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Nano under the microscope in Tata, Mistry spat

Murali Gopalan | Updated on January 16, 2018

Small car ambitions: Touted as the ‘People’s car’, the Nano did not do well for Tata

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Ousted Chairman Cyrus Mistry’s allegations bring the spotlight back on the jinxed ‘people’s car’

For all practical purposes, it is a failed project that has almost been relegated to the archives. Despite this, the Tata Nano still manages to make the news and for all the wrong reasons.

If it brought back memories a couple of months ago following the Supreme Court verdict on Singur, the latest missive on Wednesday from the recently ousted chairman of Tata Sons sure set the cat among the pigeons. A clearly belligerent Cyrus Mistry made known that the Nano was virtually a millstone around the Group’s neck which logically had to be discarded but this was just not possible.

“This product has constantly lost money, peaking at ₹1,000 crore. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision,” wrote a visibly angry Mistry to the Tata Sons directors.

It is all too well-known that the Nano was Ratan Tata’s pet project which promised the moon but ended up being a spectacular failure. Sure, it got the attention of the world for its jaw-dropping price of ₹1 lakh, but that is where the honeymoon ended. Tata’s dream of offering the masses a safer alternative to the two-wheeler just went up in smoke. When Mistry took charge, there were attempts to reposition the car largely to keep it away from the ‘cheap’ association which played a big role in derailing its drive. Yet, the damage was done and any number of attempts to reboot the people’s car, which included offering an automatic option, just did not work.

Today, with Mistry’s ouster, the gloves are off and the skeletons are tumbling real fast out of the cupboard. On the face of it, he is spot on about putting an end to the Nano’s woes except that this would have been a very uncomfortable decision. His letter clearly implies that this would not have gone down well with his predecessor.

Ironically, during the same year of unveiling the car at the Delhi Auto Expo, Tata Motors acquired Jaguar Land Rover for a hefty $2.5 billion. The huge outgo caused sceptics to sneer at the deal except that it has ended up becoming the most important lifeline to the passenger car business. It was not all smooth sailing for JLR, which bore the brunt of the 2008 global recession but still weathered the storm and emerged a lot stronger.

To think that this could be replicated with the Nano is wishful thinking. At the time of its launch, Carlos Ghosn, the CEO of Renault-Nissan was inspired enough to try and emulate something on these lines. After all, the Nano was the best example of frugal engineering which prompted Ghosn to go in for an ultra low-cost car project initiative with Bajaj Auto. And even while this did not quite materialise, it still paved the way for Renault to develop the Kwid, which is doing very well.

Even diehard supporters of the people’s car admit that it is impossible to revive the Nano simply because it has lost all connect with its potential buyers. Mistry, therefore, cannot be faulted for assuming that it was the end of the road for a project that just could not be supported forever. Across the world, carmakers are ruthless when it comes to shelving models that promised the moon but failed to deliver. There was no reason why this could not apply to the Nano either.

In fact, this project took such top priority during its development years that Tata Motors just did not focus on other passenger car models. Ironically, the commercial vehicle division ended up being super successful with another small offering, the Ace, which made its debut around the same time.

Of course, it could always be argued that the Nano faced obstacles in the relocation of its plant to poor marketing which only reaffirmed the ‘cheap car’ association but the harsh truth was that it had fallen by the wayside.

The focus on the Nano was so intense that there was not a single launch from the car unit between 2009 and 2014 when rivals were working overtime and introduced nearly 50 models. Tata Motors had clearly taken its eyes off the wheel and its rankings plummeted in the Indian car arena. The Bolt and Zest were the first part of an attempt to put things back on track while the recently launched Tiago has finally brought the momentum back in the business.

It now remains to be seen if Mistry’s missive will end up becoming a speed breaker in this revival effort. There is a clear reference to the passenger vehicle business being among the ‘legacy hotspots’. In today’s times of bad news spreading like wildfire, this is perhaps the last thing Tata Motors dealers would like to deal with.

An industry observer says that it is the most natural thing for rival automakers to make the most out of such situations. All they need to do is tell their customers that investing in Tata cars may not be such a great idea at this point of time. Volkswagen, for instance, had its task cut out during the diesel scam when customers were justifiably worried.

Tata Motors is just about putting its house in again with its passenger car business.

The next big launch is the Hexa SUV and it is still too early to say if the present war of words will act as a headwind to the efforts of its sales teams just when things are beginning to look up. Eventually, it is up to the customer to take the final call.

Published on October 27, 2016

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