Monday, January 18, 2010

Why Tata Nano Will not be Successful in US Market?

It is almost 6 months that Tata Nano cars are running at various Indian cities. It has been more or less a success story for Tata Motors as many people bought this model. The success in India has perhaps encouraged the company to take the initiative to export it to other countries. Well, I don’t think that in the original goal, USA was in the list. However, now, Ratan Tata and his colleagues are eager to market it in America. If really they can do so in the next 2 years then it will become a small revolution for Indian auto industry. 

Tata Nano: Cheapest Car in The World  
Tata Nano is the cheapest car in the world and its price is around $2,500 dollar. The next cheapest is perhaps Maruti 800. Tata Nano was designed and developed in India and Tata Motors created a new trend in Asia in the small inexpensive car segment. Now, many companies in India and China are eager to produce small and inexpensive cars. I guess that in the next 5 years, we will see many such cars. However, until now, no company could produce a cheaper car than Nano. And the models that are in the pipeline or in the planning process won’t beat this price either- not for the time being at least.
Reception in India
The reception in Indian market has largely been positive. Most people like the car because it is not only cheap but also fuel efficient (26 kilometres per litre). This is an important factor in the Indian market. India imports most of its fuels and that is why fuel efficiency is always a factor. Moreover, Nano is targeted towards the middle class income group. So, they cannot afford to spend a lot of money after gasoline. However, Nano could not unsettle Maruti from the market leader in the Indian auto sector. Thus, it sold well but not enough to increase the market share of Tata Motors significantly.
US car market not ideal for cheap car
Yes, if you have any idea about US auto market then you must have known that it is not an ideal place for small and inexpensive cars. USA is the richest country on earth and people here can easily afford to buy expensive cars and even they care less about fuel efficiency than Indian consumers. So, it will be an interesting thing to see whether Nano can become successful in USA. I don’t think that it will be a success there and I am stating my reasons a little later in this entry.
Safety Standards
This is one area I think that Nano may struggle in US market. The safety standards are very high in America. Until now, we have not seen any major problem with safety standards of this car but we have to remember that it mainly has been running in Indian roads. Secondly, I am also interested to see whether Nano can pass the environment requirements in USA.
Price will be $8000?
It is sure that the price of Tata Nano in USA wont be $2,500. First of all, it is the US market and Tata Motors will have more production cost if they want to set up a manufacturing plant in America and produce it there. Even, suppose they want to ship it from India, still, they have to bear the shipping cost and have to spend a lot of money to promote the car among American consumers. Finally, I am sure that they will need to make some adjustments to meet the strict US rules on safety and environment. Thus, the price will go up and there are some reports that the price of this car in America will be around $8,000 which is more than 3 times of the price in India.
Why Nano won’t be a success in USA?
I have already stated that this car will not be a success in USA. I feel that first of all, Tata is not a familiar name among the people in America. Secondly, small and inexpensive cars do not have the same attraction to America consumers like their Indian counterparts. For US people, the cheapest car in the world does not sound anything special. Instead, they always look for quality and comfort. Thirdly, I don’t think that Tata can afford to carry out massive promotional campaigns to familiarize its car.
Economic Times reported:
The world's cheapest car is being readied for sale in the US, but by the time India's Tata Nano is retrofitted to meet emissions and safety
standards, it won't be that cheap.
Tata Technologies Ltd., the global engineering arm of the Tata group conglomerate, brought the tiny car to Detroit as a publicity stunt for the engineering group.

Indian car companies need a vision to enter US market
Japanese car companies have been there in US market for many years. Korean car companies are successful too. Now Chinese car companies are entering this market. However, Indian auto companies are still not present here. I don’t see any vision among Indian auto companies in this regard. They should have a vision and some clear goals in this regard. After all, US market is the most attractive auto market.
So, all the best to Tata Nano in its journey to the US market.
(Written on 14 January 2010)