Can Tata Motors convince the two wheeler user to shift to Nano? See the production trends graph for two and three wheelers since 2002. Both Passenger car and two wheeler segments have been growing at a steady and almost similar pace, however the two wheelers have been outselling passenger cars 5 to one since 2002 A typical two wheeler user who makes the shift, will have to contend with about 30 – 40 Km less per litre of gas, and he has got a big decision to make there. If one argues that he is going to use it as a weekend vehicle, whether the insurance and maintenance for a vehicle /Asset whose value is rapidly decreasing every passing day is worth buying needs to be considered as opposed to using a Taxi or Auto.
If we consider that users of the current Entry level passenger car segment or for the sake of example the users Maruti 800, then one needs to think whether Tata Motors can do enough to convince a Maruti 800 user to shift to Nano. Few factors at least initially would strongly favour Maruti. The reliability and track record that a Maruti has got is a proof to the fact that Maruti has got its own set of loyalists. There are still many happy Maruti customers driving the same car out there even after 10, 15 and even 20 years. These loyalists, I would expect to go out strongly consider buying another Maruti when they decide to replace their first car. It is these loyalists and it is against this track record that Nano will have to fight. Nano is also expected to have basic features as a car and the presence/lack of regular and safety features will play an important part in the final decision made. Alternate uses for Nano as an auto rickshaw is also being considered by many and Tata Motors would probably not be happy to see this happen. This is a not a huge market and may lead to brand dilution.
Whatever strategy Tata Motors adopt, they will need to ensure that Nano sells in huge volumes. That seems to me as the only way they may be able to make this venture successful. The on road price, the customer ultimately ends up paying along with the ability of TM to maintain this price at their initial promised level is going to be a crucial factor. Ratan Tata has already announced that the promise made on pricing will be kept. If price is maintained in spite of growing raw material cost, inflation, credit rates etc, whether this is sustainable and whether Tata Motors will go short on profitability for volumes needs to be seen. Happy customers lead to happy shareholders in most cases; it may not be the same here. The prototype of Nano represents one mountain half scaled in the journey towards creation of Nano. Now Ratan Tata and Tata Motors have another bigger one left to scale, and they have competition to tackle. JRD Tata named it ‘Beyond the last blue mountain’; on a lighter note Ratan Tata may want to title it ‘Beyond the two Mountains’,
- Suresh
The author works for a Global IT consulting organisation as a IT consultant. He is currently based out of London. The views expressed in this article are his own. All copyrights and Trade Marks are duly acknowledged. He can be reached via the link on the right tab on this page.
