Tata Motors' Rescue Strategy for the "People's Car" Nano: Export!
Much of 2010 was consumed by speculation about what would happen when electric cars hit the market, but there was another story brewing: Tata Motors and the introduction of its ultra-cheap "People's Car," the Nano. Things are off to a decent start for the much-hyped EVs. Unfortunately, the Nano is cratering.
Why did Nano sales drop by 8,500 vehicles in six months? At Harvard Business Review's "The Conversation" blog, Matt Eyring (a money/branding guy, not a car guy) tackles the question and neatly summarizes it this way:
A cheap car that's not really cheap. A safe car whose safety has been questioned. A poor people's car that poor people aren't buying. That sounds like a failure, certainly.Failure at home, success abroad?
Eyring goes on, however, to argue that flunking the early tests of success for an innovative new product isn't a guarantee of total failure. Tata is tweaking the Nano to deal with its problems. This may revive the vehicle in India, but what about going for a leapfrog strategy instead?
Think of it this way: in the developing world, countries can leapfrog the slow telecommunications build-up that the West endured simply by going all-in with mobile. In the case of a very cheap car like the Nano, the leapfrogging strategy may be to go where the hype-receptive market actually is. That means exporting the car, or even manufacturing it in -- Yeegads! -- the developed world.
A supercheap car only seems that way vs. expensive cars
India isn't exactly a motorists' paradise. The Nano was intended to address this, by providing mobility with four wheels and a roof at a rock-bottom price, supplying an alternative to mopeds and scooters. But even its roughly $2,500 sticker price is steep by Indian standards. Affordable, yes, but still a big step up for most drivers.
Plunk the Nano down in Europe or the U.S., however, and even with improved safety to meet government requirements, it becomes a radically disruptive arrival. Big car companies are discovering, somewhat to their surprise, that customers in old school economies like the idea of a simple car that just goes from A-to-B and that for many buyers doesn't cost enough to warrant much financing. Renault-Nissan has discovered this in Europe, where stripped down models intended for the developing world are selling better at home. Cheap matters when you could otherwise spend tens of thousands on your ride.
In mature economies, price is everything
I've always like the Nano's chances in the U.S. because Americans are incredibly sensitive to price in their cars. Mobility for us is, to a certain extent, disposable, and people feel empowered to shift around on price as necessary. Many parents also like having a cheap auto choice for their kids. This can lead to default options, such as buying an entry level Honda or Toyota.
But it can also be met by buying into the hype. What the Prius did for hybrids in the USA, the Nano could do for cheap mobility. There's precedent of course. Volkswagen did all right with the Beetle, and Ford successfully moved away from big cars in the late 1950s and 1960s with the Falcon.
Hype sells, but only where it's desired
From my perspective, Nanomania was much more a Western thing than something that made sense in India. The reaction to the Nano was, "I can't believe they can build a car that cheap!" followed by the urgent need to sit in one and then take it for a spin. That hype can still be capitalized upon -- just maybe not in its birthplace.
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Photo: Wikimedia Commons