India

Tata: Making the Nano More Affordable


It has been a year since Tata Motors (TTM) first gave the world a glimpse of the Nano, the compact that the Indian automaker promised would be the world's ultimate . Thanks to the initial publicity, many Indians were already familiar with the car's shape, size, and engineering ingenuity. But Tata hadn't provided details on how much the Nano would cost, the type of financing the company would offer consumers, and how Tata would distribute and market it.

Now, Tata is filling in the blanks. On Mar. 23, Chairman Ratan Tata launched the Nano in front of 1,500 vendors, dealers, and other guests gathered on the Mumbai waterfront, promising that Indian consumers would find it easier to pay for the Nano than any other car. When the cars roll off assembly lines in July, the Nano will come in a basic model (price tag: $2,168) and an air-conditioned version ($3,392), while the first lot of 100,000 randomly chosen consumers will get the Nano at the promised price of one lakh rupees (that is, 100,000 rupees, or $1,961). To help finance Nano purchases, Tata has entered into a partnership with India's largest state-sector bank, State Bank of India and its seven subsidiaries. Their 1,350 branches in 850 cities will be the hub of the Nano's financing and marketing plan.

The State Bank alliance is crucial to Tata's plans to popularize the Nano. The automaker is targeting lower- and middle-income buyers in urban and small-town India, and by teaming up with State Bank, the company hopes to ensure that loan facilities are available in even the most remote Indian villages. Would-be buyers will have to pay $6 for a booking form and then make an initial payment of $60, with the rest coming in as a State Bank loan. "We want to make the car accessible to people," says Tata Motors Managing Director Ravi Kant. "This is what makes the Nano the people's car."

Nano T-Shirts and Key Chains

To expand its reach, Kant and other Tata executives also hope to leverage other parts of the Tata empire. The company will make the booking forms available not just at the banks and Tata dealers but also through the group's existing retail outlets. Those include consumer electronics chain Croma, department store Westside, watch store Titan, and Tata Indicom outlets. Tata's retailers will promote the "people's car" as they would any other big consumer product: In addition to Nano order forms, all the Tata stores will sell Nano phones, Nano key chains, Nano caps, and Nano T-shirts. That's a first for any Indian car, says Arun Nanda, chairman and managing director of advertising agency Rediffusion DY&R India.

Thanks in part to this groupwide promotion and the extensive publicity in the media, Tata will take a low-key approach to other types of marketing. "There has been enough global awareness for the Nano," Kant told BusinessWeek last year. "So we are lucky that we don't have to use a conventional marketing strategy." Indian TV networks won't be selling any splashy television ads. Instead, commercial breaks between programs are being branded "Nano breaks." There will also be a Nano online game; a Nano portal already has received 30 million hits, according to Kant. Search engines will soon have Nano pop-ups encouraging consumers to buy.

The big disappointment from Tata Motors has been its much-awaited distribution system. Tata had planned on selling the cars in the form of knocked-down kits, to be assembled at the dealers by local mechanics trained by the company. The idea was to cut costs from the traditional distribution systems and also to allow young entrepreneurship to bloom. But Chairman Ratan Tata says that the company will use the tried-and-tested systems, although he remains open to the possibility of introducing the new distribution system "after we stabilize our production."

Still, having the car hit Indian roads after long delays and disappointment will be an achievement for Tata—and Indian engineering. "It will enhance India's position as a highly cost-competitive manufacturing hub for small cars," says Sachin Mathur, chief researcher of rating agency Crisil, a subsidiary of Standard & Poor's. "It will encourage continued emphasis on product development in the low-cost car category by other manufacturers across the world, with India as the focal point." Investors have yet to warm up to Tata Motors: At the Bombay Stock Exchange, shares are down 2.41% since the Nano launch and closed on Mar. 24 at about $3.

Lakshman covers India business for BusinessWeek.

Lakshman covers India business for BusinessWeek.

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