Why a gold-plated Nano will do little for Tata's failing car

It was the Rs 1 lakh car that was supposed to set the domestic auto markets on fire. But it was probably damned by being called that: a Rs 1 lakh car that aroused concern that maybe something was sacrificed in producing a car on the “cheap”. No one likes being accused of owning a “cheap” car.

On Monday, aided by group company Titan Industries’ plan to celebrate 5,000 years of Indian jewellery, the Nano - one Nano - was suddenly transformed into the world’s most expensive car with a possible price tag of $4.5 million.

The reason for the price tag: the car is covered with 22-carat gold, silver and precious stones. At one stroke, bedecked with 80kg of 22 carat gold, 15kg of silver, and 10,000 semi-precious gems, a Rs 1 lakh runabout has been turned from cheap bauble to expensive billionaire bling.

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The makeover of the Nano is, however, the sideshow, for the real purpose of the shine-and-polish is to take it on a tour of Titan’s jewellery showrooms, presumably with Z category security in tow.

[caption id=“attachment_87935” align=“alignleft” width=“380” caption=“At one stroke, bedecked with 80kg of 22 carat gold, 15kg of silver, and 10,000 semi-precious gems, a Rs 1 lakh runabout has been turned from cheap bauble to expensive billionaire bling. PTI”]  [/caption]

It does not address’ the Nano’s own problems - of which there are aplenty. With sales of an abysmal 1,202 cars in August, down 85 percent from the previous month, Ratan Tata’s dream car is facing a nightmare on the sales front. The August figure is perilously close to the 509 cars Tata sold in November 2010, setting off alarms all over. April this year was the best ever month for the Nano - when 10,000 cars were sold - but that was a flash in the pan.

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So what went wrong with the Nano? And can its problems be fixed?

The first problem, of course, is its positioning. A Rs 1 lakh car that wasn’t a Rs 1 lakh car meant that the product prima facie didn’t live up to its name. In hindsight, it is quite clear that Ratan Tata was a victim of his own utterances - he made the promise of a Rs 1 lakh car in an unguarded moment, but costs couldn’t be held that low by the time the car came to market. But then, successful marketers know that the gap between promise and delivery can make all the difference to its success. Tata flunked the test.

The second problem related to fears about performance - which were not helped by early reports of unexplained fires in some of the Nanos. The consumer who buys a car because he can afford only Rs 1 lakh will be more careful about his money than someone who buys a Maybach for his daughter’s birthday. Needless to say, the Nano did not get great reports in its initial months - and this cost Tata.

The third problem was how Tata dealt with low sales. Instead of dealing with the car’s image and performance issues, the company compounded the problem by making it a down-payment and EMI-driven selling strategy. For just Rs 15,000 and sub-Rs 3,000 monthly installments, you could buy a Nano. EMI, unfortunately, is a game every carmaker can play. You can buy even a Merc for an EMI of less than Rs 30,000 today. Any small car - depending on the loan tenure - can be brought to the Nano’s monthly level. By choosing easy payments as its new USP, Tata neatly landed in somebody else’s turf. It didn’t help.

The fourth problem lay in its conception. Ratan Tata saw it as a car that people previously using two-wheelers would upgrade to. But that is not the kind of people who are buying the Nano - at least not in sufficient numbers. It seems many of its buyers are people seeking a second car for fun and local, short-distance use. And there aren’t enough of them to soak up Nano’s huge assembly line at Sanand.

So is it a failure?

Not by a long chalk. As Matthew Eyring, president of Innosight, a global consulting firm, notes, the real problem with the car was its initial hype. “A cheap car that’s not really cheap. A safe car whose safety has been questioned. A poor people’s car that poor people aren’t buying. That sounds like a failure, certainly. But really it’s not. It’s par for the course for almost every breakthrough innovation.”

According to Eyring, Tata would have been better off launching and testing the car quietly before unleashing it before the world with great fanfare. “It might not have been easy, but had Tata piloted the Nano quietly, on a small scale, perhaps through a limited production run in a small city like Durgapur in West Bengal or Ranchi in Jharkand, its engineering, pricing, financing, and marketing might have been adjusted far from the limelight to suit the needs of an optimal target customer. Then…the Nano might have made its debut to the wider world with less hype and greater effect. It might not have been a Rs 1 lakh car or even an alternative to motorscooters. But when it first appeared in the mainstream, it would have been right product for the right price in the right market.”

But, it’s not too late to change course. Gold-plating the Nano and studding it with gems may get it noticed, but ultimately its what’s under the hood that counts. The shine is an optional extra.