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       Remaking Nano: Discarding Rs 1 lakh worth of promises
 
         Posted on :17:11:30 Jun 9, 2014
   
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       Last edited on:17:11:30 Jun 9, 2014
         Tags: Remaking Nano, Rs 1 lakh
 
SUGITA KATYAL: When Tata Motors rolled out an inexpensive compact vehicle in 2009, the automaker heralded the car, saying it would change the lives of millions of Indians, particularly among its aspirational middle class. 
 
But the egg-shaped car, the Nano, failed to impress and sales have been sluggish, undercut by an image of poor quality and underwhelming power.
 
Now, Tata Motors is trying to revive sales by remaking the Nano for a younger, more affluent consumer. The Nano Twist, which started appearing in showrooms in January, has more modern features like power steering, a stereo with Bluetooth technology and remote keyless entry.
 
But it remains to be seen whether the revamp will entice buyers.
 
The Nano Twist’s higher price tag alone may be tough for consumers to swallow. The new car sells for about Rs 236,000, or about $4,000, roughly double the original. And it is also unclear whether Tata can take market share from established competitors like Maruti Suzuki, Chevrolet and Hyundai, all of which offer similarly sized vehicles.
 
J. Basu, a writer based in New Delhi who researched extensively before buying, said he chose a small car from India’s largest automaker, Maruti Suzuki, because it was more powerful, had better acceleration and offered more leg room than similar cars in his price range.
 
"It was better value for money. Somewhere along the way, the Nano lost the plot,'' he said. Tata Motors had an ambitious vision for the original Nano. The car, which weighs about 1,300 pounds, not much more than a grand piano, was marketed to consumers looking to upgrade to a car from a motorbike.
 
The problem, analysts say, is that India’s first-time car buyers were not just looking for an inexpensive car. They also wanted a car that was cool. The Nano’s 624-cubic centimeter engine — smaller than the engine in many motorcycles — did not perform well on highways or hills. So the Nano failed to resonate with first-time car buyers spoiled for choice in a country where most of the world’s top carmakers sell small hatchbacks, too.
 
“Customers found the build quality short of expectations, the fuel efficiency mediocre and the car not holding itself well with age. The highway performance was short of required and the acceleration sluggish,” auto analyst Deepesh Rathore, co-founder and director of Emerging Markets Automotive Advisors, wrote in a recent report on the Nano. “The Nano was somewhere between a car and a two-wheeler, both in terms of price as well as performance. That was not what the customer had been expecting.”
 
Reports of several Nanos bursting into flames in 2010 also hurt sales, although the company insisted there was nothing wrong generally with the model. Tata Motors says its cars meet all safety standards.
 
“Safety is of paramount importance to Tata Motors. All our vehicles, including the Tata Nano, meet all Indian safety regulations, including the frontal barrier crash test” at 30 mph, “as mandated by the government,” a company spokeswoman said in an email.Citing company policy, she declined to be identified.
 
Such disappointments came at a tangible price for Tata Motors, which also owns the Jaguar and Land Rover luxury brands. Sales have been far lower than the capacity of 250,000 cars a year at the Nano plant in the western state of Gujarat. According to company figures, cumulative sales fell to 21,129 in 2013-14 from 53,848 in 2012-13. In one particularly bad month, November 2010, only 509 cars were sold.
 
“It got slotted as a cheap car, which was not a great place,'' said Ranjit Yadav, the president of passenger vehicles at Tata Motors. ”It did not fail; it did not hit the imagination of the consumers. They wanted more."
 
Tata Motors hopes it can reposition the Nano to reach out to younger customers or people looking for a second car. For instance, it is pushing the Twist as a college graduation gift and trying to use terms like “cool,” “peppy” and “fun” to describe it, a spokesman said.
 
Yadav, the president of passenger vehicles, said the new model had bumped up Nano sales by 10 to 15 percent in the past two months.
 
“The Nano story has been a journey with Ratan Tata’s vision of affordable mobility,” he said, referring to the former chairman of Tata Group who helped the company expand its car business.
 
“Over the past four or five years, the market has evolved, including the customer. We’re repositioning the car as a smart city car aimed at the smart city buyer, unlike the earlier model, which was more affordable transportation,” Yadav said.
 
He said that in the past five or six years, the proportion of Tata buyers from 24 to 34 years old had expanded to 40 per cent, from 15 to 18 per cent.
 
Yaresh Kothari, research analyst at the Indian investment firm Angel Broking, said the Twist had a long way to go before it could be considered a legitimate challenger to the country’s most popular small car, Maruti’s Alto. About 25,000 Altos are sold each month, starting at Rs 315,000 ($5,390). By comparison, Tata Motors is selling more than 1,000 Twists a month.
 
“The real success is when the company is able to sell 7,000 to 8,000 a month, or even 10,000,” Kothari said of Tata Motors.
 
Some auto experts say Tata Motors needs to change its message. Rathore says Maruti Suzuki has thrived because of its clever marketing, especially in rural areas where the company chooses moments like a post-harvest period, when farmers are flush with funds, or the wedding season, to market its cars there.
 
For the Nano Twist, “The situation is still quite bleak. Nothing has changed on the ground,” Rathore said. “The new model has to be substantially better than the present car. They will have to give a more convincing argument to customers and say, 'This is not the Nano but a whole new car.'”
 
In the end, Tata Motors will have to find more fans like Abanindra Chaudhuri, 65. Chaudhuri, who lives in the eastern city of Kolkata, bought a Nano in 2010.
 
“It’s the cheapest car in India; its petrol consumption is very good and it has space for four or five people,” he said. “It’s easy to manoeuvre and easy to park.”
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