Tata Builds Upgrade Strategy After Cheap Nano Falls Flat in India

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Tata Motors has been doing so well at the upper end of the global auto market lately that it apparently forgot how to do well at the lower end—even in its home country of India.

Thus the Tata Nano, a stripped-down minicar priced at around $2,000, has flopped since being introduced four years ago as the world’s cheapest automobile, one aimed specifically at the striving rank-and-file consumer in one of the world’s biggest developing markets. Tata has been busily adding content to the nameplate, raising the price and recasting it as a cool car, not just an inexpensive one.

“This was the flagship product for the passenger-car market” for Tata in India, Anil Sharma, an analyst for IHS Automotive, told the Wall Street Journal. “The disappointing sales are a pretty big negative for the group.”[more]

It wasn’t supposed to happen this way. The world’s largest democracy has been struggling with its transition to a western-style consumer economy; even savvy multinational retailers such as Walmart have gotten caught in the vagaries of doing business in modern India. But with local knowledge and an investment of several hundred million dollars in developing the vehicle, building a new factory and marketing the highly affordable Nano, Tata was deemed capable of making it a hit.

After all, over the last few years, faced with equally or perhaps more daunting, obstacles, Tata has enjoyed success in leveraging its purchase of Land Rover and Jaguar into strengthening brands in the ultra-competitive luxury end of the global market.

It turns out that aspiring middle-class Indians want inexpensive cars, but not ones like Nano that are solely positioned around being easy to afford. That’s basically how the market is in the United States and Europe, but Tata executives apparently didn’t realize their native consumers were attitudinally so similar. So sales of Tata now hover at around only about 2,500 a month, down from a peak of about 10,000 in early 2012. Not even gimmicks like the bejeweled Nano that Tata displayed earlier this year have worked. And Nano’s flop is dragging Tata’s financials down with it.

So Tata is remaking the “people’s car” by giving Nano a stylish facelift, adding a stereo, raising the price and launching a marketing campaign to give the car more cachet, according to the newspaper. And the company is learning patience.

“Perceptions are hard to change overnight,” Ankush Arora, head of Tata’s passenger-vehicle business, told the Journal. “It’s going to take us a while.”

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