Carl Peter-Forster, managing director and group chief executive, Tata Motors recently told Business Standard: “We have a very satisfied set of customers owning the Nano which means there is nothing wrong with the product. So now the positive word of mouth of the car will spread and that is how we are anticipating growth in sales from here on.”
The company has exhausted all the marketing techniques—from zero down payment subsidised finance schemes to opening of Nano dedicated kiosks across the country—and has ended up with the word-of-mouth option (read nil options).
If word-of-mouth phenomenon has not helped Tata Nano yet, how can Forster hope it would help Nano now, after three years and 1 lakh cars?
“Nano sales last month dipped to 3,260 units, down by 64 per cent as against 9,000 units recorded same month last year. Over the previous two months Nano sales have nearly halved to 8,712 units as against 16,704 recorded in the corresponding two months previous year. Tata Motors slashed production of the small car by 31 per cent during the past two months as the company did not have too many takers of the car following stocks of the Nano lying unsold with dealers,” Business Standard reported.
So what went wrong? Which black swan has upset the applecart and tilted the Nano dream?
There are three un-pondered reasons behind Nano’s poor performance
The low price!
Nano is crippled by its price which has been widely deemed to be its strength! (One can see the eye-brows being raised).
A few months back I was talking to an aam aadmi in Kerala, a typical middle-class man retired from the Airforce and is now working in a post office. Our conversation veered to the topic of cars, since he was planning to buy one. Instantly, I invited his attention to Nano. He said without even thinking, “Well, it costs low. So people may not care to look at it and appreciate.”
That puts across a point: Car in India is not about utility or mobility; it is a dream, ambition and status symbol; just like a house.
So the low price of Nano does not turn it into an asset.
The re-sale car market posing a challenge to Nano
A 3-4 year old used car originally costing 3-4 lakh in on-road price (like Chevrolet Spark and Maruti Alto) can pose a stiff challenge to Nano given the relative price-parity that emerges when it comes to re-sale.
For instance, Nano’s Mumbai on-road price for Std BSIII model pegged at 1.51 lakhs is a few walks away from the Rs.2 lakh plus used-car-version ‘Spark’. People, who may go for the advanced model Nano Cx BSIII, may consider opting for ‘Spark’ or ‘Alto’ given that the said Nano model costs around 1.82 lakh rupees.
In fact, Nano seems to have failed to pose a challenge to the market players in this re-sale car niche segment.
“People buy Nano as their third or fourth car” said Sales Head Jobi Thomas, Mahindra First Choice, Kochi.
That is the ultra-rich segment, a far cry from Nano’s perceived customers.
“Nano has gained visibility in the market and people are buying it. Nano units between 80 and 90 are being sold a month”, said Robinson, Product Manager and Nano dealer with RF Motors, Kochi--a booming car market.
But, after two years, Nano is available in the used car market with a price tag of Rs.1 lakh! Is that good sign? That takes us to the next reason:
Nano re-sale value may not be satisfactory
If Tata Nano sales of new cars have lost its momentum, Nano re-sales do not raise a question.
Re-inventing Nano
Nonetheless, Tata Motors is wasting no time. Tata is trying to expand to other regions searching new markets for Nano. Given its modular design, Nano could be knocked down and assembled elsewhere in the planet. No wonder, Tata is looking at SAARC nations, Latin America and other regions, where the economic conditions are similar to India.
Tata may come up with Nano electric models and even a Nano diesel version.
Bon Voyage!
As published in: http://www.commodityonline.com/news/Tata-Nano-Three-unexplored-reasons-behind-underperformance-41679-3-1.html
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