Why Tata Nano Failed: Indian Mother’s Point of View
Tata Nano – most awaited car in India and worldwide, placed near the wisdom shelves of Mustang and Beetle before of its launch. It was an experiment for disruptive innovation and pride of many Indians during those flamboyant press releases praising India’s Innovation. Ultimately it was a failure. Sales in November 2010 dropped by 85% from last year. And started the critics. Three main reasons came out: Tata recalling cars for installing fire safety after fire reports, waiting list and production delays, heat and sound caused by engine. It’s not new for Tata Motors Limited. Several models of Indica, another Tata Car, were brought back to factory for safety issues in 1999-2001. Though these were some issues, I wanted to know a major reason for such a big fall. It is cheap. The equation says it has to sell.
An advertisement on television triggered a discussion in my family over lunch as it does in every Indian family. This time it was Tata Nano. My mother just spoke a sentence, deep enough to escape an early thought, ‘Tata Nano failed because of less dicky space (rumble seat).’ When an analyst is deciphering Tata Nano’s mistakes, first thing coming to anyone’s mind are big jargon words like press release on fire, waiting list, production delays, governmental issues, organizational. But it was dicky space for my mother. It gave me a strange feeling and I started to research for authentic sources and came across this HBR Blog. Both combined clicked lot to me.
Deciphering Tata Nano’s Mistakes
Matt Eyring on his HBR Blog points out three reasons of success
- ‘you have to conceive of something people will actually want’,
- ‘devise a way to produce it reliably and profitably at the price those people will pay’, and
- ‘communicate a clear, targeted value proposition, differentiated from competing offerings’.
This car would have replaced motorcycles according to initial reports and price comparisons. People on bicycle cannot afford Tata Nano, people on motorcycles can afford Tata Nano, and people already having cars won’t degrade as society complex is a big issue in India. This means, major chunk of probable consumers but not all will be people who have motorcycles.
In India, people upgrade from motorcycles to cars for only two reasons – safety and space (to keep luggage). Upgrading from cars to luxury cars is another issue. Now, Tata Nano failed the first part with fire reports and calling back vehicles for installation of fire safety. Let’s talk about second issue. If you happened to see a Tata Nano, you will see less of leg space (to keep some stuff beneath your seat, dicky space (to keep luggage behind car). BANG. Both the factors were at fault and a big failure to meet motorcyclists demands.
Now comes the bicyclists. Well, truth be told, India is still poor and bicyclists don’t have so much money to buy a Nano. Who was Tata aiming at?
Nevertheless of a failure, Tata performed well to task no. 2 – produce reliably and profitably. It surfaced out India’s Innovation and reaching to its stakeholders like car parts suppliers.
Bottom-line: Emerging Market is a very dicey area. You must know what people want and deliver at prices they can pay. Innovation is not only about technology, but also about adjusting to consumer needs.