Tatas Learn Key Lesson As Nano Heads For Sunset: Indians Want Affordability, Not Cheap

After eight years and a sustained failure to set hearts racing, the Tata Nano, it seems, is set to drive into the sunset. A Times of India report says that Tata Motors will phase out the Nano in three to four years so that it can cut out the multiplicity of car platforms from the current six to just two.

If this happens, it will be both a vindication of ousted Tata Sons chairman Cyrus Mistry, and a partial rejection of his stand that the Nano was being kept alive only for “emotional” reasons. His reference was to the fact that the Nano was Ratan Tata’s pet “Rs 1 lakh car” project, a car which was supposed to upgrade millions from thinking two-wheelers to four-wheelers.

A day after he was ousted, Mistry said in a note leaked to the media that the Nano had “consistently lost money, peaking at Rs 1,000 crore… As there is no line of profitability for the Nano; any turnaround strategy for the company (Tata Motors) requires to shut it down. Emotional reasons alone have kept us away from this crucial decision.”

But he has been proved wrong in his assumption that emotional reasons will keep the Nano running, as the decision by the Tata Motors management to phase it out – along with the Sumo – show.

The failure of the Nano, unveiled with much fanfare amidst global spotlight, can primarily be put down to Tata’s mistake in presuming that price was crucial to weaning people away from two-wheelers to cheap cars.

This is a mistake many marketers make: they confuse the average Indian’s need for affordability to a willingness to buy products that come cheap.

Far from it. As Dheeraj Sinha wrote in his book India Reloaded, the average Indian’s idea of a car was built around the roomy Ambassador. He may not be able to afford a car, but his idea of a car is not something with all the essentials removed from it. Quite the contrary. He want the addition of desirable features. A car is a status enhancer, and the last thing Indians want is to look cheap. A second-hand car that is cheaper than the Nano would work for most Indians better than a car that has cheap written all over it. The Nano was tomtommed as the world’s cheapest car, and so the Indian lumped it.

Consider the contrast with Renault’s Kwid, another car inspired by the idea of “frugal engineering”. Far from looking cheap, it tries to resemble a mini SUV. And, after selling over 100,000 Kwids, Renault is making money on it.

Phasing the Nano out shows that Ratan Tata has learnt to bite the bullet. The new Tata cars, built around style and better performance, are doing much better than the old models.

Tata Motors has outgrown Nano thinking.