Why TATA Nano failed in the Market?

Abstract:
When TATA Nano has announced in January 2008 it was overhyped to be the car of every Indian.
The price of Nano was said as Rs. 1 lakh, as said by Ratan Tata, the Chairman of the Tata Group
then. Every lower-middle-class person looked at Nano as a dream car that can be afforded by
them. The Nano was hype so much in the market, instead of becoming the Smart car of the Indian
Market; it became the “The Cheapest Car”. the car was not suited at all to be used in hilly terrains.
There were incidents of car engines catching fire and excess of heating. The engine used to make a
lot of noise and people even started comparing it with an auto. Interiors were dull with insufficient
leg space.

Tata Nano received around 200000 bookings initially. This made them probably feel proud and
they didn’t bother for improvising of executing any new promotion strategy to keep the attention
of the people intact. Tata Nano was considered to target motorcycle riders, second-hand car
owners, and other families in the lower-middle-class group who had never thought of buying a car.
Now, this led to a somewhat contradictory situation. As per the target audience, the media and
society accepted this as a Poor man’s car. When Nano later raised its price to overcome the
negatives of the first model, the price became much higher at which rate many other cars were
available which were already well settled in the market. In a new Marketing strategy, TATA
focused on the emotional aspects of a parent and promoted in a way that parents can actually give
their kids a Tata Nano instead of giving them bikes as a car is compared safer to a bike. This would
also make them smart parents.

Executive Summary:

This research spans around the above question and hence is the area of our concern. The primary
aim of this research is to identify the major factors which lead to the failure of TATA Nano even
after having promising and a novel product to deliver.

Our research is concerned with addressing the various contributors to TATA Nano failures and
the factors responsible. Nano was the dream project of Ratan Tata, the Chairman of the TATA
group. He invested huge money in this project to make a car that can be afforded by everyone, a
dream that each house in India can have at least one car. India is a country where having a car is
still a dream for millions of people. Ratan Tata took this dream of people upon him and
introduced Tata Nano in January 2008. Due to issues like manufacturing factory relocation, the
manufacturing cost of Nano was more than the Selling price but Ratan Tata made a promise that
the car will be of 1 lack so he kept his promise due to which company had to deal with loss. But
due to the increasing material cost price, the price of Nano also increased. In 2017, it was
₹2,15,000.

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Background:

Nano was manufactured by TATA Motors in India. Initially, it was launched at a price rate of ₹1
lack but it increased with time. The motive behind launching Nano was to target the middle-class
people who use a motorcycle as they can’t afford a car. The dream was to make a car that can be
afforded by anyone. TATA Nano received a lot of publicity; even Barack Obama praised Nano
because it was all over the market before it was released. Even after this much publicity, the sales
expectations were not met.

Multiple issues led to the failure of Nano. In some cases, the Nano cached fire, and the
perception of Nano being unsafe and lacking quality due to cost-cutting led to the decline of sales
volume. Tata Nano was widely known as ‘Cheapest Car in the World’ but this is the main reason
why Tata has suffered problems in the market. Here people did not take a cheap car in a sense of
low price but they took it as cheap in a sense of quality. Here the marketing team of Nano failed
to position it in the market or you can say that it was wrongly positioned in the market and the
minds of people.

Nano was in the category where a person would be confused between buying a good bike or a
Cheap Car. The space in Nano was not enough for a family consisting of 5 members. Indian
people buy cars to show off their status but the Nano lack features and looks were very simple.
The car lacked both speed and power, nor was it builds to handle highways and muddy roads.
Tata motors promised to give the Nano at 1 lack but then it raised its price from 1 lack to 1.2 lack
and then to 1.5 lack.

Problem Definition:

 Did not match the expectation: Indian customers require products which would be an
aspiration to neighbors, In short, we want an Item which would be “Neighbors Envy
Owner's Pride”.

 Wrong marketing strategy: “Nano, the cheapest car of the world” tagline given by Tata
motors itself led to the failure of the car. It gave the wrong impression of 'Cheap car'.

 Failed on Performance front: In early days lots of Nano caught fire that damaged the
image of Nano so much that people started looking down on Nano.

 Increase in the price: Only the costumers who booked Nano during Launch got the car at
₹1 lack price. Rest all customers got it at a very high price. The base model in 2017 was of
₹2,15,000.

 Pre-booking waiting period: waiting period for Nano was too high that most of the
costumer moved for another car and canceled the booking for Nano.

 Failed to understand customers: people expected a good car that can compete with the

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 exiting cars in the market. But Nano failed in both looks and performance. It was in a
category where people were confused between buying a good looking bike or Nano car.

Research Objective:
The objective of this research is to find why the TATA Nano car failed in the 4th biggest automobile
market in the world after being the cheapest car in the world. The various research problems will
be answered in this study:

1. Why did Nano fail despite a novel idea? 

2. What factors lead to Nano Failure?

3. What went wrong in the market strategy of Nano?

4. What kind of mindset Indian customers have regarding Cars?

5. What problems did customers face while using Nano?

Research Design:
Our business research problem is to find out how Tata Nano is recognized by potential
Respondents. We need to understand what the Respondents think about Tata Nano so we can
understand the perception of TATA Nano.. We identified some characteristics as rural,
fashionable, safety, ecological, and trendy that could define Tata Nano, and the Respondents
should be asked if they agreed. We should also have some idea about whether the customer sees
the Nano as a car for the younger generation or people's cars or both. Furthermore, they need to
inquire about the goal of social class for Nano.

Besides, we identified the following criteria: price and affordability, fuel efficiency, good design,
quality, comfort, safe services, followed by Tata's brand name, the reason why people would buy
the Nano. Respondents are required to choose the reasons according to their choice, ranging from
most likely to least likely.

Then we have to understand the purchase plan of the respondents and why they think whether
Tata Nano will work or not. For this, we asked some respondents what they perceive by a
successful brand. According to him, a successful brand is one that fulfils the promise of quality,
which can be easily remembered by people, who have a name and reputation in the market and
focus on customer satisfaction.

If we get all this information, then we will be able to analyze the perception of Tata Nano.

Sampling Plan:

The respondents for the qualitative research study were sampled and filtered on the basis
of the following attributes:

1. Costumer
2. Sampling unit: Urban, Rural

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 3. Qualitative sample size: (M/F, age group 18-65)
4. Sampling area: Indian tier 1 and 2 cities

Interview Process:

 A brief introduction of the respondents is recorded.

 A private room or a phone call/video call with no disturbances or distractions is
utilised.
 The preamble to the in-depth interview is read out, informing the respondent about
the process ahead.
 A consent form is signed by the interview.
 Each interview is recorded, with important points noted down on a note – pad.
 The interview is informal in nature. Time: 15-20 minutes.
Sample Interview Questions:

1. Is it okay if this interview is recorded?

2. Please introduce yourself.
3. How did you come up with the idea of Nano?
4. What was your business plan and challenges that you have faced?
5. Could you tell us about the investment made in project Nano information and
revenue generated from it?
6. Why the Nano failed and what caused failure?
7. Can you share some details about the exit mode from the business?
8. What were some key lessons you have learned from the failure of Nano?
9. What problems you faced while using Nano?
10. What you used to feel while sitting in Nano?

Data collection:
We chose exploratory research to examine first-hand data about people's opinions of Tata Nano. It
was necessary to know the key elements that could be useful for nanotechnology in identifying
the assumption. To gain insight and understanding, we showed the respondents a picture of the
Nano and asked them what they thought about the Nano. We also asked them to define Nano in
one word.

We also did secondary data analysis by obtaining information from Tata's Nano websites. The data
is also collected from sources like websites, reports, journals, books, scholarly articles, newspaper
articles, through search engines. We will analysis this data, and we will try to find out why Nano
failed.

Data Analysis:

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From secondary data and exploratory research, various insights were derived which were used to
determine the applicable variables and subsequently to formulate hypotheses. The exploratory
research consisted of 30 approx in-depth interviews. A balanced proportion between both genders
was chosen of different age groups for the purpose of the interview. This particular set was chosen
for survey to be more representative of the target market which has been discussed in this report.

From the secondary data analysis, we found that the main target segment of Nano is rural India.
But our findings show that being the cheapest car in the world; people accept and view it as a city
car. Aside from rural India, it has a large market in Tier 1, Tier 2, and Tier 3 cities in India.
Therefore, Tata's strategy should have been to do good branding to attract large customer
segments, especially the youth of India.

Most of the respondents think Nano is not a safe and ecological car. From the secondary data
analysis, we found that there were many cases in which Nano car cached fire.

From secondary analysis and respondents reply one thing is clear. Both agree that the marketing
strategy chosen by TATA to call Nano the cheapest car of the world worked as a negative
marketing.

Improvement from existing research:

We used both primary data and secondary data to make this report. We used secondary data from
various sites, articles, etc. From where we found out why Nano failed in the Indian market. We
collected primary data through Survey in which we asked specific questions from a group of
people of different ages about what problems they faced using Nano, what they thought about
Nano, What improvements were required. The survey methodology with common men is not
carried in the existing research. Customer opinion is also necessary as they are the ones who pay
for product expecting it to be good.

REPORTING:

The final report of this research will be presented to you in the form of pdf and will include the
following sections:

1. Abstract
2. Executive Summary
3. 2. Background
4. 3. Problem Definition
5. 4. Research Objectives
6. 5. Research Design
7. 6. Data Collection
8. 7. Data Analysis

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 9. References

Timetable:

Time Frame Hours Work Description

st th
1 -4 May 15 Hours Defining The Research Problem
4th-9th May 28 Hours Writing The Research Proposal
9th-13th May 15 Hours Literature Review
13th-15th May 8 Hours Drafting The Questionnaire
15th-28th May 40-55 Hours Data Collection
28th-31st May 12 Hours Data Analysis
1st-2nd June 8 Hours Conclusion
2nd-5th June 14 Hours Final Draft And Review
12th June - Submission

Reference: