STRATEGIC MARKETING

• CASE STUDY

TATA MOTORS LIMITED: 'NANO' - A MARKETING DISASTER?

Case 518-0024-1

This case was written by Chandan Thakur (Institute of Management Technology - Nagpur (IMT)). It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.

2018, Institute of Management Technology - Nagpur (IMT). No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner.

TATA MOTORS LIMITED: 'NANO' - A MARKETING DISASTER?1

TATA Motors' Nano, supposed to be the world's cheapest car with a planned selling price of just INR 100,000 ($2600 at that time), was the star attraction at the New Delhi Auto Expo in 2008. The car generated an international buzz as it was supposed to bring millions of lower middle class Indian families into the automotive market.2

However, the Nano failed miserably in the market. The sale of Nano was 30,350 units in 2009 - 10, the first year of its existence in the market. It increased to 70,432 units in 2010-11. It peaked at 74,527 units in 2011-12. Thereafter, the sale of Nano had been declining. It declined to 53,848 units in 2012-13, to 21,129 units in 2013-14, to 16,901 units in 2014-15. It increased slightly to 21,012 units in 2015- 16 and then declined to all time low to 7,591 units in 2016-17. 3

ABOUT TATA MOTORS LIMITED

Tata Motors Limited was a leading automobile manufacturer with a portfolio that included passenger cars, commercial vehicles like trucks and buses, sports vehicles, and defence vehicles. The company was established in 1945. It was a part of US $ 100 billion TATA Group founded by Jamshedji Tata in 1868. Mission of the company was to be passionate in anticipating and providing the best vehicles and experiences that excited its global consumers.4

THE RISE AND FALL OF TATA NANO

Ratan Tata, former chairman of Tata Group, conceived the idea of the Nano less than a decade ago. He had seen lower middle class families in India riding two-wheelers jeopardizing the safety of the whole family. He decided to build small car at the price of just INR 100,000 for those consumers who could not afford four wheeler and therefore were forced to use two wheelers.5

The concept of a small car named Nano was introduced at the 2008 Auto Expo, New Delhi. The new product caught the attention of the world and generated lot of curiosity. Nano was listed in the Guinness World Record as the "World's cheapest car". The thought behind the concept of 'NANO' was that it would replace two wheelers and would create a huge market of first time car buyers. The company had expected that it would disrupt the auto market and change the game. However, the market did not buy the proposition and the Nano failed miserably

TATA NANO: A MARKETING DISASTER?

According to some experts, one of the important reasons for the failure of NANO was its positioning as 'world's cheapest car'. Consumers perceived the car as low quality car. The brand kept changing its positioning and target market from 'a car for the poor villagers of India' to 'an alternative for bike riders' to 'a car for young couples' to 'a car for older couples with kids'. However, the brand could not be successful.7

According to another expert, NANO failed because the product could not meet the expectations of people. Pricing was another important reason for the failure of the brand. Despite the promised price of INR 100,000 per unit, the price kept increasing due to various reasons. Another reason for the poor sale of Nano was consumer's perception about the safety of the car. The incidence of few Nano car engines catching fire put a question mark on the safety of the car. The incidence generated a lot of negative publicity for the brand.8

"The Nano's failure is ultimately a story of the constraints of industry coupled with the evolving nature of consumer expectations among India's middle class".9

FUTURE OF TATA NANO

By 2018, the future of TATA NANO looked very bleak. It was at the verge of extinction. Moreover, safety and emission norms were expected to increase the vehicle price by INR 100,000 - 150,000 making Nano commercially unviable for TATA MOTORS to continue its sales. Tata Motors' dealer sources revealed on condition of anonymity that they had not got any intimation on Nano. Tata Motors had not disclosed any plans for the strategic revival of Nano for Financial Year 2018.10

MANAGEMENT DILEMMA

The dilemma for management was to understand what went wrong in the case of TATA NANO in terms of marketing strategy leading to rise and fall of it within less than a decade. Also, Tata Motors had a challenging task to find out the future course of action / strategy with respect to TATA NANO.

TATA NANO: SEQUENCE OF EVENTS

2008: TATA NANO was unveiled at the Delhi Auto Show with price of INR 100,000/- per unit

The NANO was supposed to be manufactured at Singur in West Bengal. However, due to protests, the company was forced to relocate its manufacturing plant to Sanand, Gujarat.

Initial plan was to manufacture 250,000 units of NANO per Year.

2009: TATA NANO Launched

2009-10: Sale of NANO was 30350 units

2010-11: Sale increased to 70,432 units

2011-12: Sale peaked at 74,527 units

2012-13: Sale declined to 53,848 units

2013-14: Sale declined significantly to 21,129 units

One of the reasons for the decline of the demand for the car was

the negative publicity generated due to some incidents of NANO car

engines catching fire.

2014-15: Sale declined further to 16,901 units

2015-16: Sale was 21,012 units

2016-17: Sale decreased to all time low - 7591 units

2017-18: Future of TATA NANO was uncertain.

2018-19: Whether manufacturing of NANO would continue or stop

was a big question.

QUESTIONS

The questions assigned to the case TATA MOTORS A MARKETING DISASTER? are the following (FIND OUT THE ANSWER WITH THE APPROPRIATE MARKET RESEARCH METHOD)

1. What do you think were the reasons for the failure of Nano?
2. What were the marketing mistakes done by TATA MOTORS?
3. What were the mistakes in the marketing strategy done by TATA MOTORS in Nano Car? Focus on the STP strategy
4. What should be the future marketing strategy of TATA MOTORS for NANO? Find out the answer by using appropriate research methods/ techniques base on the Core competences as a source of competitive advantadges .

4. Decide which principles, theories, or models best apply to the observed facts of the case to prepare your answers. Remember that your analysis is likely to be founded on a specific theory, and avoids solutions based mainly upon personal intuition.

5. Develop your solution in consideration of the principles, theories, or models that you have selected. The assigned questions may require you to consider alternative solutions. Remember the importance of showing not merely your judgement but the basis for it.

Answer rating: 100% (QA)

Analysis of TATA Motors Nano Case 1 Reasons for the Failure of Nano Perceived Quality Positioning Nano as the worlds cheapest car led to a perception of low quality Changing Target Markets Inconsisten... View the full answer