment in the region, as outside companies shy away from antiquated

land laws and political disruption.

As things stand today, work has been suspended at the Nano plant. Tata has closed

shop because, as chairman Ratan Tata told journalists in Kolkata (formerly

Calcutta): "I can't bring our managers and their families to West Bengal if they're

going to be beaten, if there is going to be violence constantly, if their children are

afraid to go to school."

Tata has faced trouble ever since it got the go-ahead for the plant on May 18, 2006.

Just a week later, there were angry demonstrations by farmers objecting to the

"forcible" acquisition of land for the project. The Trinamool Congress, a political

party led by Mamata Banerjee, who has been spearheading the agitation against the

Left-ruled West Bengal government and the plant, even staged a hunger strike.

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Matters came to a head recently, with the Nano due to roll out in October this year.

On August 24, the Trinamool Congress started an indefinite protest at the factory

gates and stopped all access to vehicles. On September 3, Tata suspended work and

said it was evaluating alternative sites outside West Bengal.

Since then, the Trinamool Congress has called off the protest on the basis of

unspecified promises by the state government. Talks have been held between the

two sides, though Tata Motors has been left out of the discussion. In a statement on

September 8, the Tata Group said: "Tata Motors is distressed at the limited clarity

on the outcome of the discussions between the West Bengal state government and

the representatives of the agitators in Singur. In view of the same, Tata Motors is

obliged to continue the suspension of construction and commissioning work at the

Nano plant. We will review our stated position only if we are satisfied that the

viability of the project is not being impinged, the integral nature of the mother

plant and our ancillary units are being maintained, and all stakeholders are

committed to develop a long-term congenial environment for smooth operations of

the plant in Singur."

Jitendra Singh, a Wharton management professor who is currently dean of the

Nanyang Business School in Singapore, characterizes the standoff in Singur as

"essentially political blackmail." He says the issue is broader than how it will

impact Tata's ability to deliver a $2,500 car. "While India has made a great deal of

progress and the economy is doing well, the weak leg continues to be its political

system," he says.

There may yet be a face-saving formula worked out and Tata could resume

operations. But it is clear that trouble will strike again. The first Nano will roll out

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of some other existing Tata Motors location. The plant in Singur, even if it goes

through, will play second fiddle.

Some are more optimistic. "I don't think that the Tatas will actually pull out unless

the situation worsens a lot," says Rajesh Chakrabarti, assistant professor of finance,

at the Hyderabad-based Indian School of Business (ISB). "I think they will find a

solution."

Paying a Price

If Tata Motors does pull out of Singur, it could cause the project cost to increase

and therefore impact the company's ability to produce a low-cost car. But other

factors have also changed in the external environment, points out John Paul

MacDuffie, Wharton management professor and co-director of its International

Motor Vehicle Program. "A lot of things have happened to threaten the $2,500

price point," he says. "Commodity prices have been going through the roof, and

there are other cost increases that are going to affect everybody. The real question

is: What cost increases are idiosyncratic and distinctive only to Tata that might

erode any kind of advantage they have?"

Singh agrees that the current crisis will eventually show up in the cost of the car.

But he says he wouldn't be surprised if Tata pulls out. "Of course, it will cost them

to do that, but better to do it now than to be open to blackmail in the future. There

will be a one-time relocation cost, but I'm sure he will find another state willing to

take the project."

MacDuffie believes the new costs brought on by the Singur standoff could compel

Tata to take a second look at its competitive edge in the domestic Indian market.

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"There may be some Maruti products at the low end of the market that will

continue to be very strong price competitors because they have such high volume

and they have long-established facilities, which are probably all paid for in India,"

he says.

Maruti will be the one to contend with as Tata tries to rein in the Nano's costs.

"Suzuki, Maruti's parent and the source of the design, is renowned in Japan for

having extremely cheap designs and extremely cheap tooling, and they are very

effective in running on the edge of what keeps things from breaking down in order

to [have] a cost competitive position in the Japanese market," says MacDuffie.

"That know-how will make Maruti a formidable competitor at the low end of the

market."

MacDuffie suggests that Tata needs to focus on limiting the Singur damage to

Nano's costs even as it fights competition on other fronts. "If they can keep these

idiosyncratic cost increases from becoming too large and avoid too much delay,

and also avoid too much publicity that tarnishes them in a reputational sense, they

should be in a good position for the Nano to have a large impact first in India," he

says.

But the Singur problem seems to have no easy resolution. Tata has been given 997

acres of land, acquired by the state government under the Land Acquisition Act of

1894. (This was challenged, but the courts have ruled that the acquisition is legal.)

Of this, some 645 acres is for the mother plant and another 290 for a vendor park

which will host various ancillary units for the Nano. The remaining 60-odd acres

are with some state government agencies.

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The Trinamool Congress and its partners were, in the beginning, opposed to the

entire acquisition. Today, it has no problems with the mother plant. But it wants

the vendor park moved elsewhere and the land returned to the farmers. Tata, on the

other hand, says that the economics of the project won't work if the ancillary units

are moved out. The Rs. 100,000 Nano would end up with a heftier price tag.

"As part of the proposed integrated auto cluster in Singur, about 60 key auto

ancillary suppliers to the Nano have taken possession of land in the integrated

complex and have invested about $110 million towards construction of their plants

and procurement of their equipment and machinery," says a Tata statement. "The

project's auto ancillary partners, who had commenced work at their respective

plants in Singur, were also constrained to suspend work in line with Tata Motors'

decision."

Tata has also made significant investments. But Ratan Tata is prepared to write

them off. "If anybody is under the impression that because we have made this large

investment of about Rs. 15,000 million ($328 million), we will not move, then they

are wrong," he told the Kolkata Press conference.

Political Baggage

Speaking to a Tata Group magazine last year, Ratan Tata elaborated on how the

Singur problem evolved. "I think Singur has been an exceptionally unfortunate and

unique situation," he said. "The problems there are mainly political -- between two

political parties -- and we've been caught in the crossfire. The land acquisition was

not our doing; the West Bengal government managed that. There was no problem

when it was offered to us or when we accepted. Singur becoming an issue was an

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out-of-the-blue happening. The solution lies in sitting down with the state

government and talking about compensation, retraining, reemployment and the

rest, with Tata Motors being made a party to this activity. Instead, what we've got

is a chorus of negatives, loose talk of returning the land, women and children

blocking roads, and guns, bullets and firings."

The state government has offered to provide 400 fertile acres elsewhere in the state

to the agitating farmers, but there are no takers. Banerjee, herself, believes she is

on a winning horse politically and is not prepared to make any concessions. In

2007, she had witnessed the popular appeal of the land issue when trouble broke

out over a proposal to set up a chemical hub over 14,000 acres in Nandigram, a

rural area 70 km from state capital Kolkata. This was to be situated in a special

economic zone (SEZ), a 50:50 joint venture between the state-owned West Bengal

Industrial Development Corporation and the Salim Group of Indonesia.

It was once again Banerjee's Trinamool Congress that campaiged against land

acquisition. The protesting villagers and farmers took over administration of the

area, under the banner of the Bhumi Uchhed Pratirodh Committee (Committee

against Land Evictions). On March 14, 2007, some 4,000 armed policemen were

ordered to move in. At least 14 people died in clash. The site of the proposed

chemical hub has since been moved from Nandigram. Meanwhile, in subsequent

elections to the zilla parishad (a district-level governing body), the Left was badly

beaten by the Trinamool -- the first time in 30-plus years that the Marxists have

lost in the region.

"All players are trying to revise their understanding of the ground realities based

on what they have witnessed in the past few weeks," says Chakrabarti of ISB. "It is

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a political-economy kind of problem." He adds, however, that part of it is also pure

saber-rattling. "The companies are just taking a stance and putting pressure on the

political players because they know that the politicians want their investments."

There have been no corporate casualties as yet, but there are some indicators of

trouble. "We are yet to take any decision," says Infosys director of human

resources T.V. Mohandas Pai. "We will have to relook and rethink because we are

concerned about the safety of our employees." Infosys, the country's second-largest

information technology company, has been planning to invest $110 million on a

software development park near Kolkata. It has yet to receive the 80 acres

promised by the state. The Times of India reports that another IT giant -- Satyam --

has decided to pull out of a special economic zone (SEZ) it was planning to set up

in West Bengal.

"What impact this episode has on other corporate investments into West Bengal

depends on what stage of finalization their plans are in. But it will certainly be a

dampener on new players coming into the state, especially because the controversy

has been [going on] for such a long time and has also gotten so much publicity,"

says Chakrabarti. "At the same time, one also needs to realize that not all

investments require large amounts of land. Also, there are other players who have

done their own land acquisition without getting the government involved. It is only

when the industrial players try to cut a deal with the ruling government and the

opposition manages to launch a strong enough protest that all hell breaks loose."

An Impact on Investments

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India Inc. is worried about the impact on investment flows. According to a

statement by Reliance Industries chairman Mukesh Ambani: "A fear... is being

created to slow down certain projects of national importance. The Nano project is a

unique and innovative initiative which will establish India's position as a small car

hub. Indian Industry must be encouraged to make such large investments in order

to build the country's competitiveness as well as support job creation."

"The Nano car is a statement of the coming of age of Indian manufacturing, and

places India's innovation skills high up on the world map," says Jamshyd Godrej,

chairman and managing director of Godrej & Boyce and past president of the

Confederation of Indian Industry (CII). "It is, therefore, very unfortunate that the

entire project is facing a political situation which it does not warrant." Nano's

moving out would be a setback for not just West Bengal but also the entire

country, says Godrej. Adds CII chief mentor Tarun Das: "The adverse impact is

not restricted to Singur or West Bengal but will resonate in India's global image."

"Any delay will jeopardize the general investment climate in the country by

undermining the confidence of foreign investors in the present difficult times,

when a severe recession is threatening the global economy," says Indian Merchants

Chamber president M.N. Chaini.

Even Union Commerce and Industry Minister Kamal Nath is concerned about the

impact on investor confidence, particularly in West Bengal. "We have to attract

investments," he says. "Incidents and such events obviously shake the confidence

of the investor, especially in the particular state in which it is." India hopes to get

$40 billion in foreign direct investment (FDI) this year; in the January-June period,

the actual FDI inflow was $20 billion.

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Will the Nano effect impact this? "While the Singur issue has made headlines the

world over, I don't think this will be a very major issue at an international level,"

says Chakrabarti. "Many other states have invited the Tatas to set up the Nano

plant."

Multiplier Effect

Will the Nano's problems hurt the Indian automobile industry and its ability to fuel

economic growth elsewhere as in the U.S. or other developed economies?

MacDuffie feels that while the two situations are not strictly comparable, there

could be lessons for India in the area of infrastructure investments. "A lot of what

made that multiplier effect possible in the U.S. post-war economy was the decision

by the federal government and the willingness to use some of the riches of those

post-war years to invest very heavily in infrastructure. That allowed the car to have

a transformative impact on a lot of the economy, on where people lived and on

how they spent their leisure time and the like," he says.

MacDuffie points to the construction of the U.S. interstate highway system as one

of the most visible manifestations, adding that many other public investments

increased the economic feasibility of dispersed growth into the suburbs possible.

"There were deliberate choices to invest in infrastructure for the automobile rather

than for mass transit and railroads and such -- of course with the auto companies

trying to influence that. If the government of India really wanted to gain that kind

of multiplier effect they would need to be willing to make similar investments in

infrastructure."

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Even as the controversy was at its height, non-resident Indian (NRI) and steel

baron L.N. Mittal was holding a meeting of the company's top managers in Delhi.

"One can face this kind of problem in any other country," said Mittal of Singur.

"But the country as a whole is interested in growing. [Singur] does not give us

nightmares. And we will not revisit our plan in India because of the Singur

episode."

Mittal admitted, however, that his projects were facing some roadblocks. He plans

to set up two integrated steels plants in the states of Orissa and Jharkhand. But land

acquisition, mining permissions and other approvals have kept the projects on the

drawing board. The cost of the plants, announced in 2005 and 2006, has ballooned

from $20 billion to $30 billion. "The more the delays, the more the cost overruns,"

says Mittal.

Another NRI, Vedanta Resources chief Anil Agarwal, has also expressed his

confidence in India. He has just announced a $9.8 billion global investment plan;

of this, $7.6 billion is earmarked for India.

Antiquated Land Laws

But even as the world keeps knocking at India's doors unfazed by Singur, there is a

larger question that the controversy has given rise to: the whole issue of land

acquisition. "We certainly need to revisit the land acquisition law," says

Chakrabarti. "It is very antiquated particularly because it does not take into account

major projects that change the value of land dramatically. The current law still

works fine if one wants to build a road or railway that needs just a small stretch of

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land, but it does not fit the current situation of acquiring land for industrial

purposes."

The law dates back to 1894; although there have been amendments, they have

clearly been inadequate. Companies and governments have taken their own route,

depending on circumstances.

The Jindal Group, for instance, is setting up a steel plant in Salboni in West

Bengal. It has paid compensation up front. It has also offered free shares in the new

company to all the people dispossessed of their land. Sajjan Jindal, vice-chairman

and managing director of JSW Steel, says that had he been in Ratan Tata's shoes,

he would have offered the recalcitrant farmers double their holdings nearby. But

Jindal had it relatively easy. At Salboni, some 90% of the 4,800 acres required was

already with the state government. It was possible to be more than generous with

the other owners.

Yet, despite their very high standards and ethics, the Tatas seem to have been

embroiled in more than their fair share of land acquisition rows. Among projects in

suspended animation or abandoned are a $550 million titanium project in Tuticorin

in Tamil Nadu, several projects in Orissa steered by Tata Steel, and a port in the

same state in partnership with engineering giant Larsen & Toubro. At Kalina

Nagar in Orissa, where a $3.4 billion steel plant has been planned, there were

violent clashes between the police and tribals. Some 14 tribals were killed in police

firing in January 2006. (Incidentally, in July of this year, the Tatas also pulled out

of four major projects in Bangladesh, which borders West Bengal. The $4 billion

plan had made no progress since proposed in 2004.) For the Tata Group, the sun is

setting in the east.

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MacDuffie recalls another such crisis in Brazil in the mid-1990s, when the rules of

the game suddenly changed for the automobile industry. Encouraged by strong

economic growth at the time, the Brazilian government offered favorable tax

treatment to small cars with engines below a certain size. "Suddenly, that part of

the market just took off," he says. "All of these multinational companies came

flooding in to build capacity in Brazil."

According to MacDuffie, a wave of optimism ran across the global automobile

industry that Brazil would go on to offer generous government subsidies to open

new plants. The unions too were willing to be "somewhat flexible in allowing

innovative work arrangements," he recalls. "Suddenly there were multinationals

that were trying out innovative production concepts in Brazil that they hadn't ever

tried in their home countries. Volkswagen opened what they called a modular

factory and General Motors followed suit with something similar."

All that enthusiasm was short-lived, and the Brazilian government withdrew those

incentives. Havoc followed. "In a very short period of time, lots of companies had

all these unused capacities," says MacDuffie, adding that the momentum was such

that the investments kept pouring in even after the favorable market conditions

shifted. "They just couldn't shift gears quickly enough to withdraw and the

consequences were paid later."

Among the casualties in Brazil was a joint venture Chrysler and BMW had formed

to build an engine plant, MacDuffie notes. "That got started late, and it just

absolutely never got off the ground and eventually it was closed and all the

equipment was sold to a Chinese firm."

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In India, other business houses are also facing unexpected changes in the playing

field after making initial investments in projects. South Korean Pohang Steel's $10

billion steel plant at Jagatsinghpur has run aground over acquisition of forestland.

Goa has scrapped all the SEZs -- 15 had been planned -- after agitators against the

takeover of farm and forest land threatened to target tourists, the lifeblood of the

state. The same scene is being played out in many parts of the country. In early

September, villagers in Potka (Jharkhand) humiliated and publicly paraded

surveyors of Bhushan Steel & Power. The company wants 3,400 acres for a

proposed steel and thermal power project.

"The crisis faced by the Nano project will certainly lead to major problems with

other mega projects, like the $2.7 billion Nandagudi SEZ in Karnataka, the $6.6

billion Raigad SEZ in Maharashtra, the $2.6 billion Dadri (power project being

implemented by Anil Ambani's Reliance Energy) in Uttar Pradesh, the $8.7 billion

Gurgaon-Jhajjar (gas pipeline project) in Haryana, and the $8.8 billion (Arcelor-

Mittal) Keonjhar project in Orissa. India at this stage can ill-afford such a loss,"

says Chaini of IMC.

There are no easy answers. In Maharashtra, at the Reliance SEZ project in Raigad

district, a referendum is being conducted in 22 villages. Farmers will be voting on

whether to give up their land. Reliance wants 25,000 acres for this mammoth

project. The polling is a state government initiative; as with the Tatas at Singur,

Reliance has been kept out of the loop.

Reliance has been negotiating with the farmers on its own, unlike at Singur where

the state government is doing the job. As with Singur, one of the issues is

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compensation. Reliance is offering Rs. 1 million ($21,900) per acre; the farmers

say the land is worth four times as much.

In Singur, farmers were paid $18,600 per acre of single-crop land and $26,250 for

double-crop land. That was a premium, to-the-market rate. But, with the Nano

plant making progress, the rate shot up to $87,500 per acre. The farmers feel they

have been taken for a ride. Every project that involves land acquisition will, going

forward, most likely face resistance; farmers will hold out for a better deal. In

Singur, only 1,200 farmers out of 12,500 with less than 300 acres have not

accepted the compensation.

According to Jindal of JSW, this is the reason dispossessed farmers should be

made shareholders in the project. Tata has offered jobs and training, but that is

clearly not enough. The Singur controversy continues, and agitation is likely to

resume.

The Economic Times, meanwhile, contends that even the Leftists now feel that they

are better off without the Nano. If they give in to Banerjee's demands, they will --

as in Nandigram -- lose seats to the Trinamool Congress in the coming general

elections. On the other hand, if they sacrifice the Nano, they can blame the party

for any setback to the state's industrialization efforts. Whatever the rhetoric might

be, new jobs will only come from factories, not farms. "Whether Tata stays or

goes, both will be favorable for us politically," says West Bengal transportation

minister Subhas Chakraborty. "If Tata stays, we take the credit and if they pull out,

we will blame the Trinamool."

Impasse Effecting Tackled

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Press Interview Conducted by Times of India:-

TOI: It must be a relief for you that you have finally found a place for your plant.

Tata: It is not a sense of relief but satisfaction — that it is all settled, that we are

not orphans looking for a home. I think it’s a continuing process. We left one place

and have come to another. But we will look forward to the new location with a

great deal of enthusiasm because, hopefully, we will have an environment where

we can do what we set out to do, which is, not just manufacture a car but be a good

corporate citizen in the process.

TOI: Far from your project being an orphan without a home, states were falling

over each other to offer you great villas. What was special about Gujarat’s offer?

What clinched it for the state?

Tata: I think what made a difference was the fact that Gujarat has been able to

define the land and give us the possession. Land is the main thing that takes much

time. Gujarat has done it in an unbelievably fast manner and given all approvals

and permissions with great speed. You know if it were possible to transport or

move the plant in a day we could have been in business the next day at this

location in Gujarat. But we are not dealing with something that can be moved in a

day.

TOI: How long it has taken to seal the deal?

Tata: I was not directly involved in the process. We will have to ask Ravi Kant

(Tata Motors MD).

Ravi Kant: It took a few days.

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TOI: What would a few days mean?

Ravi Kant: I would say about 10 days.

TOI: When did you finally decide that it would be Gujarat?

Tata: We finally decided last night. Let me say the entire process started when

problems started growing in Singur. We had offer letters from many CMs who

knew that we had problems in West Bengal. As soon as we made the

announcement, I guess it was on August 22 when I made the announcement that

we would move if the situation did not improve, we had letters from four or five

states and we responded to each of the letters. I think most of us were travelling at

that time. When we came back, we started picking up the letters and actually

talking to the states about land — land being the main issue. And so I think

probably sometime in September, we started looking at land, studying what these

states had to offer etc. Indeed, we had to look for an insurance policy. It was not an

emergency from our side until it came very close to saying we were going to move

from Singur.

And then it became very urgent to settle something else fast. Ravi has been running

around from one state to another. It was important that one team travelled from one

state to another so that they can compare. The chief minister of Gujarat moved

very fast. Gujarat enjoys the reputation of being an investor-friendly state. So we

decided this was really the place where we have everything in order. With all other

states, despite all their good intentions, there were many things yet to be settled. So

we decided to move forward with Gujarat and everything was put in proper place.

TOI: Will the Sanand plant be the mother plant?

Tata: Yes, this is the mother plant.

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TOI: At the last Vibrant Gujarat summit in 2007, you said “You are stupid if you

are not in Gujarat”. What took you so long to come here?

Tata: We were in Gujarat even at that time as we have Tata Chemicals here. But

we didn’t talk of this project at that time, although I think Mr Modi told me

jokingly, “You are having trouble there. You come here and I will give you

everything.” Now, we are here, as luck would have it.

TOI: Will you be able to deliver the Nano on time despite the Singur setback?

Will the initial production of the car come from your plants at Pune and Pantnagar?

Tata: Yes. We already have a makeshift operation in place. It is important to tell

the world that in spite of all that has happened we will bring out the Nano within

the same window (the last quarter of this year).

TOI: What made you go to West Bengal in the first place? Buddhadeb

Bhattacharjee?

Tata: Did you say Mamata? (Laughs) Yes, it was Mr Buddhadeb Bhattacharjee. I

have known him literally from the day he took over as chief minister from Jyoti

Basu. We were at that time with the Haldia Petrochemicals Complex and because

we had a problem, not with the state government, but with Purnendu Sen, we

withdrew. At that time, I met Mr Bhattacharjee and was extremely impressed with

his sincerity. And that sincerity has been there throughout. He told me that I should

not withdraw and I told him we must but we would come back with a bigger

investment to West Bengal because I believe he was doing the right thing. Then

one day when we were inaugurating the cancer hospital in Kolkata he said why

you don’t bring your automotive project to West Bengal. I told him the incentives

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you have will not match with what other states are offering. And both he and

Nirupam Sen (industry minister) set themselves the task of meeting what was

needed.

To be honest, he first offered us land at Kharagpur. But then that was far from

Kolkata. I told him that if we wanted the project to be showcased to the world as a

world-class enterprise, we should have it at a location where we could bring in our

best people, give them the best schools, best colleges etc. In deference to my wish,

he showed several plots out of which we found Singur most suitable.

Unfortunately, what followed was something unexpected while we had something

wonderful going. It would have brought investments to a part of a country which

has been neglected. It was a forerunner of future investments in that part of the

country.

TOI: What is the loss to the Nano project because of time overrun?

Tata: First of all, all the equipment will come good. So there is no loss on

equipment. One may ask what have you left behind and how much of it is totally

wasted. You can retrieve a fair amount of the fixed assets that you may have and

relocate it. It is our view that in terms of the current year we will not have to reflect

any appreciable loss in our books. We have also not discussed with the state

government what we would do with the land because it’s still leased to us. The

state government wants us to look at other projects, which we have agreed to do.

We just said that we will do it if the environment is conducive, otherwise we will

not. So it’s not that we have walked out of West Bengal and left a crater or a barren

piece of land behind.

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TOI: Gujarat has not been known to offer special incentives to industry. What was

your experience?

Tata: I think as far as we are concerned whatever we needed and was getting in

West Bengal, it has been matched here. We are very pleased with the package and

the speed with which, more than anything else, the package has been finalized.

TOI: You are embarking on this project at a time when there is a global economic

downturn. There is a liquidity crunch in the country too. What is your outlook

regarding the global slowdown? How long do you think it will last?

Tata: The global slowdown is affecting. It is percolating like a coffee machine

down to industries that were not directly involved in the crisis. We ourselves here

are facing a downtrend because of a tightness of credit. If it opens up, as there are

some signs of doing, I think we will see some recovery. But the US and Europe are

still reeling under writeoffs and writedowns and defaults, which is creating a kind

of domino effect in other industries. And nobody seems to know where or when it

will bottom out.

TOI: Would you have an assessment of how long the slowdown might continue in

India?

Tata: No, I am not any more qualified than some others, although I think nobody

knows how long it would be to bottom out.

TOI: From Bengal to Gujarat, it’s the same country and two very different stories.

What lessons do you draw as a senior business leader?

Tata: I don’t know how much problem that we faced was really that of the famers.

I would just say that political opposition and political aspiration should always be

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subordinated to the better welfare of the country or the state. I don’t know who

would be the losers. You have talked about us being one of the losers in the sense

of losses owing to time overruns. But I wonder what we have left behind. I am sure

West Bengal can attract other investments and will attract other investments and

we will be as supportive as we can in attracting new investments. But what about

the people who had aspirations for jobs? The people who have made this issue of

land-for-land — will they prosper? Has anything been done to increase their yields,

their income levels? Many of them are below subsistence levels — they say so

themselves. On the one hand, they talk of drinking their money away or not having

money, and on the other hand, they talk of having their land back. I mean are we

doing anything to improve their lot? These are the questions that come to my mind.

So, political opposition should hold the country first and not themselves. That’s all

I am saying.

TOI: Mr. Tata, thank you.

10 Facts That put Nano into the Limelight

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The People’s Car! It is indeed a deserving title bestowed upon Tata Nano, the

world’s cheapest car introduced on the ramp recently. Link of this car with reputed

Tata Empire of India itself states the glory of Nano, which has been in news for

long. And there are more than few aspects of this car that certainly enforced the

eyes of international audiences to stick to the grand launch of this super-affordable

compact car of the year. If you have been fascinated by the view of this splendid

road-runner, here are the 10 most interesting facts about this small wonder of the

world.

What Triggered the Idea?

Indian roads are often seen flooded with two-wheelers, carrying small families in

the form of father, mother and two or three children. The idea of designing a safe

drive for such families inspired Ratan Tata, the Chairman of Tata groups and the

brain behind Nano, to introduce a compact car with five seats. The dream called

Nano was put into reality to provide a safe and comfortable, yet economical car for

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those hailing from the lower segment of the middle class. But, the luxurious

appearance of the car can certainly encourage even affluent individuals to get

attracted towards it.

Nano – What’s in the Name?

What’s the story behind this wonderful car being called ‘Nano’. In one of the

Indian languages, Gujarati, the word translates to ‘small’. Rattan Tata, the

uncrowned king of Tata Empire, belongs to Gujarat state of India and hence, the

name has been adopted from the genius’s mother tongue. Another reason for

choosing the name is to reflect the high technology performance of the car.

Price – Yes! We Need to Mention

It is no more a hidden truth that Tata Nano enjoys the status of being the cheapest

car in the world, but the discussion remains deficient without mentioning it once

again. Available at the price of 100,000 Indian rupees, equivalent to $2,000, the car

costs a little more than the famous auto-rickshaws spotted on the Indian roads.

Hence, it definitely calls for a pleasing change expected to be seen on the roads of

the country.

Promising a Compact Drive

Tata Nano perfectly fits the frame of Indian roads, which are famous for high

traffic loads and traffic jams. Nano is expected to bring some improvement,

because of its compact size and impressive dimensions to facilitate the person

sitting on the driving seat. What we can expect is the introduction of more compact

cars in the country, only after Nano confirms its success with time.

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Most Eagerly Awaited Car

Tata Nano became the hot topic for Indian as well as the international media since

the first news was released regarding the car. The people had been eagerly waiting

for the car to make its debut and it became clear from the statistics measured from

the official website of the car. While the official website of Tata Motors

experienced 7.9 million hits on the day of Nano revelation, the Tata Nano website

recorded 4 million hits in the time period of 30 hours. You can expect the heavy

load these websites must have faced in all these months.

Guinness Book Entrant of 2009

And as the 54th edition of prestigious Guinness Book of World Records 2009 was

released, Tata Nano became successful in entering the list deservingly. Being a

great performer, a compact vehicle and most importantly, the cheapest car of the

world, Nano was righteously endowed with this honor.

Low Design Cost is the Secret

What makes Tata Nano the cheapest car of the world at present? The credit goes to

the low production costs of Indian manufacturing industry, which enabled the

engineers to subtract certain features, without compromising with the performance

of the car. Steel was removed efficiently and less sheet metal was consumed to

manufacture this car. Also, the tubeless tires, light-weight engine and many other

features brought down the production cost impressively and hence, the world saw

the dawn of a profit-oriented car.

Environment Friendly Small Angel

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Tata Nano is expected to contribute fewer pollutants than the most popular two-

wheelers of the country. With impressive tailpipe emission and low generation of

carbon dioxide, the car can contribute to remove the black spots from the

pollution-oriented image of the country.

Stupendous Demand for Nano

The demand for Tata Nano seems to scale new heights and the company expects to

run out of stock to fulfill the demand. Hence, only 100,000 car buyers will be

entertained with the car, by selecting them at random. Nearly 30,000 booking

locations in the country have been chosen to sell the number between April 9 and

April 22.

Comparison with Most Popular Family Car

Maruti 800 has been the favorite family car in India so far and hence, its

comparison with Nano is inevitable. To begin with, Nano costs half the price of

Maruti 800. Apart from this, the bumper to bumper length of the former is 8% less

than the latter. Finally, Nano has 21% larger seating capacity as compared to the

Maruti model. Certainly, there are many more features which can enforce the

Indian audience to change their preference.

The Tata nano – a unique strategy

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The Tata Nano creates buzz in India and around the world.

The world’s cities should aspire to a sustainable future that is not necessarily

dependent on cars.

India experienced an automotive breakthrough last week: the release of the Tata

Nano, the most economic vehicle in the Indian market, and arguably, in the world.

The so-called “people’s car” has received praise from many sources, such as The

Economist:

Despite the Nano’s size (it is a bit over ten feet, or three metres long) its interior is

surprisingly spacious. This is no accident. The car is the pet project of Ratan Tata,

the Tata group’s revered chairman, who is over six feet tall. Accordingly, the Nano

is optimised for the 95th percentile of American men. In South Asia, this makes

the car downright cavernous. When it comes to performance, the Nano goes from

zero to 100kph (60mph) in a languid 30 seconds, but it is surprisingly enjoyable to

drive. And with a petrol consumption of 67mpg, few cars can match its fuel-

efficiency.

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And the San Francisco Chronicle:

Don’t dismiss the Nano as a small, poor man’s car that will cause a mere ripple on

the world market. The Nano is a radical innovation, with the potential to

revolutionize automobile manufacturing and distribution.

The tiny Nano incorporates three innovations, which together make it huge. First,

the Nano uses a modular design that enables a knowledgeable mechanic to

assemble the car in a workshop. Thus, Tata can outsource assembly to independent

workshops that can then assemble the car on buyers’ orders. This innovation not

only removes costly labor from the manufacturer’s side but also allows for

distributed entrepreneurship on the dealer’s side.

Second, the low cost of the Nano comes from a combination of its no-frills design

and its use of numerous lighter components, from simple door handles and bulbs to

the transmission and engine parts. The lighter vehicle enables a more energy-

efficient engine that gets 67 miles to the gallon.

From the perspective of the automotive industry, the release of the Tata Nano is

remarkable indeed—a success of Indian ingenuity and, hopefully, a business hit.

The Nano, and vehicles like it, will help in reducing energy consumption in India

and decreasing local and global emissions, compared to the “business as usual”

scenario, due to the car’s high efficiency. Cars like the Nano will also improve the

quality of life for those able to afford it. (It is important to note that the privileged

few who can afford the Nano still comprise a minority in India and the rest of the

developing world.)

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But the Nano is not enough to solve mobility and urban development problems of

cities in a sustainable way. Much more is needed.

The problem is that more cars — no matter their size or propulsion — bring more

congestion, accidents, sprawl, and, if they rely on fossil fuels, more local and

global pollution.

Cities should aspire to a sustainable future that is not necessarily dependent on cars

(and the highways and parking spaces that come along with them.) This argument

is very well expressed by organizations like India’s Center for Science and the

Environment, which recently issued a press release that says they are “against all

cars, and not just the Nano. Our cities don’t need more cars; they need better public

transport.”

Cities can be more successful and livable if they pursue some of the following

types of strategies:

“active transport” (i.e. bicycling, walking)

mixed-use and denser development with better public spaces

integrated mass transit

innovative infrastructure and manufacturing that includes nice ideas like the

Nano

car-use demand management, for example:

o downtown parking and driving restrictions

o congestion and pollution charges

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o equitable taxes that cover externalities of these restrictions, not the

subsidies in fuel

I recommend implementing the above strategies as a baseline response, even if the

individual Nano car releases less emission than the two-stroke motorcycle or the

heavy vehicles used in the U.S.

Supporting better vehicles is not enough—and is even wrong—for society, as a

whole.

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Industry Interaction

Q) ‘World’s Cheapest Car on Fire-Literally’-This is the heading given to the News

article in ‘The Independent’-London, (Motoring) on October 27th 2009. This is

shocking indeed! What are your viewpoints on the same? The article is reproduced

below for your perusal:

The world's cheapest car, the Tata Nano, is under fire in India as reports emerge of

some of the models bursting into flames recently due to alleged circuit problems.

Three fires have been reported spontaneously occurring in the steering columns of

Nanos in India, where 7,500 vehicles have been delivered since July.

No injuries have been reported but one customer has refused to allow Tata to

inspect the car and instead filed a police report, according to US financial

newspaper The Wall Street Journal.

Tata announced October 26 that they will undertake a pre-delivery audit of all new

cars and will examine cars already in customer use, but have avoided the dreaded

"recall" word thus far. The Indian automaker blamed the problem on a short circuit

in the switch that controls the headlights, windshield wipers and dashboard

indicators.

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The tiny Nano is called "The People's Car" due to its historically low price of

around Rs 115,000 (€1,700). The car has already received an overwhelming

200,000 pre-orders in India and has revolutionized the way the world looks at low-

cost automobiles.

Nearly 100,000 Nanos are expected to be sold domestically in 2010, with export

plans in place for Nigeria in 2010 and Europe in 2011, provided it passes safety

testing. In July, Tata announced its intentions to sell the Nano in Latin America,

via Italy's Fiat group, which has a strong presence there.

Ans) Such incidents have occurred with many car models, not only the Tata Nano.

In fact, car’s getting jammed, heating up and totally bursting and exploding are

instances that have occurred in major car models the world over. The reason may

be attributed to defective circuits, improper mechanics handling the car or a host of

other factors. However, once a car is on the road and is working, that is the time-

tested fundamental that the car is travel-worthy.

From the Management Perspective, the Production System Efficiency and the

Quality Control Checks must be in place to safeguard the Manufacturer. Tata has

all that and more.

Q) The introduction of the Nano received media attention due to its targeted low

price. The Financial Times reported, "If ever there were a symbol of India’s

ambitions to become a modern nation, it would surely be the Nano, the tiny car

with the even tinier price-tag. A triumph of homegrown engineering, the $2,200

(€1,490, £1,186) Nano encapsulates the dream of millions of Indians groping for a

shot at urban prosperity." The car is expected to boost the Indian economy, create

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entrepreneurial-opportunities across India, as well as expand the Indian car market

by 65%!

Do you feel the Nano has lived up to these expectations?

Ans) The Nano is living up to these expectations and much more. It is also an

outstanding example of India’s brainpower, talent, creativity and mindset. The

concept itself is an intangible asset and heritage that India has bequeathed to the

world! Nothing can stop the strength of an idea whose time has come!

Q) Following is a copy of the article carried by ‘The New York Times’ on the Tata

Nano. On January 10, 2008, 10:24 am . We request you to go through the article

and comment on the same, with respect to the Tata Nano as the world’s cheapest

car.

Tata Nano: The World’s Cheapest Car

Ratan Tata, chairman of Tata Motors, displaying the Nano in New Delhi on

Thursday. (Photo by Money Sharma/European Pressphoto Association)

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Tata Motors today took the covers off the world’s cheapest car — the Nano.

Over the past year, Tata has been building hype for a car that would cost a mere

100,000 rupees (roughly $2,500) and bring automotive transportation to the

mainstream Indian population. It has been nicknamed the “People’s Car.” Over the

course of the New Delhi Auto Expo, which began this week, anticipation had

grown to fever pitch.

With the theme from “2001: A Space Odyssey” playing, Ratan Tata, chairman of

Tata Motors drove the small white bubble car onto Tata’s show stage, where it

joined two others.

The Tata Nano could sell for around $2,500

“They are not concept cars, they are not prototypes,” Mr. Tata announced when he

got out of the car. “They are the production cars that will roll out of the Singur

plant later this year.”

The four-door Nano is a little over 10 feet long and nearly 5 feet wide. It is

powered by a 623cc two-cylinder engine at the back of the car. With 33

horsepower, the Nano is capable of 65 miles an hour. Its four small wheels are at

the absolute corners of the car to improve handling. There is a small trunk, big

enough for a duffel bag.

“Today, we indeed have a People’s Car, which is affordable and yet built to meet

safety requirements and emission norms, to be fuel efficient and low on

emissions,” Mr. Tata added. “We are happy to present the People’s Car to India

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and we hope it brings the joy, pride and utility of owning a car to many families

who need personal mobility.”

The base price for the Nano will be 120,000 rupees, including road tax and

delivery. Higher level models will cost more and come with air-conditioning. Sun

visors and radios are extra.

The nearest priced competitor is the Maruti 800, which costs roughly twice as

much as the Nano. In comparing the Nano to the Maruti 800, Mr. Tata said, “It is 8

percent smaller — bumper to bumper — and has 21 percent larger seating capacity

than Maruti 800.”

The Hindustan Times reports reactions from a couple of Tata’s competitors, Maruti

and Hyundai:

Jagdish Khattar, a former head of Maruti 800 manufacturer Maruti Udyog Ltd.,

says it’s too early to say whether the Nano will overtake the original.

“It’s a good product but it’s still too early to say whether it will overtake the 800

because it caters to a totally new market segment,” he said while watching a live

telecast of Tata’s press conference after unveiling of the Nano.

But clearly, at least one other manufacturer was worried.

An official of Hyundai Motors, which unveiled an LPG version of its Santro

Thursday, was more circumspect.

“We definitely see it as impacting our sales,” he said in halting English, preferring

to maintain anonymity.

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Anand Mahindra, managing director for Mahindra & Mahindra, Tata Motors’

primary competitor, said before the unveiling, “I think it’s a moment of history and

I’m delighted an Indian company is leading the way.”

The Nano will go on sale in India later this year with an initial production run of

250,000 a year. Tata says it will offer the Nano in other emerging markets in Latin

America, Southeast Asia and Africa within four years.

Ans) The Tata Nano is not only the cheapest car, it is an idea that has carried the

entire world in its sway! For the first time in the history of mankind, an

organization has developed a wonderful car that the common man who cannot

afford a costlier one can buy and use with pride! The quality has not been

compromised; rather, it is a gesture of Corporate Social Responsibility!

Of course, it is a competition to car manufacturers the world over; which is not

surprising. As a result the heat is intensifying with competition and even Hyundai

Motors, General Motors and several Companies have seen it as affecting their

competition. This is because the Tata Motors, through its winning strategy has

eliminated all competition. Indeed, THE WINNER STANDS ALONE!

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Newspaper Article

The Tata Nano: Product or Social Innovation?

On March 23, 2009 Tata Motors launched the world's cheapest car,

simultaneously revolutionizing the rules of automobile manufacturing and creating

a massive new market where none had existed before.

Until now, most automobile multinationals have focused their efforts on the top

10% of the Indian population, attempting to market "de-featured" versions of their

global product lines.

Tata Motors, however, focused on the 75% of the Indian population which still

travels using two-wheelers (motorcycles, scooters) and three-wheelers, at a price

point of about $1,500. By delivering a $2,000 car, Tata Motors has changed the

game. We can now expect a huge customer migration from Honda and Suzuki-

powered two-wheelers to Tata's Nano. By unlocking this new market, Tata Motors

plans to give the Indian masses access to a passenger car, the same way Henry

Ford democratized the automobile in the U.S. at the turn of the 20th century with

the invention of Model T.

The Tata Nano represents a discontinuous shift in the very concept of the

automobile.

Let's look at the historical and social perspective of this remarkable achievement:

- The Tata Nano shows the power of vision—setting a very high bar—to create a

Rs1-lakh ($2,000) "people’s car."

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Ratan Tata explains his vision: "I observed families riding on two-wheelers – the

father driving the scooter, his young kid standing in front of him, his wife seated

behind him holding a little baby. It led me to wonder whether one could conceive

of a safe, affordable, all-weather form of transport for such a family. We are happy

to present the People’s Car to India and we hope it brings the joy, pride and utility

of owning a car too many families who need personal mobility." Tata knew who

his customer was from the very beginning. He set a clear goal with emotional

appeal—similar, in many ways, to JFK’s “man on the moon” mission.

- The Tata Group is one of the oldest groups in India, perhaps over 100 years old.

It is very difficult for a 100 year old person to be nimble, fast, and innovative!

What's truly remarkable here is that an old line company has fundamentally

transformed itself in its quest to make its vision a reality. Tata did not even make a

consumer automobile 10 years ago. In fact, until 1993, India had only two

automobile companies, both simply assembled with left over technology from

European automobile manufacturers. Add to this the fact that once the Indian

economy opened up in 1993, almost every global automobile company entered

India. In this context, Tata Motors' achievement becomes even more impressive.

- The price of the entire car—$2,000—is less than the cost of a DVD player in a

BMW! A friend pointed out to me that one Tata Nano equals thirteen iPod Nanos

from Apple. At this absurd price point, the Tata Nano visibly demonstrates that

phenomenal success in business is not a function of resources. If that were the

case, the multinationals would own the Indian market. It is not resources but

imagination that is the key to success. The Tata Nano is living proof that it is still

possible to challenge the assumptions of an industry and change the game

entirely.

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- More than the product, Tata Motors will fundamentally revolutionize the

distribution model, the go-to-market strategy. The car has a “modular design, ”

The modules will be made in a central manufacturing plant and sent as kits to be

locally assembled by hundreds of thousands of entrepreneurs closer to the

customers. As I write this, I’m having a flashback to IKEA and what it did to the

furniture industry. Again, Ratan Tata’s words: “…we're looking at small satellite

units, with very low breakeven points, where some of the cars could be assembled,

sold, and serviced. We would encourage local entrepreneurs to invest in these

units, and we would train these entrepreneurs to assemble the fully knocked-down

or semi-knocked-down components that we would send to them, and they would

also sell the assembled vehicles and arrange for their servicing. This approach

would replace the dealer, and therefore the dealer's margin, with an assembly-cum-

retail operation that would be combined with very low-cost service facilities.”

This is what I call mass customizing the automobile— taking the product to the

customer as opposed to the big box retailers who want the customer to come to the

store. Tata Motors will learn more about customer needs and tastes than anyone in

the world. The Tata Nano is as much a “distribution revolution” as it is a “product

revolution”.

- So far we assumed India was nothing more than a place for low cost call centers

and IT outsourcing. That image has been shattered by the Tata Nano. The Tata

Nano will not stay inside India. It will soon disrupt automotive markets in other

emerging markets and even in Europe. The SMART car, for example, is in for a

challenge. Combine this with the fact that in 2008, Tata Motors acquired the

prestigious British brands Jaguar and Range Rover. Fifty years after the British

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quit India; an Indian company comes to the rescue of these prestigious British

brands. The irony of it all.

And the innovation engine that Ratan Tata has created is not finished. Already,

there is talk of an all-green electric car.

The Tata Nano is a signal that India will indeed compete as a technology leader in

manufacturing.

- Another remarkable yet relatively unsung story in the Tata Nano saga is the

political dimension. When people compare India and China, they usually conclude

that China’s centralized political process and single party rule help in rapid

decision-making whereas India’s democracy is an “Achilles heel” that puts “speed

bumps” on economic growth. Indian politicians can, and often and will slow things

down in order to gain votes. Mr. Ratan Tata has, by his actions, fundamentally

changed the equilibrium between Indian industry and politicians, in favor of

industry.

In 2007, the state government of West Bengal allocated 1000 acres for the Tata

Nano project. Tata Motors started constructing their manufacturing plant and spent

a significant amount of money on the project. In a purely a political ploy to revive

their sagging popularity, politicians from the opposition party went on a strike

demanding that Tata return 400 acres to the agricultural farmers. The politicians

thought Mr. Ratan Tata would cave in since he has already sunk huge investments.

Instead, Ratan Tata chose to abandon his partially completed manufacturing plant

in West Bengal and shifted his factory to Gujarat.

For the first time in India, the industrial sector showed that they are more powerful

than the politicians. In fact, following the Ratan Tata lead, several other Indian

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companies withdrew their investments in West Bengal. West Bengal’s farmers are

now upset with the politicians since they lost compensation for their land and more

importantly, they lost the opportunity to get jobs in the Tata Nano factory. Thanks

to Ratan Tata’s leadership and courage, there is strong speculation that the pro-

industry political party will win the national elections scheduled next month! In my

opinion, Ratan Tata’s standing firm against Indian politicians is as much a

signature event as Mahatma Gandhi standing against the British to win India

freedom in 1947.

Finally, there is something greater than business at play here as well. Ratan Tata

embodies the spirit of a new, enlightened capitalism. Here’s what he had to say

on values a few years ago:

"What I feel most proud of is that we have been able to grow without

compromising any of the values or ethical standards that we consider important.

And I am not harping on this hypocritically. It was a major decision to uphold

these values and ethics in an environment that is deteriorating around you. If we

had compromised them, we could have done much better, grown much faster, and

perhaps been regarded as much more successful in the pure business sense. But we

would have lost the one differentiation that this group has against others in the

country. We would have been just another venal business house."

And again:

"I think it is wrong for a company in India to operate in exactly the same way,

without any additional responsibilities, as if it were operating in the United States,

let's say. And even in the United States, I think if you had an enlightened

corporation that went into the Deep South, you would see more of a sense of social

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responsibility, of doing more for the community, than the company might accept in

New York City or Boston. Because it is inevitable that you need to be a good

corporate citizen in that kind of environment. And companies that are not good

corporate citizens—those that don't hold to standards and that allow the

environment and the community to suffer—are really criminals in today's world."

Through his actions in the Tata Nano project, Ratan Tata has demonstrated that

capitalism can have a soul—the profit mission and the social mission do not

conflict and can, in fact, be pursued simultaneously. As I mentioned earlier, Ratan

Tata incurred enormous losses in shifting the factory from West Bengal to Gujarat.

Yet in the new location, Tata is not only putting up an automobile plant but they

are also voluntarily investing in the community by building hospitals, by building

schools, by improving the infrastructure, by recruiting local people for the plant,

and by starting an engineering school to train and develop local people to operate

an assembly plant. This has been Tata’s philosophy wherever they do business. He

does not subscribe to Milton Friedman’s dictum: The only objective of a business

is to make profit.

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Conclusion

After the study of various aspects I found that –

Nano Car Is Definitely Not For:-

Someone looking for better performance

Someone who is looking to impress

Someone who want to speed trial on Sunday

Someone who is looking for long drives.

But Nano Car Is Defiantly For –

Someone who is looking to buy a car but cannot afford much price.

A students who want to go college, tuition instead of bike etc.

Someone who depends on second hand car.

For a house wife who can buy a car with her own savings.

Someone who depends on scooter.

So Nano is not a basically a luxury cars but it can fulfilled the all capacity for

middle class people.

Impact Of Tata Nano On Life Of Common Man

In India every one can afford a Nano, just as we buy any electronic

appliances for a home uses.

Decrease in price of second hand car.

High traffic on roads due to sale of exceeds car on roads.

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Increase in loan on car installments.

Tata has succeeded in value engineering of the product and its great success for

tata’s. It’s something on which India can feel proud of. Nano has been developed

effectively.

The Tatas have been since long, a Company reputed for their sound ethics,

Corporate Governance and well-designed Social Responsibility. They are

philanthrophists whom the nation and the world looks up to.

The Tata Nano, the ‘Peoples’ Car’, the first of its kind in the world, has been

succinctly expressed by top Managerial People the world over, as a successful

‘Blue-Ocean Strategy’-

Where you don’t tackle the competition, you eliminate it. That is exactly what the

Tata Nano has done, by creating and capturing new markets and the stream of

Population as target audience who can afford the Tata Nano!

SO of course, they are under the eyes of major car manufacturers the world over,

who cannot help but applauding such a wonderful strategy and creation!

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Bibliography

Book Name - Winning at new product

Author Name - Robert G. Cooper

Book Name - Lean, Rapid, and Profitable New Product Development

Author Name - Robert G. Cooper and Scott J. Edgett

http://www.thaindian.com/newsportal/business/tata-nano-car-an-

overview_100235031.html#ixzz0WO32GuQW

http://tatanano.inservices.tatamotors.com/tatamotors/