c



c

c
c c


c
c


 c
c



c cc c c
j

 

Tata has changed the age old thoughts through the innovation of
the world's cheapest car. Tata Nano is economical and
mechanically simple. Tata Nano's efficiency comes from including
only those items that are necessary for basic transportation and
eliminating the not so relevant ones i.e. having one part that can
perform a task just as good as two components can do, thus
resulting in cost savings. Tata also refrains from including
unimportant items that are not feasible due to monetary reasons.
Besides having the right parts to meet the cost objective, Tata Nano
has adequate features that exceed current regulatory requirements
and meet minimum safety standards. It has a sheet-metal body with
strong passenger compartment equipped with safety features such as
crumple zones, intrusion-resistant doors, seat belts, strong seats and
anchorages. The rear tailgate glass is fixed to the body and tubeless
tyres enhance safety further.


 
For making Nano available for Rs. 1,00,000 many cost reduction
measures have been taken like:
ucRne windscreen wiper and one side mirror instead of two.
ucRadio, air conditioner & power steering are not included.
ucInstrument panel contains only basic features
ucFuel gauge is similar to that of the two-wheelers- basic, yet
functional
ucaetal body is not strong enough and it is joint with glue& not
welding to save cost.
In addition, Tata has come up with practical ways to reduce car
weight and thereby trim down the overall cost. It uses
comparatively small and light engine, a 623cc two-cylinder petrol
engine made of aluminium, unlike conventional engines which are
made out of cast iron. The engine of Tata Nano is strategically
placed at the back of the car leaving the front section for luggage.
Rther factors that contribute towards the weight reduction are the
usage of hollow steering wheel shafts, plastic body panels and
smaller tubeless tyres. As a result of these measures, Tata Nano
weighs only about 590kg. Lesser weight and fewer parts mean less
raw material and lower cost for Tata Nano.
a   
At its launch the Nano was available in three trim levels:
c The Basic Std priced at Rs.c123,000 has no extras;
c The Deluxe Cx at Rs.c151,000 has air conditioning;
c The Luxury Lx at Rs.c172,000 has air conditioning and
power windows

a


   
The Nano has affected the used car market in India, as many
Indians may opt to buy a Nano rather than a used vehicle.
The new-car market is also being affected. Sales of new aaruti
800s, the second-cheapest car in India, dropped by 20% prior to
the Nano's introduction.
However the future owners of the cars are concerned about the fact
that Tata Nano is built from scratch and most of the component
parts are new and do not share platform with other models in the
Tata family (though the cost of parts and services is likely to
decline as more Tata Nano cars are driven on the road).
—

   
Direct competitors like aaruti, Hyundai, Bajaj and Cherry are
concerned about the Tata Nano·s overwhelming response. They
have changed their strategies in the Indian market and some are
planning to produce similar models to Tata Nano in the near
future.
Tata Nano is likely to encroach on the market territory of aaruti-
800, which is priced higher than Tata Nano. Despite six percent
shorter, Tata Nano has about twenty one percent more interior
space than the aaruti 800 due to its larger height and width.
Suzuki is aware of the gap and is working vigorously to improve its
current car lineup. It will focus on achieving the practicality and
efficiency of Tata Nana without compromising on safety and
quality. However, aaruti Suzuki is not in a position to reduce the
price of aaruti 800 just for the sake of competing with Tata Nano.
Hyundai is another company taking Tata Nano seriously. Hyundai
plans to launch a new model in the market which would be priced
cheaper than their current cheapest model-Santro.
 



Demand function of Tata Nano is

DTN = P, I, T,cC,cPU,cPC,cB, Sc

Where:
P ² Price of Tata Nano
PU ² Price of used cars
PC ² Price of competitor cars
I ² Income demographics (Income class of customer)
T ² Taste of consumer (preference of car to bike)
C ² Cromo effect (Due to media hype)
B ² Brand image (goodwill of TATA Co.)
S ² Supply of Nano







 

For Tata Nano the demand in the market is inelastic (´d <1) i.e.,
even if there is a huge change in price, there will not be a major
difference in the number of customers.
@


 




 

Unless Tata reduces the price of Nano Rs.50000 or less there

would not be considerable change in the number of customers
who are willing to buy it. Similarly Tata Nano can very well
increase the price of the car till 185000 or as per market
conditions without the fear of losing the customers.
R j 
  
 —




The production capacity of the car must be increased as its supply

plays a major role in Nano·s demand function. Althoughc Tata are
gearing up their production capacity by 20% from 4500 units per
month, it will not be enough to meet the rising demand or to
capture the whole market before competitors· new launch.
Tata Nano has to produce more than 20000 units per month to
meet its demand. This can be done through steps like introduction
of
ùcShifts,
ùcNew aachines for production,
ùcxpansion of existing plant,
ùcTalks with Government for getting subsidies and layout for
producing more cars in return for employment

 
R   
 —
—


ùcTata Nano car·s basic model has been priced at Rs. 1 lakh.
This price was decided after taking into consideration an
excise duty of 16%. Due to 4% reduction in taxes as per this
year·s budget plan, the Tata aotors Company would have a
bit more room to reduce the cost of Nano in the coming
months.

ùcSince aaruti and Hyundai are a threat to Nano·s market,

further reduction in cost can be made. However it should not
be reduced extremely as it may make the product seem inferior
in quality to the customer.

ùcAlternatively instead of reducing the cost even more they can

ensure that the ¶on road cost· of the car does not exceed
Rs.100000
R j 
 
 —
—


ùcAs discussed earlier that the demand of the car is inelastic, the
company can raise the price and improve on certain important
factors in further development and promotion of Nano.

ùcHowever it should not touch the price level of exiating

competitors· cost (i.e.; of aaruti 800)

ùcThey can work on the defects in the current status Nano like
no hand breaks, providing metal outer body for Nano etc.
c
c