Tata Motors – An Overview

Tata Motors is part of the Tata Group, India’s most respected industry house. Tata Motors is
India’s largest automobile company, with consolidated revenues of USD 20 billion in 2009-
10. It was established in 1945 as Tata Engineering and Locomotive Company Limited
(TELCO). Initially the Company was engaged in manufacturing locomotives and engineering
products. It manufactured its first commercial vehicle in 1954 in collaboration with Daimler-
Benz AG, which ended in 1969.

Despite the success of its commercial vehicles, Tata realized the need for diversification and
began to look at other products. Tata motors entered the passenger vehicle market in 1991 by
launching the Tata Sierra, a multi utility vehicle. After the launch of three more vehicles
belonging to the LCV and utility vehicle categories Tata launched the Indica in 1998, the first
fully indigenous passenger car of India which was a huge hit. Since its first roll-out in 1954,
Tata Motors has produced and sold over 4 million vehicles in India.

Today it is the leader in commercial vehicles in each segment and among the top three in
passenger vehicles with winning products in the compact, midsize car and utility vehicle
segments. It is the world’s fourth largest truck manufacturer and the world’s second largest
bus manufacturer and employs more than 24000 workers. In March 2008, Tata Motors
acquired Ford’s UK based car brands Jaguar and Land Rover.

Tata Nano – A Brief Overview and Idea Generation

Tata Nano, the 1 is one of the most ambitious projects of Tata motors. It has been touted as
the people’s car, an engineering marvel and what not. To some extent the design and
development of the Nano is symbolic of India’s ambitions to become a modern nation. It is
considered to be an exemplary example of “Gandhian Engineering”, which involves frugality
and challenging of conventional wisdom. Since its introduction, it received a lot of media
attention due to its low price.

The idea of the Nano took root in the minds of Tata when he saw the common mode of
transportation for the Indian middle class. Unavailability and low quality of mass transport is
a very common problem in India. It was routine to see a family of four travelling within the
city in a two-wheeler, with one child standing or sitting in front of the father and the other
seated on the mother’s lap or in between the two of them. It was the sight of this which made
Ratan Tata to seek out an innovation which will provide safe and comfortable transportation
at a cheap cost to the bulk of the Indian population. To quote him, “I saw families riding
around on scooters with kids standing up and the mother carrying a baby and sitting pillion
and decided to do something about it. It started as a quest for an affordable transportation
solution”.

The Nano is not just a low-cost car but an eco-friendly one too and has been widely
appreciated for several of its eco-friendly initiatives such as using compressed air as fuel and
the electric version that was to be developed as well.
The quest was operationalized with the idea going into development in March 2003. The
team was headed by the 37-year old Mr Girish Wagh, who was a part of the Indica team in
1997 and also played a key role in Ace, the mini-truck developed by Tata Motors which was
a runaway success. The mandate given to the team under Girish was clear – to design and
develop a no frills car whose purchase price should not exceed the 1 lakh price mark. The
scope of the project was to achieve this cost target without compromising on the standards
and safety of the car.

Design and Specifications

All along, the design was developed by dispensing with most non-essential features, reducing
the quantity of steel used in construction and so on keeping in mind the cost target.

The car was designed by an Italian design bureau under the constant supervision of Ratan
Tata. Keeping the low cost was the basic criteria, but they never compromised with the
design and style of the car.

Designed with a family of 4 in mind, the Nano sports a roomy passenger compartment with
generous leg space and headroom. The four doors coupled with the high seating position
make the entry and exit comfortable. With its 3.1 metres length, 1.5 metres breadth, 1.6
metres height with adequate ground clearance it can still effortlessly manoeuvre in busy roads
in cities as well as rural areas.

Unlike conventional Indian low cost cars which have a manual gear box this has an automatic
gear transmission which enables it to magnify the torque output thereby improving the
efficiency and the mileage.

Basic Specifications
 Price - 1.2 lakh
 4 seats, 624 cc engine, Maximum speed of 105km/h
 Mileage of 22kms in cities and 26 kms on highways
 Fuel capacity of 30 litres
 Rear wheel drive system
 Fuel Type: Petrol and a later Diesel variant
 Colours: Red, Yellow and Silver
Major changes
 They moved the compact engine which is usually in the front of the car to above
the rear wheels which gave them 21% more interior space and 8% smaller exterior
compared to its closest rival, the Maruti 800 or Alto
 It doesn’t have any nose section with a smaller traditional bonnet battery and
spare wheel for the car. For filling the fuel the bonnet of the car needs to be
opened
 It is 20cm shorted than Maruti 800 still more space inside
 It matches all the safety requirements of a car with a strong passenger
compartment, crumple zones, intrusion resistant doors, seat belts, strong seats and
anchorage
 Regarding pollution, its petrol engine meets Bharat Stage-III emission norms and
can also meet the Euro 4 norms. It does lesser pollution than two wheelers
 The tyre size varies because of higher weight on rear side and they are using
inexpensive drum brakes all-round

Cost saving aspects

The Nano’s design implements several cost reducing innovations.

 623cc engine has only 2 cylinders

 Rear wheel drive: manually actuated 4-speed trans axle that gives the car better
fuel efficiency
 Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph but
would quickly wear out at higher speeds.
 Analogue speedometer, odometer and fuel gauge
 The Nano's trunk is only accessible from inside the car, as the rear hatch does not
open.
 No Radio, Power windows, air conditioning, anti lock brakes, air bags, remote
locks
 One windscreen wiper instead of the usual pair
 No power steering which is unnecessary due to its light weight
 Three lug nuts on the wheels instead of the usual four
 Only one wing mirror

Thus with a lot of engineering innovation Tata Motors came up with the Nano within the
mandated cost while following all the conventional requirements and style of the car.

Tata Nano vs. Maruti 800

Price
With an ex-showroom price of roughly 1.2 lakhs for the base variant it clearly beats the
Maruti 800 which costs about 1.95 lakhs and had the distinction of the cheapest available car
in the Indian market until the lauch of Nano.
Looks
In looks, Tata Nano clearly beats the Maruti 800 with stylish and highly stunning looks
considering that it is the cheapest car in the world. However the Maruti 800 has old style
looks and does not look classy in front of the nano.Also Maruti 800 is about 10% longer in
exterior dimensions, which means Tata Nano will be easier to manoeuvre in congested traffic
as its small in size on the exterior.

Power
The Tata Nano churns out a maximum power of 33 BHP as compared to Maruti 800 churns
37 BHP. But Tata Nano weighs only 580 Kg compared to Maruti 800′s 660 Kg as a result of
which for the power to weight ratio Tata Nano is at 0.057 BHP / Kg and Maruti 800 at 0.056
BHP / Kg. It means, the feel of power of Tata Nano will be almost equal to Maruti 800′s feel
at a much lower price.

Noise and Harshness

This is the one area where Maruti 800 beats Tata Nano. The Nano becomes quite noisy at
speeds above 60 Km/hr due to the engine being rear mounted and noise insulation is not that
high end. Another reason is that being the low capacity engine compared to Maruti 800’s 800
cc, the Nano has to put in more effort for extracting out more power in lesser engine
displacement.

Mileage or Fuel Efficiency

Tata Nano beats Maruti 800 in fuel efficiency because of two reasons

 it has less capacity engine which means that it runs at close to its higher engine
speeds mostly ( which improves fuel efficiency)
 it has been designed taking into consideration of Euro 5 norms, which means a really
fuel efficient engine

Comparing the mileage Maruti 800 of 15 to 18 kmpl to Tata Nano’s 20kmpl, a 20% saving in
the fuel cost is apparent.

Interior Space
Although the dimensions are somewhat smaller than that of the Maruti 800 the Nano still has
about 20 % greater inner space compared to it.

Stakeholders
Consumers
With the coming of the Tata Nano, a significant portion of the Indian population (more than
just the 300 million strong middle class) will be able to afford a car for the first time. In India,
owning the car is a status symbol and the purchase, a celebrated event as it signifies a
considerable spend of one’s savings. Thus millions of consumers will have access to what the
developed world has taken for granted for so long and will be liberated from the vagaries of
public transport. While primarily targeting first-time purchasers, and mostly in semi-urban
and rural areas, the Tata Nano is also preferred as second vehicles, vehicle for teenagers and
as taxis. It would serve as a "gateway" car- getting people addicted to the cheaper models
and then moving them up to bigger, more profitable(for the car manufacturers), less fuel-
efficient cars .

Competitors
The Tata Nano was predicted to immediately wreak havoc on the existing second-hand car
market, and to a lesser extent, on the two-wheeler market. It will also trigger a fall in prices
of low-end models (like the Maruti 800 and Maruti Omni, both of which can be sold
profitably at Rs 1 lakh) and already there is a global rush to manufacture the next Nano with
Nissan, Renault, Maruti and Hyundai all following suit with their own cheap entry level cars.
With the Nano, even three-wheeler makers will have to cut prices to remain competitive.

Government
The Nano's ultra-low price tag covers subsidies offered by the Government with respect to
land costs, high quantum of loan at low interests and certain tax exemptions all of which add
up to a huge burden on the Public Exchequer. There will be pressure from other
manufacturers to get such support for similar projects. To combat congestion, the government
will be forced to draw appropriate tax laws and regulations, and with the increase in auto-
sector, they will also have to drastically improve road infrastructure. Presently, the economy
is not equipped to deal with the huge traffic volumes that are anticipated with the introduction
of Nano. This might spur investment in infrastructure like Roads and parking spaces. Also
there might be an improvement in the quality of the Public transport system, which stands to
become redundant and suffer huge losses if more people switch to cars.

Financing the Tata Nano

Investments in the Tata Nano were slated to exceed the Rs 2000 crore mark. Consequent to
the decision to shift the Nano plant to Gujarat following the Singur land issue, Tata Motors
said it will make an investment of Rs 2,246 crore in the first phase of Nano car project in
Gujarat, while shifting and relocation expenses will cost an additional Rs 650 crore since
almost 90% of the plant had already been completed in Singur for which it had spent close to
Rs 1500 crores. Even 60 of its suppliers had collectively spent about Rs 500 crores to locate
in the Singur complex.

The Gujarat state government offered several incentives to lure the auto maker to set up shop
in Sanand. As per the Government Resolution (GR) passed in this regard, the Tatas did not
have to make any investment in the 1,100-acre land provided by the government in the first
phase. It had to pay the land price to the government in eight annual instalments, which was
supposed to begin only after production commenced at the plant. The real investment to be
made involved Rs 614 crore in erecting the plant, Rs 1,189 crore in plants and machinery, Rs
199 crore in product development, Rs 135 crore in toolings, Rs 87 crore in IT and utilities
and Rs 22 crore in others. The initial phase I investment was estimated to cater to the
manufacture of 2.5 lakh Nano cars per annum, expandable to 3.5 lakh Nano cars per annum
as per the GR.
However Tata Motors found itself in a pressing need for cash consequent to its purchase of
the luxury Jaguar and Land Rover brands. Just before the credit crunch hit, Tata had bought
the Jaguar and Land Rover and the residual $2 billion of bridge loans for this deal was also
due in June. It had only $100 million of cash left in its books as of the end of 2008 was
finding it hard to raise 70 billion rupees ($1.4 billion) for its working capital requirements.

The company sought to harness the massive demand for the Nano to help it raise funds to
cover the bridge loans and also finance its working capital. The Nano’s had to be booked
with a deposit of almost its full price, thereby making the buyers front up most of the cost of
the new car. This was slated to provide the Tata Motors with $1 million for at least 3 months
and at least another $200 million against delivery of the first 100000 units.

For the basic Nano, the deposit totalled a sum of 95,000 rupees ($1,890) is on the showroom
price of Rs 112735 and more for models with optional extras. The more expensive models
had deposits of Rs 120000 and Rs 140000 bringing up the average to roughly $2000 per car
for the initial 100000 units. Also potential buyers paid a fee to submit an application -- 200
rupees if booked online and 300 rupees otherwise. With a 50-50 split between the estimated
numbers this added another $2.5 million.