The Tata Group is a powerful diversified Indian industrial conglomerate, which is worth over 28 billion dollars. Tata Motors, the automobile division of Tata introduced its new model in early January: an electric car which is priced at $2,500 or about 1,700 Euros.
Tata Motors is already the largest Indian car manufacturer with a turnover of approximately $7.2 billion. In this document, we will analyze the issues and strategic interests of this action. The Nano is on the market in the segment of low-end cars. It is the most affordable car in the world. The Nano costs twice as less when compared to the price of other cars in the low-end segment of the Indian market.
Firstly, we will examine the reasons behind Tata's initiative to launch such a low-priced car. It might have been wise to sell the car at a price that makes it the cheapest car in the market but at a price higher than $2,500 in order to eventually break the price up to $2,500 and eliminate competitors by the strategy of ‘punishment'.
Maybe this is a powerful signaling effect that makes Tata Motors a champion of ‘ultra low cost' and a benefactor to the Indian middle class by democratizing the automobile.
Tags: Tata Group, launch of Nano, low-end automobiles in Indian market, electric cars
[...] This idea of low-cost car can be daring. Traditionally, car manufacturers give priority to quality, comfort and safety. However, this decision is not surprising. For several years, the low-cost concept appeared in many economic sectors: air transport, travel, retail discount stores, computer science (eg the Asus EEE) . etc. Due to its innovation, Tata Motors has managed to be the first to invest this strategic segment. Tata has developed this new product in-house which is a way of developing a priori long, costly and risky, but highly controllable vehicle. [...]
[...] It is the most affordable car in the world. The Nano costs twice as less when compared to the price of other cars in the low-end segment of the Indian market. Firstly, we will examine the reasons behind Tata's initiative to launch such a low-priced car. It might have been wise to sell the car at a price that makes it the cheapest car in the market but at a price higher than $2,500 in order to eventually break the price up to $2,500 and eliminate competitors by the strategy of ‘punishment'. [...]
[...] Of course, the quality of the Nano is worth the price. This is really a basic vehicle. Tata has had to give options like air conditioning or power steering and an engine power of a motorcycle engine. The model is devoid of any item of comfort and includes the bare minimum to be an operational vehicle. This is a characteristic of ultra low-cost: Reduce the comfort and accessories to a minimum or even remove the basic characteristics (e.g. meals on flights EasyJet, for example). [...]
[...] In 2004, Renault had already started the trend towards low-cost launch with the Logan, a cheap model, but still much more expensive than the Tata Nano. The Indian manufacturer has an edge over its competitors. Renault had teamed up with the Indian Bajaj to launch a model that would cost $ 2500, by 2010. The importance of the learning curve and the accumulation of experience will probably be decisive in the evolution of the position of Tata Motors in this segment in the next 2 to 3 years. [...]
[...] Moreover, the results of internal skills; Nano Specific expertise, cost control, knowledge of the Indian market and OEMs, innovation in the design of inexpensive parts . These key success factors have enabled Tata Motors to achieve this feat. The benefits are unlikely to be economic: if the project proves successful, Tata Motors will appear as a visionary company and will consolidate its brand image in the world. However, this strategic decision has many risks and uncertainties. Certainly, the high demand for such vehicles is cheap, but the Indian government is already concerned about the consequences in terms of congestion and pollution with sustainability as a concern that is very much present. [...]
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