From safety issues to cheap car tag, Tata Nano is a self induced struggle

Nano's production though continues unhindered despite mounting losses

Apart from the Nano, the Manza and Vista have been amongst the most noted car brands that Tata Motors rolled out in the last decade.

Servicing customers of sedans and hatchbacks were introduced only after the rollout of the mini car Nano in 2008. After the initial buzz, demand for both the brands (known formerly as Indigo Manza and Indica Vista) nosedived just like the Nano.

After years of sustained poor performance, the company was forced to pull both models out of production lines. Nano’s production though continues unhindered despite mounting losses.

In 2015 Nano sales jumped 24 per cent to 21,012 units compared to 16,901 units sold in the previous year. The sudden jump was due to the launch of an upgraded version which was priced higher than the outgoing model.

The excitement quickly faded in the ensuing quarter when Nano sales nearly halved to 2,352 units in April-June compared to 4,529 units sold in the same quarter last year.

In March itself Nano sales dipped to 732 units, far from the 20,000 units per month envisaged earlier, according to data provided by the Society of Indian Automobile Manufacturers.

Last year Tata Motors even tried to shed the cheap car tag and reposition the Nano as a smart city car on the lines of Maruti’s hugely popular Alto and Hundai’s Eon.

With the launch of GenX Nano, featuring a boot, improved styling and an automatic gearbox the car saw a sharp mark up in cost to the tune of 50 per cent.

Despite all these changes, Nano sales remain disappointingly low even as buyers flock in encouraging numbers to Renault showrooms to buy the Kwid, a tall and stylish, 800cc hatchback which the French company launched more than a year ago.

Company insiders and market watchers believe that the cheap car tag aside, the negative publicity received during its initial days when pictures of fire engulfed Nano started to flood the internet became a pivotal point of consumer rejection.

“Safety issues concerned the Nano buyer the most during that period”, said a Mumbai-based analyst.

Tata Motors however left no stones unturned when it came to marketing and sales. Several schemes including two-wheeler trade-ins, attractive lending options, cash discounts, free service maintenance, small Nano kiosks in the rural areas, multiple freebies, to name a few were rolled out to draw customers to showrooms.

One of the biggest causes of worry for the Nano was the company’s near failure to tap its overseas demand. Before its commercial launch in India the then chairman Ratan Tata shared his plans to take the car to developing markets of South East Asia, Latin America and Africa.

The car however has reached the shores of only Sri Lanka, Nepal and Bangladesh.

“The Nano product development concept called for a car below Rs 100,000 but the costs were always above this. This product has consistently lost money peaking at Rs 1,000 crore (Rs 10 billion). As there no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision”, said Cyrus Mistry is the letter sent to the directors of Tata Sons.

A mail sent to Tata Motors seeking comments on issues raised by Cyrus Mistry remained unanswered.

Tata Motors exhausted all means to make the car a commercial success. Karl Slym, the former managing director of Tata Motors said in an interview to Business Standard, “Nano is like an open canvas for us. We have the option of positioning it on the lines of the (Volkswagen) Beetle or the (BMW) Mini”.

Photograph: Amit Dave/Reuters