Ten years later, the world’s cheapest car may go out with a whimper

I was in the 11th grade when Tata Motors unveiled the Nano at the New Delhi Auto Expo in January 2008. The ensuing PR blitz had me and my friends sold. This compact car was being sold for just ₹100,000 (around $2,500 at exchange rates at the time).

It was a passion project of India’s foremost industrialist, Ratan Tata, so there was no way it was going to fail. Annual sales were expected to eventually breach the 500,000 mark.

But the Nano was more than just a car. It symbolised India’s approach to frugal innovation, the ability to do more with less, the ability to scale things on the cheap. It symbolised the social mobility promised by the future. Millions of Indian families - the kind that squeezed onto motorbikes for short trips- would now be able to own a car without having to worry about long drawn-out financing plans.

It was going to be a gamechanger.

And now, ten years later, there are barely any Nanos to be seen on Indian roads. The cheap car has proven to be a very costly failure for its manufacturer, sounding the death knell for Tata’s domestic passenger vehicle business. In June 2018, only one unit was produced by Tata Motors, while only three were sold. No units were exported.

How could things go so wrong?

The first problem was cost escalations and production delays. The Nano ended up being manufactured at a higher cost than expected, owing to the higher input costs and the need for additional features, but Tata Motors had no choice to sell it at the price that they promised. That was, after all, the USP of the car - that it was only ₹100,000.

The car’s large-scale rollout also ended up being pushed back by a year to March 2009 due to production delays, which tempered enthusiasm. Production had to be shifted from the company’s Singur plant in West Bengal to Uttarakhand and Gujarat due to farmer protests over land acquisition. Even with the car’s national launch being delayed, the final product looked like it had been rushed. There were numerous instances of Nano models catching fire in the initial months.

The second problem was branding. Tata Motors completely misread the market. Cars were meant to be aspirational products, not just utilitarian. In a country like India, where status signifiers are ubiquitous, buying the “cheapest car” was a dead giveaway that you couldn’t do better. Calling it as such made it seem like it had the bare minimum of features and was less safe to drive than higher-priced hatchbacks.

The “1 lakh car” thus became perceived as the “poor man’s car”.There was definitely a strong level of demand for it, but only a fraction of the people who needed such a cost-effective car were ready to purchase it. The car was relaunched as the ₹199,000 “GenX Nano” in 2015, equipped with automatic transmission and Bluetooth connectivity, but the damage was already done by then.

The third problem was the lack of a coherent distribution strategy. The Nano would have been a strong-seller in small towns and rural markets, but Tata Motors lacked a solid dealership network in these far flung areas. As sales declined considerably a year after the car’s launch, reaching a low of 550 units in December 2010, Tata Motors even took to selling the car in hypermarket outlets like Big Bazaar and exporting it to neighbouring countries like Nepal and Sri Lanka. The strategy never paid off.

The end of the road

As things stand, the Nano could go out of production very soon, as its parent looks to axe ageing models. Tata Motors has maintained that it is yet to take a decision on the matter, but the continued investment, especially to comply with future emissions norms, simply does not justify the returns. A statement from Tata Motors clarified this by explaining that “the Nano in its present form cannot continue beyond 2019”.

It has been suggested that the car is still in production only due to Ratan Tata’s emotional connection to it, which is hardly a reason to keep going. Even though the Nano brand could be facing the axe, there has been speculation that it will get a further lease of life through Tata Motors’ deal with Jayem Automotives. Under a proposed partnership, Jayem is set to use the body of the Nano to make a special electric vehicle, which will be branded the Jayem Neo EV. However, a spokesperson for Tata Motors said that this was merely speculation.

It looks to be a sad end for the “people’s car”, a product that promised so much. However, its phasing out should give way to smarter product choices from the company as it looks to regain market share at home.