Hitting a dead end

A Tata Nano. File

A Tata Nano. File   | Photo Credit: Reuters

If the Nano’s debut heralded India’s emerging economic prowess, its demise captures the hangover of the Licence Raj


Dealers have stopped placing orders for the small car, the Tata Nano. Production in the Sanand plant in Gujarat is down to two cars a day. The people seem to have rejected “the people’s car”.


The idea of the Nano was born one rainy day, less than 10 years ago, on a slippery Indian road, in a billionaire’s car. A family riding a two-wheeler had lost control and been spilled on to the pavement. The image of the family’s vulnerability and of other people riding two wheelers, many of them without helmets, negotiating rain and traffic, scrambling to reach their destinations, had seeded the idea in the mind of Ratan Tata, the billionaire. At first he toyed with the concept of a safer scooter, and then an open-sided rural vehicle. Finally, Mr. Tata and his team decided to build a ₹1 lakh car, the price tag becoming a goal by accident. Talking to a journalist in the course of an interview, he happened to press the target on the project.

Ambitious pitch

Mr. Tata would introduce the Nano to the world at the 2008 Auto Expo, New Delhi. The new arrival was greeted with ecstasy. The ambition of the project made the world sit up and take note. It was an evocation of India’s frugal engineering and low-cost manufacturing capabilities. Reflecting the country’s mood of self-confidence was an agent of the demographic dividend and the ‘India Growth Story’. It announced India’s new economic power.

It had a touch of swagger. There was a do-good quality to it. Behind the ambition and the rough-and-tough auto engineering was the desire of its maker to add safety and comfort to the lives of not-so-rich Indians. Through the market, of course. This was not foolish sentiment. The Tata Group hoped to make money.

The Nano was listed in the Guinness World Records as the “world’s cheapest car”. The pitch struck a chord. The car generated much interest early on and was initially sold through lottery, pushing forecasts of 65% growth in the Indian car market, contingent on the Nano’s success.

Losing its way

Sadly, the Nano has not lived up to its promise. It was thought the small car would replace two wheelers, and create a market of first-time car buyers. It was thought that its low price would disrupt the auto market and change the game. India had seen this happen in the FMCG market. But few products directed at bottom of the wealth pyramid have had similar success. Mr. Tata in his heart knew what he was selling and to whom. But the market didn’t buy the proposition. The Nano wore “the cheapest car” appellation with pride, not realising car purchases signal prestige and status, especially in middle-class India. “The people’s car” never really understood the people. By the time the mistake was realised, it was too late.

It didn’t help that the price could not be held down to ₹1 lakh despite the concessions from government. Even the most basic variant’s undiscounted price rose past ₹2 lakh. The cheap car ceased to be affordable. Rather than being the first car of two-wheeler-owning families, it acquired a bit of a crossover appeal of sorts, becoming the second or third car in some rich homes, before interest subsided altogether. In the end, the Tata Nano lost its way in a tangle of flawed assumptions and misfired ambition.

Comment on disruption

What does Tata Nano’s short story of fame and failure say about disruption? The notions of disruption and ambition have gained power in recent times, in business, politics and elsewhere. The anticlimax of the Nano is an important reminder that not every disruption is guaranteed to succeed. Not all pain begets gains. Almost everything that looks great on the drawing board and at glitzy launches fails spectacularly in the market and the real world. Even successful products must bow out when better ones come along. What separates the winners from the losers is not a love of risk. The successful disruptor understands people, before venturing to transform their lives.

The death of the Tata Nano as we know it is a setback. Thankfully, not a paralysing one. It may be reborn successfully in the electric-powered avatar. Or, another plucky business house may have a go at building “the people’s car”.

If its debut heralded India’s emerging economic prowess, the demise captures the hangover of the Licence Raj. The concessions to the Tata Nano plant represent a discretion-driven system in which governments sweeten invitations to business, to incentivise investments and new jobs. This is different from a rules-based system that is governed by laws, is predictable and procedure-driven. Ad hoc decisions encourage lobbying and, consequently, abuse of power and favouritism. Businesses are more likely to take political positions in exchange for commercial advantage in a discretion-driven system.

Puja Mehra is a Delhi-based journalist

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Printable version | Feb 18, 2020 2:46:13 AM |

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