The Tata Nano Debacle

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After much pomp and fanfare about it being the cheapest car in the world and saving thousands of motorists from having to drive around in deathtraps or “even worse”, motorcycles, the Tata Nano was released to a collective *sigh* from the people that should’ve been rioting to have one. With a new generation (supposedly) coming to the U.S and Europe, we should examine just why it was so disappointing on the sales front.
Well, for one, we’re petty…

There was a bit of “hot” hype surrounding the Nano at the time of its launch. I would certainly be rather fearful to put my family in a car that has a reported history of bursting into flames. Was it the fact that although it cost $1,600.00 when it was first launched the price has climbed to the almost (relatively) astronomical sum of $3,500 for a diesel model? Probably, although that couldn’t necessarily be a bad thing for sales as you’ll see in a bit. No, the problem with the cheapest car in the world is that…well, it’s the cheapest car in the world.
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In a purely rational world this makes sense, use some clever engineering to create a barebones car that will perfectly satisfy the needs of the people is a brilliant logical idea brought along by logical, rational people. That’s why it’s doomed to fail in the highly irrational and emotion-driven marketplace. Hands-up everyone, who here bought his or her car entirely on a logical basis. I see a couple of hands in the back of the room, how’s that 2008 Toyota Camry treating you?
No, we want pizazz, we want joie-de-vivre, an extension of our personality, even clueless shoppers buying their newest silver appliance want it to be slightly more distinctive than all the other silver appliances in the parking lot. And nobody wants to be the person that shows up in a Nissan Versa Base [Ed. Note – Especially around these parts…], constantly being reminded by most every other car in the parking lot that if they had worked just a tiny little bit harder or made one more sale they could’ve afforded an option. Any option.
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The same problem arises with the Nano, How do you convince people to purchase your product if all they’ve heard about it is how cheap it is? All that would come up to our buyer is images of people mocking them for only being able to buy the cheapest car in the world. Every time someone mumbles in their vicinity they’ll imagine that they’re simply hoping this cheap eyesore would catch fire. No, better to stay on that motorbike or try and get a used Maruti, at least nobody will know how much they paid for it right off the bat.
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Tata has gone the distance and tried to move the Nano upmarket with different engines, appearance packs, and even a fancy model with an automatic transmission due to be released sometime this year. This is good. It actually encourages people to buy the car and spend more money on it as well.
Their Nano will be better than the one the other person bought at launch. That one was a base model, so it’s fair game. Lord knows what Tata will do with the new model, hopefully things will not start up in flames.
Only Porsches and Ferraris have the cachet to pull that off and keep selling.

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  1. Night Traveller Avatar
    Night Traveller

    Neat little car , I would like to drive one just to see for myself what kind of product they are sending out.

  2. PotbellyJoe ★★★★★ Avatar
    PotbellyJoe ★★★★★

    What worked for the Model T has now been thwarted by marketing. Huzzah.
    It's the human desire to look better than you actually are. How else can you explain the sub-prime lending issues?
    I work in marketing. I used to work in consumer products. I helped tailor communications for products ranging from Goose island beer to o.b. tampons. We were a diversified group.
    There is a lot of equity in uniqueness, but there is little gain if that uniqueness does not carry value. Very few industries can subsist on the "Less for Less" product value statement. "Same for less" is hard enough in the automotive world, ask Hyundai. Why?
    Simple. Image. What does this product say about me? I think this article nails it. It is a long-standing belief in the automotive world that people will pay for shiny and paint and will upgrade to NOT have the visually stripped out model. It's a method to build an "upsale" into the product.
    Toyota was famous for this. Their "Mass Customization" technique of building cars to popular equipment packages meant that a discerning consumer could tell from the outside of the car what the car had inside and by extension whether the buyer was a cheapskate.
    The Sienna is the most apparent at this, but the Rav4 was right there with it.
    Ever see a Sienna with flat-black mirrors, black body-side molding, slapcap wheels and no tinted windows? That's a CE model. That model existed so that Toyota could say "Starting at under $25,000," when the LE, the version everyone bought, was actually closer to $27,500 for a starting price. Here's the thing. people would research online, see that the CE had power windows, ABS, VSC, CD player, AC, everything they needed at a price that was on par with every American van and significantly cheaper than an Odyssey. So they came in to look at it. Keen dealers would put a CE of the same color next to an LE upgraded package (I think package 4) of the same color. The package included an upgraded interior with a CD changer, tinted windows and alloy wheels. It made the CE look like a rental car. BAM, you just moved Johnny Family $3000.
    It sucks, but it's the truth. We buy cars because we like them. And what we like about them is that they satisfy our needs while looking like something we want to be seen in, or they are not the car we don't want to be seen in.
    Tata has a strange population to work with in India. In all of my dealings with Indian consumers, they are among the cheapest group of people to ever have buying power. They are shrewd and will sell you out for a nickel. It's a stereotype, but it exists for a reason. They drive hard bargains and will BS you to death in order to get it.
    However, it seems even they are not immune to the desire to own a vehicle that makes a statement. Specifically not a "I got Less for Less," statement.
    Sorry for the long-winded comment, but I think there are some strong learnings in all of this for brands looking to win in the high-volume world of basic automobiles.

    1. Peter Tanshanomi Avatar
      Peter Tanshanomi

      When I bought my Spyder, I almost went with the base RS because I didn't think the RS-S's cruise control, stiffer anti-sway bar, color dash display, upgraded shocks, and fancy wheels/paint/seat stitching was worth $1800. My wife was the one who talked me into it, saying, "That's less than 10 percent more. You're going to have this a long time, get what you really want."
      Just for the record, she was right. I still think it looks totally bitchin', and I LOVE that cruise control.

    2. skitter Avatar


    3. Devin Avatar

      I'll admit that I'm far from immune to things that make you look subtly cheap. Like take the shifter on the car I drive now, on Canadian models the base Elantra GT has a rubber shift knob, the slightly more expensive one has a leather wrapped one with silver bits glued to it. And as much as it makes absolutely no difference to actual shift quality, I did gravitate towards the more expensive version for this silly and ultimately pointless reason.
      Luckily though I bought it when the more expensive version was the same price as the cheaper one.

    4. Alan Cesar Avatar
      Alan Cesar

      And the VW Beetle. But the Beetle had a remarkable punching-above-its-weight ad campaign that really resonated with people.
      However, you're applying American market concepts to a decidedly not American market. There's no evidence in the article, just speculation. Do the tarted-up Nanos actually sell better than the base models? How weak, exactly, are sales? Is the company losing money on these?
      Typically, a company doesn't invest in a generational redesign of a vehicle unless it's profitable. While it may not have been the runaway success that it was hyped to be (few things do), I'd take this as a sign of the model's success, not its failure. I'd be happy to hear actual evidence to the contrary.

      1. PotbellyJoe ★★★★★ Avatar
        PotbellyJoe ★★★★★

        Alan, I would argue that this is an arena where there are a few universals transcendent of nationality. I have worked on marketing initiatives in over 20 countries and in categories that have image-based appeal (personal experience = Beer, Electronics and Clothing) people are proud to be able to show their stuff isn't the cheapest.
        I'm not going to argue the business case because I don't have the numbers, but let's keep something in mind here, even if you are making money and revenue this does not mean you are as successful as your investment could be. Tata, and a few business journals, have noticed that the Nano is not selling as it should. Tata is a major player and this is a gigantic segment of population, so they need to get it right regardless of how profitable the current vehicle is. A closer to home example would be if you're going to try to be a major player in the American mainstream car market you have to have a strong offering in the midsize segment. So whether your last midsize model made money or not, you still have to redesign it for a new generation and get back into the fray. Otherwise you will be missing out on one of the highest volume and most competitive landscape in automobiles.
        So to answer your comment, yes companies do, especially if it's a market they can't afford to lose.
        WSJ has an interesting article 2 years ago on the subject.

        1. Alan Cesar Avatar
          Alan Cesar

          I tip my hat to you, sir.

          1. PotbellyJoe ★★★★★ Avatar
            PotbellyJoe ★★★★★

            And I doff my chapeau to you for calling out the VW Beetle as a very solid contender for marketing overcoming potential stigma. Solid argument.

    5. Jeff Glucker Avatar
      Jeff Glucker

      Can… uh, can I have some beer?

      1. PotbellyJoe ★★★★★ Avatar
        PotbellyJoe ★★★★★

        Sure, we're drinking Founders All-Day IPA on my deck tonight. It's going to be 2 degrees, dress warmly. I'll attempt at keeping the grill hot enough for the steaks.

    6. Sjalabais Avatar

      Great comment! My image search on the phone is embarrassingly fruitless, but Volvo applied such a distinction strategy, too. Painted bumpers were the most visible sign of equipment and model year progress. I think the 1998 S80 was the last of them to be sold with black plastic bumpers.

    7. salguod Avatar

      Absolutely. I work in a Industrial Design firm and can tell you that this is spot on. Successful companies get that every purchase has an emotional component, usually more than people realize. There's been a fair amount of research in this. Not only that, but people create emotional connections to their products and, by extension, their brands. Companies like Apple really get this and they get that every interaction has the opportunity to strengthen that connection. Apple designs every experience with the brand to draw you in, from the product to the packaging, to the store, to the genius bar and so on. The result is that you feel emotionally connected to Apple and will defend them strongly, even when they mess up.
      In the automotive I'm not sure any company has really gotten this like Saturn did in the early days. In a few short years they had such a loyal following that they were travelling to Tennessee for "homecomings". There are plenty of car companies doing a good job of cultivating a brand image and plenty of performance models have loyal fans, but I'm not sure anyone has yet built a family like following like Saturn did. And they did it not with a superior product, but with a quirky, but generally mediocre, economy car.
      On the Model T, I think one difference here is that it was competing against the horse and buggy. In most measurable ways the T was clearly superior – faster, more endurance, no mind of its own, etc. Not only that, but simply by having a car you were showing that you had means and you were sophisticated, even if it was a Model T.
      The Nano competes with other, pretty efficient means of transportation. You could have a motorcycle or scooter, there are buses and taxis and I'm sure there are nicer, used cars available. Very basic and cheap but new is a hard sell against more upscale but used for similar money.
      The Beetle is an interesting case, however. I think they got that selling rationality and low price was a loosing proposition. So instead they made it the smart choice. Yeah, it happens to be cheaper, but look, it's a better car in all these ways. Plus it's cute. Now, instead of the guy who can't afford anything else, you're the smart guy who picked the better, inexpensive car.

  3. Peter Tanshanomi Avatar
    Peter Tanshanomi

    I don't want a Nano, but I would jump at the chance to drive one. Although, I've already driven a Shandong Pioneer 650, which I assume would be basically the same…only more so.
    <img src="×603.jpg&quot; width=500">

    1. CherokeeOwner Avatar

      You should do a write-up on this thing.

      1. Peter Tanshanomi Avatar
        Peter Tanshanomi

        It would be pretty much this.

    2. hatchtopia Avatar

      That looks like an absolute deathtrap. Write it up!

      1. mdharrell Avatar

        I'd say it only scores in the low- to mid-range on the deathtrap scale, but I suppose it's all relative.

        1. Rover_1 Avatar

          And this comment comes from our resident 'deathtrap' expert for your enlightenment !
          And congratulations on your latest purchase. A truly safe car ensures your safety by making you wear a helmet ?

  4. Peter Tanshanomi Avatar
    Peter Tanshanomi

    "Hands-up everyone, who here bought his or her car entirely on a logical basis."
    <img src=""&gt;
    And I drove that '94 Escort wagon for 11 long, miserable years. Logic sucks.

    1. PotbellyJoe ★★★★★ Avatar
      PotbellyJoe ★★★★★

      If everyone bought cars using logic, there would be no new car sales. In order to be a logical buyer, you need others to be illogical first.

    2. Dean Bigglesworth Avatar
      Dean Bigglesworth

      "Hands-up everyone, who here bought his or her car entirely on a logical basis."
      <img src="; </img>
      And I drove that ´03 Focus wagon for 12 long, miserable years. Logic sucks.
      And I'll probably drive it for a few more years.

    3. Jeff Glucker Avatar
      Jeff Glucker

      My truck and my wagon are definitely not logical…

    4. Sjalabais Avatar

      My current Honda minivan is such a buy. I have convinced myself that, yes, I am happy with the choice. Why? Because I have that everlasting carrot-on-a-rope hanging from the sky: The more money I save with rational transportation, the sooner I'll be able to afford the irrational one. Man, I can't believe how much brain capacity is used on something that is not going to happen this year or maybe next…

      1. Peter Tanshanomi Avatar
        Peter Tanshanomi

        "The more money I save with rational transportation, the sooner I'll be able to afford the irrational one."
        But of course.
        <img src=""&gt;

        1. mdharrell Avatar

          I figure the more money I save by avoiding rational transportation, the more irrational transportation I can acquire.
          <img src="; width="400">

          1. Peter Tanshanomi Avatar
            Peter Tanshanomi

            At least step up to the SunL 150!
            <img src=""&gt;

          2. mdharrell Avatar

            No, I was already covered on the question of tadpole-configuration three-wheelers. The delta-configuration American Microcar adds balance. So to speak.

    5. Maymar Avatar

      On one hand, I picked my car on the irrational virtue of preferring how it drives. On the other, there was virtually no cost or penalty over some of my other choices, and I'm not bothered by it looking like the cheapskate model.
      I'm not bothered by logic, I just don't care for the circumstances that require that logic.

    6. salguod Avatar

      I drove a '93 Escort LX 5 door for 11 years. 5 speed, crank widows, 13" steel wheels and 'fridge white. About as basic as you can get, although it did have (power sucking) AC, a tape deck (woo-hoo!) and some kind of lighting package (reading lamps, under hood lamp, trunk lamp & glove box lamp).
      I'll contend, however, that it was not a purely logical experience. There's an emotional satisfaction I gained from living with it. I did the mature thing, and I can (and do at times) wear that as a bit of a badge of honor.
      We are emotional creatures, very, very few if, any, of the things we do are devoid of emotion.

  5. dukeisduke Avatar

    The first picture – so in India they put ribbons on the hood, instead of putting cash on the hood?

  6. Prince Halibrand Avatar
    Prince Halibrand

    The shape and mission both compel this comparison.
    <img src="; width="500">

    1. Alan Cesar Avatar
      Alan Cesar

      Oh, but the Cyclops was available with such luxury!
      <img src="; width=500 />

  7. nanoop Avatar

    Next week I'd like to have Potbelly Joe's take on Dacia, who are rather successful in Europe. Thanks in advance!

    1. PotbellyJoe ★★★★★ Avatar
      PotbellyJoe ★★★★★

      For free?
      The gist of their success is "Less for much less" based on very low labor costs and adequate product (this is where the Nano fell flat.) Many of the markets that Dacia has seen solid to remarkable penetration are markets where just owning a car is a status statement. So they have a bit of Model T appeal. That doesn't take into account the growth the brand has seen in developed markets like France, Germany and such. In those markets, they are competing mostly against the secondhand, and very secondhand and that as the average sale price for a Dacia is under 8,000 Euros, it is a solid value proposition that you can have a new car for the same money as a well-used vehicle. Dacia also seems to be honest about their position in the marketplace that you won't get frills and electronic do-dads, you're get a 4-wheeled appliance with metal, glass, a steering wheel and heater.
      Without the demographics and previous purchase behavior of the Dacia buyers, I can't say for certain who these buyers are, but I would assume there is a healthy contingent of first time buyers and lower socio-economic groups, meaning they wouldn't own a car otherwise.
      There are business outlets doubting that they can keep the momentum though. There is a massive contract negotiation going on between the workers and Renault right now over inflation and proper wages. As the wages rise, the profits dwindle or the prices will rise commensurate to the wage increases.
      It's hard to be critical of a company that generates nearly $6 billion in revenues with 14,000 employees and a creator of countless more jobs through suppliers, retailers and such.
      I'd love to see how many Dacia buyers return to Dacia for their next purchase.

      1. nanoop Avatar

        Gorgeous, thanks!
        The question about the returning buyers is interesting, given that they are attracting so many first-time-new buyers.
        Consideringthat their resale values are insane, they are among the top five depreciation winners in Germany, it's a question about aspiration (meh, a Cary will do) and "option laziness" : I need a car, the last one was ok, I'll take the same again and hardly loose money.
        They do the base-price-jacking thing, too.

        1. PotbellyJoe ★★★★★ Avatar
          PotbellyJoe ★★★★★

          Yep, Hyundai in the US has some of the highest returning buyers scores. Some surveyed say it's because of previous good experience, credit scores show it also has a lot to do with limited ability. Hyundai was a brand and dealer network that has been very aggressive with poor/no credit buyers and also has historically allowed longer term loans (a benefit of a 10 year warranty.) Many banks have limits on the size and length of a loan on used vehicles so the buyer has to go new in order to get smaller payments as weird as that sounds. Add to this that used vehicles will also carry higher interest rates with banks, well the math starts to do funny things.
          I wouldn't doubt if a similar situation exists in Europe, but I don't know the terms of financing vehicles in the EU like I do the US (5 years experience US.)

          1. Rover_1 Avatar

            Some absolutely brilliant very well-informed insights, that make much sense.
            Thank you.

          2. nanoop Avatar

            I remember my grandfather leasing a Kia or Hyundai mid-90ies, insane concept. Before that he took a 5y-loan for a new (new as in: they came right from the manufacturer) Lada… He got the gist of owning a new car (less surprising cost developments), but never aspired to own something more up-market.
            These customers, sigh…

  8. Cool Cadillac Cat Avatar

    Yugo, anyone?
    I know, I know, there are Yugos which proved to be durable and unexpectedly trouble-resistant, however, even a blind squirrel occasionally finds a nut.