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Nano's boon turns into its bane

Tata Motors has been keen to correct a positioning mistake for quite some time but sales continue to flag

Swaraj Baggonkar & Viveat Susan Pinto  |  Mumbai 

For Tata Motors, the route to making the Nano the 'Volkswagen Beetle' of India was supposed to be through a steady replacement of the two-wheeler, puny for the number of people it was often made to ferry.

So confident was the truck and car manufacturer of the success of the Nano that it did not spend a rupee on advertising, unlike competitors such as Maruti Suzuki, Hyundai and General Motors who spend several crores of rupees every year before and after their car launches.

However, Ratan Tata, chairman emeritus of the Tata group, in a recent interview admitted to what went wrong with the car he had thought up - the Nano as the 'cheapest car'. "It became termed as the cheapest car by the public and, I am sorry to say, by ourselves, not by me, but the company when it was it. I think that is unfortunate," Tata told a news channel.

With more than 13.7 million two-wheelers sold in the country every year, the market targetted by Tata Motors for the mini car, yet untapped by any other car manufacturer, was huge. Research agency CRISIL believed that the Nano would expand the domestic car market by a whopping 65 per cent.

However, more than four years since its launch, Tata Motors has been able to clock sales of only 242,431 Nanos, even as the Sanand factory, where it is made, has the capacity to produce 250,000 units each year.

Nano's affordable price tag (less than half of that of its nearest rival, Maruti 800) reduced it to an undesirable product among potential customers looking to upgrade from a two-wheeler. They were, after all, looking to upgrade to an aspirational vehicle with the usual comforts rather than one perceived as a 'cheap car', with its connotations of compromise.

Current buying trends show that as much as 70 per cent of car and SUV unit sales come from middle and top-end variants, indicating the decreasing popularity of entry-level models. About 60 per cent of customers of the Nano itself prefer the top-end variant (LX), which costs 43 per cent more than the base variant (Std).

"Even in the premium hatchback segment with models like the (Maruti Suzuki) Swift, people spend on the ZDi-variant whose cost is nearly Rs 8.5 lakh, on-road Mumbai. This shows the aspirational value of a car for the buyer," says an analyst, on the condition of anonymity.

Tata Motors did send its team on a branding and promotion course correction last year. With a campaign portraying city-slickers from some of the metros, the Mumbai-based company has, for the past few months, been trying to reposition the Nano as a 'smart city car' and taken to social media like Facebook and Twitter aggressively to attract the younger lot.

"The positioning of the vehicle is an evolution. Earlier, we were basing it more on the rational reason to buy, as price used to be the number one consideration for a purchase. But now we are looking more at the emotional connect. Not just at lifestyle, but what makes for an aspirational product. One thing on our radar is the rich demographic dividend our country has about 55 per cent of the population is under 25 years of age - which adds to first-time buyers. Their needs have evolved over the past decade and they are changing ever since, so the vision of providing an affordable mobility solution will continue, with additions to suit their demand," says a Tata Motors spokesperson.

The company had added features worth Rs 25,000 to a special edition of the car last year, without raising the price of the car. The 2013 model came with vast engineering improvements, and complete with creature comforts such as remote keyless entry, twin gloveboxes and a four-speaker music system with Bluetooth.

Yet, the November sales at 952 units marked the second consecutive month of poor performance for the Nano this year. So far, the model has seen a dip of 72 per cent at 13,274 units as against 47,130 units sold in the same period of April-November, last year. The segment just above that of Nano's, according to SIAM, which also includes entry-level cars such as the Chevrolet Spark, Hyundai Eon and Santro, Maruti Suzuki, Alto 800, A-Star, Alto and WagonR, has grown by six per cent in the April-October period.

Ratan Tata has also suggested that the Nano could make a fresh start, after being tested in an international market like Indonesia. But brand experts say it would be a tall task.

Harish Bijoor, CEO, Harish Bijoor Consults, says, "Nano hinges on the premise that as everybody wants a car, the people's car has to be cheap. Meddling with this concept is hardly a good idea. The new youth-centric positioning might have given the brand some traction, but it would be better if Tata Motors launched a new car altogether. It could be a green car like a hybrid. But it would have to be minus the Nano brand name."

Jack Trout, president of Trout & Partners, an international marketing consultancy, and regarded as a global expert on brand positioning, has said in the media that the tag of the lowest-priced car killed the brand as people didn't want their neighbours to see them with it.

Nabankur Gupta, founder-CEO, Nobby Brand Architects, explains the uphill task:"It is always difficult for a brand to move up the value-chain and occupy a higher position. It is easier to come down the need curve. Sony (electronics) and Raymonds (textiles) have managed to go mass-market now. Chinese brands, on the other hand, find it difficult to occupy a higher plane as they continue to be seen as coming out of mass assembly lines, with a focus on volume, rather than value. The same goes for the Nano. Consumers might prefer a new brand."

First Published: Sun, December 08 2013. 22:30 IST