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Post by Saurabh Jain on Jan 11, 2008 8:09:12 GMT 5.5
Pretty girls and fancy new models didn’t help Fiat much. Close by, Skoda’s swanky new cars looked relatively pale. At a show where car lovers come to check out the latest, the fanciest, the fastest and luxurious new cars, Tata’s Rs 1-lakh car was a winner by a huge margin. It was clearly ‘The Car’ of Auto Expo 2008. The car is not yet on road.
And a verdict on its success — as a commercially viable car — will have to wait. But there are three big messages that Tata’s car has already sent out.
One, it takes a lot of guts and courage to do a breakthrough innovation in India. The scepticism and criticism for the Rs 1-lakh car have been coming from all over. Will it be a two-wheeler or four-wheeler? Will it be a car with canopied, foldable roofs? Don’t call it a car — it just won’t meet the safety standards? And the latest — will it ever make money?
If the cynicism from business rivals wasn’t enough — NGOs have joined in raking up the issue of Singur bloodshed at the auto show. You need to have the guts and doggedness of the Tatas to achieve what they have done.
Two, there are reasons why Maruti Suzuki, a company best placed to beat Tatas at it, could not/did not take the lead here. The DNA of MNCs make it extremely difficult for them to do the kind of innovation that Tatas have managed to do. “They (MNCs) have in many ways established ideas of doing things,” says BCG India chairman Arun Maira.
Newer entrants like Tatas — with not much physical capacity locked in — have the flexibility and nimbleness to do some groundbreaking innovation. Headquartered in India, Tatas had both the push from its headquarters and the pull from potential customer segments to go down that path, unlike an MNC.
“Their home market influences their global vision significantly,” says Tata Sons executive director R Gopalakrishnan. MNCs see a flattened world and want to have products that will give them economies of scale and can move across geographies. “That organisational structure constraints and militates (against this kind of innovation),” he says.
This is not just about frugal engineering and low cost. “Its about priorities and desires — and being able to pay attention to a (low-end) segment with the same seriousness and quality,” says Future Brands MD and CEO Santosh Desai.
Three, Tata’s Rs 1-lakh car may be a defining moment for the global auto industry. The biggest draw of the Tata’s car — 250-odd journalists attended the press conference this morning, virtually every news agency and top global newspapers have already written about it — is its price tag. It is everything that a car and the global auto industry isn’t about — style, comfort, sophistication, speed, technology, design and luxury.
Suddenly, it has opened up a vast new market and showed possibilities that global auto majors didn’t think existed. The rush of announcements on small cars haven’t stopped coming.
As global attention moves from mature markets to the emerging markets, as corporate world looks at bottom of the pyramid rather than top of the pyramid to expand business — increasingly key product attributes in many industries might get redefined globally — with a dramatically new customer segment
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Post by Saurabh Jain on Jan 11, 2008 8:10:04 GMT 5.5
Nearly 72 hours before the launch of his dream car, Tata Group chairman Ratan Tata spent 90 minutes with ET for a one-on-one on the making of the people's car. He shares the trials and tribulations he faced during the journey. Here is the full text of the interview. Q: Are you nervous? Is this much bigger than the launch of Indica? I think I was much more nervous during the launch of Indica because we had never been in car manufacturing before. We were venturing into a new segment. We are again venturing into a new segment but in a product line in which we have 10 years of experience now. At the time of the Indica launch, you did not know whether the market would accept you becoming a car manufacturer from a truck manufacturer. We took some widely publicised goals at that time that we would be as big as the Ambassador, or we would have the same size of the Maruti or we would have a diesel engine. We made those statements. We didn't know those would be the kind of things the market would go for. So, I think at that time we were much more apprehensive and nervous than we are today. Q: If one would really start at the very beginning, what really was the trigger for the idea? Basically, just as an Indian, you know, I would be as concerned of my-self as one of the rickshaw pullers in Calcutta running with a rickshaw behind with two people sitting back. It bothered me. My mind will start thinking: Can we put a bicycle there? The same thing bothers me when I visit a plant also. The workers are bending over when the work piece should be raised or maybe they should sit in a pit or what-ever. Because I think human fatigue is something that affects safety. So in this particular case, you could not help but notice that there were three or four family members on a scooter, the kid standing in the front, the guy driving the scooter and the wife sitting side saddle holding a little kid. And when you're driving a car, you certainly say, Oh my god, be careful, they may slip. Add to that slippery roads and night time too. Any of these reasons can be dangerous for transport. That does not mean that the scooter should not exist because scooters are an evolution of bicycles and it is all the path of prosperity. And this seemed like a dangerous form of transport. So, I, to be frank if I might go through the process, I asked myself, what if you put two wheels on the back that will give greater stability? If you build a bar over the top could you save the occupant? I will stop there and come back. Last year, to my surprise I found that BMW had produced a scooter with the same bars that I had thought about with rubber bumpers on the side so that if they (the riders) fell they wouldn't hurt themselves and the seat there had a seatbelt. And I thought, that's exactly what I had thought about. The fact was that BMW had put this out though it was not successful and they had withdrawn it. But, someone else had also thought of the same thing. It had only two wheels not three.
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Post by Saurabh Jain on Jan 11, 2008 8:11:37 GMT 5.5
NEW DELHI: It’s the car that promises to shake up the world automobile industry. The Tata Motors Nano, India’s first original contribution to the car industry, was unveiled on Thursday at a packed, near-stampede launch. As promised, it’s priced at Rs 1 lakh ($2,500).
The history-making car, which many industry observers predict will be a huge hit in emerging and even advanced markets, is already attracting world-wide attention with television channels in Europe and the UK telecasting the event live. Already, the launch of the Tata small car, the cheapest in the world, is being compared to seminal events such as the launch of Ford Model T and Volkswagen Beetle
Chairman Ratan Tata unveiled the Nano, without a doubt the truck and carmaker’s most ambitious product, in standard and deluxe versions. The theme from “2001: A Space Odyssey” played in the background. The car will hit the market in the second half of 2008, close to the festive period.
The standard variant, sans air-conditioning and power steering, will have an ex-dealer price of Rs 1 lakh. Customers will have to shell out value-added tax and logistics cost from the factory. For Delhi buyers, therefore, the standard variant is likely to cost Rs 1.20 lakh (showroom), including local levies, registration and insurance charges.
The car unveiled on Thursday represents the culmination of Mr Tata’s dream of offering the comfort and relative safety of a car to users who can afford a two-wheeler. The four-door, four/five seater car is “8% smaller than the M800 externally but 21% more spacious internally”, Mr Tata said. It meets the frontal crash test norms mandatory in India.
The Nano has been designed to meet offset and side impact crash test norms required overseas. In emission terms, it’s Bharat Stage 3 compatible and “we can meet Euro 4 too with this engine,” Mr Tata said. The car’s mileage, he said, will be 20 km per litre.
Vendor sources said the AC version is likely to be launched around December, with a 60cc AC that will not place too much strain on the engine. It will be “priced somewhat higher” than the stripped-down variant, Mr Tata said. Tata Motors is also planning diesel and hybrid versions of the Nano. “By and large, we’ve always been a diesel company, so we will have a diesel version that will follow this variant soon after,” Mr Tata said.
The current engine is a 623 cc, two-cylinder, MPFI engine with single-balancer shaft and four-speed manual transmission. The top speed is around 105 km per hour. The power-train is packaged in the rear to increase interior space and improve manoeuvrability. Tata Motors is building a 250,000-unit plant, expandable to 350,000, at Singur that will be fulfilled before we look at satellite plants,” Mr Tata said.
The company is in the process of finalising its distribution strategy for the Nano. “It won’t be traditional, we will remove some layers in distribution, sales and service,” Mr Tata said. “We are working on the distribution, finance and services backup for the Nano. We already have the passenger vehicle model for our Indica and other utility vehicle range that will help us to frame a structure to deliver the car,” he added.
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Post by Saurabh Jain on Jan 11, 2008 8:13:48 GMT 5.5
His car may well spark a revolution on the streets. Will Tata Nano be the iPod of the car market or its Nirma? The iPod changed the MP3 device market and it did not really matter what the competition did. Nirma, in late ’80s, handed out a beating to Hindustan Lever’s Wheel and created a new mass segment. Experts say Nano will perhaps be more Nirma than an iPod.
They feel there won’t be any spillovers in the car industry. Nano is expected to change the automobile market in India, which should ideally mean new strategies for competitors. “This car is actually a bridge between the automobile market and the two-wheeler market,” says Ranjit Shastri, MD, Psi, a consulting firm. This new market that Nano will create will not eat into the market of other car segments, but will affect the two-wheeler market drastically.
The family two-wheeler, which is in the range of 75-125cc, costs Rs 35,000-50,000. This segment accounts for 92% of the two-wheeler market in terms of sales. With the launch of Nano, the spillover will happen from this two-wheeler market to Nano. Two-wheeler manufacturers have realised it and Bajaj Auto and Hero Honda are making plans to enter into this new segment.
Earlier, Maruti 800 has been the essential small car with a price tag of Rs 2 lakh and all aspiring car buyers have preferred it as their first car. Today, that may change to a certain extent. But this will in no way harm Maruti Suzuki or Hyundai Santro as owning a car is still aspirational and anyone who wanted to buy a car above the 3,400 mm series will continue to do so.
Maruti 800 held a 30% market share in terms of sales in 2001 among all passenger cars. Today, it has fallen to a mere 5%. Maruti has laid stress on Alto while relegating 800 to the background, and it was a calculated move. Thus, they never wanted to be a part of the lower end segment of the car market. Same goes for Hyundai Santro.
The launch of Nano creates a market for the small car which may allow competitors to enter this market with new models but should not harm their existing strategies.
“At most, Maruti may want to launch an exchange offer for 800 and give an attractive price for 800 buyers to migrate to Alto. They should then refurbish and put these used 800s in the market for Rs 70,000. This should act as a drag on some of the velocity that Nano is going to pick up,” says Shastri.
For other players, there are two strategies: First, get into this segment yourself. Second, cut down on operational expenses and make existing products available at a cheaper price. However, sudden price cuts will not be viable as a strategy.
The competition will have to wait and watch how Nano is received, what all has gone into it to make it so affordable and then try and work a strategy around it. Even if Nano manages to convert 10% of existing the two-wheeler market—which is close to 900 million—Nano will have almost 50% market share of the car market. But that is provided that Nano remains the only car in that segment. Chances are this will become the hotbed for competition.
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