The Tata Nano: The People's Car (A)

Submitted By maxiguer
Words: 949
Pages: 4

Case: The Tata Nano: The People's Car (A)
NPR Story:
In addition to the case please read the following NPR article: http://www.npr.org/templates/story/story.php?storyId=92289904 Tata Nano:
10/1/2008, Tata Motors unveiled a $2,500 car – The Nano – “Rs1 lakh car” or “the people’s car” scheduled launch 09/2008
Smallest car in the world, room for 4 adults, most fuel efficient car
Cost for Indians INR100,000 + 12.5% AVT+ Road and Transportation Taxes launch of 2-cylinder gasoline-powered version
Diesel versions soon after
As the Nano’s expected launch approached, downturn in TM stock price from $18.60/share in September 09/2007 to $9.53 in 09/2008, almost 50% drop.
Market middle-class families and college students. 2 wheelers owner, first time and used cars buyer
Increase households that could afford a car by 65%.
Environemental nightmare

Tata Group:
Conglomerate with international interests in engineering, energy, information systems and communications, materials, services, consumer products, and chemicals.
Its 96 companies employed 650,000 people on six continents
Tata Engineering and Locomotive Co. Ltd, train manufacturer, was established in 1945
Tata Engineering collaborated with Mercedes Benz (1954-1969) for CV and trucks
1990s, Tata enter passenger-vehicle market with India’s 1st sport utility vehicle: Tata Sierra
1998, jackpot with the Tata Indica
2002 Launch of the Indigo – most popular car in India
2004 acquire the Daewoo Commercial Vehicle Co. Ltd., Korea’s 2nd-largest truck manufacturer
2004, Tata Motors 1st Indian manufacturing company to be listed on the NY SE.
2005 launch India’s first indigenously developed mini truck, called the Tata Ace
2005 acquire 21% stake in Hispano Carrocera SA, Spanish bus manufacturer.
2008 acquire Jaguar and Land Rover
6st largest commercial vehicle manufacturer in the world – India’s largest automotive company
Globally, the company served the European, African, Asian, Middle Eastern, and Australian markets.
India’s automotive industry:
Benefited from market liberalization in the 90s – with eased regulations on foreign trade and restrictions on private companies.
International companies took advantage of cheap highly trained engineers, and established manufacturing operations throughout the country.
In 2005, experts predicted that India would become the world’s third-largest economy by 2020.
2005–06, one of the largest and fastest-growing car markets in the world – passenger car market 25% growth per year, and passenger-vehicle exports growing by 12.7% annually.
India’s exports, mainly to Asia and Africa, growing at a rate approaching 30% annually and had already reached 850,000 units in 2005–06, up to 65% growth in exports some years.

Economy car Segment:
Maruti 50% market share with $5000 pricing
Car ownership in India 8-25/1000 people
Fasted growing car market expected in 2009
Media population 25 and fastest growing middle class

Cars sold via dealer networks, and sales volume depended both on network and the sales per dealer.
J.D. Power and Associates study of the Asia Pacific market: Tata’s dealer margins across the various models ranged from 4% to 10%.
A.T. Kearney study estimated the profit margin of ultra-low-cost cars at 2%/ 3%—about $75 for the $2,500 Tata Nano.
Dealers received further discounts if they paid cash up front to Tata— about 1% of full dealer cost.
Tata Motors contribution margins estimate is about 15%.

Used cars
Used car sales in India had fallen preceding Nano’s launch.
The price of a used Maruti 800 fell 30%

Two- and three-wheelers
2007, India’s two-wheeler market was 2nd-largest globally, with 8M units sold.
By 2011, 2-wheeler production was forecast to 18 million units.
Typical motorbike cost about INR37,000 (1/3 of a Nano).
Manufacturers: Bajaj Auto, Hero Honda, TVS Motor, Yamaha Motor, and Kinetic.

Bajaj Auto dominated the market for passenger-carrying 3-wheelers used for