By: Ashish K Mishra/ Forbes India
The fate of the ‘People’s Car’ hangs in balance, with its prospective customers giving it a miss. Now, Tata Motors has mounted a massive rescue act
Ravi Kant has always had a formidable reputation as a marketing whiz. In the mid nineties, he helped Titan emerge as one of the most powerful brands in the country. Under him, LML was able to put up a spirited fight against Bajaj Auto . And the story of how Tata Ace came to dominate the mini-truck market under his leadership is part of company folklore.
But none of these achievements may have quite prepared him for the biggest challenge at the fag end of his professional career. Today, as vice chairman of India’s biggest automotive company, Tata Motors, Kant has the onerous responsibility of reviving an “iconic brand” that completely veered off course: The Tata Nano.
The Nano was always more than just a car. It was Tata group supremo Ratan Tata’s dream project to bring an affordable transportation solution within reach of the masses. The promise of a small car priced at Rs. 1 lakh had fired the imagination of an entire nation — and the global automotive industry. Yet, in August 2010, 18 months after its launch, Kant has now been forced to take over the wheel to salvage a dream that has gone badly wrong. It was only once the November sales figures came out that the world realised the enormity of the crisis.
Nano sales that month, widely considered to be a peak festival month for sales, had plummeted to just 509, its lowest ever, which also included 68 units bought by its own employees at a company loan scheme of 2 percent. This was despite the fact that the car was available off-the-shelf in at least 10 major states across the country.
“One has to distinguish between the bookings that took place in 2009 and open sales, started since August 2010 in phases. The reported sales of the Tata Nano in the month of November are what has been supplied to dealers, and not retail sales, during the month as per plan. Sales will increase as we go on expanding,” says a Tata Motors spokesperson.
So far, 71,000 Nanos have been sold, representing only about 40 percent of the projected sales target. Tata Motors has invested Rs. 2,000 crore in the Nano project, including a 2,50,000 units-a-year plant in Sanand, Gujarat. But sales have simply not taken off.
For the past three months, Kant has led a review inside Tata Motors along with Global CEO Carl Peter Forster and managing director P.M. Telang on the Nano project every day.
For starters, the Nano marketing team has been completely reshuffled, following the exit of Rajeev Dube, the head of its passenger car business and Nitin Seth, who headed the car product group. New brand teams have taken over. The distribution strategy has been redrawn, confidence boosting measures like an extended warranty and Rs. 99 a month maintenance contracts have been introduced, and a new advertising campaign on television and outdoor has been launched to boost awareness, particularly in tier II and III towns. Evidently, Tata Motors is straining every sinew to breathe new life into the Nano. And insiders say Kant is monitoring every aspect at the daily reviews: How many customers have walked into outlets post an ad campaign? How many of the walk-ins was the dealer able to convert into sales? How many new outlets were opened in the last one week?
But in the automotive world, there are few believers in the Nano story. “Is there anybody in the country who does not know the Nano? It was a household name even before the launch of the car. It is not clear what will it gather from a few crores of advertising,” said a competitor, on condition of anonymity. Some believe that the sales drop to 509 units in November suggests that the product has been rejected outright
Kant and his team seem to be in no mood to give up though.
The Supply-side Woes
Early last month, Tata Motors organised an all-India vendor meet to restore confidence among the vendor community and discuss the future of the Nano. Managing Director Prakash Telang, a Tata Motors veteran, made an impassioned presentation assuring everybody that necessary action would be taken and that Nano sales would gradually increase to about 15,000 units by March 2011. He implored suppliers to focus on the long-term relationship and hang in there. “In a suppliers’ meet people will give you the confidence. But when you are back in your office alone and start thinking, that is when you realise that the fire is much more than you had thought,” says a director at a sizeable vendor for the Tata Nano.
Early in the product planning stage, Tata Motors had promised him volumes upwards of 1.75 lakh units a year for his component, which forms a very crucial part of the car. “Right from the start, the project was highly cost intensive and we spent a lot on the technology learnings and setting up the facility. So volumes were the only way we could have made money. Today we are nowhere near that,” adds the supplier.
It is pretty much the same story for a lot of suppliers to the project. Worse, quite a few are still supplying for the Nano based out of Singur, West Bengal. Either they do not have the required funds to invest near the new Nano plant at Sanand, Gujarat or they are sitting on the fence, waiting for a clear picture on the Nano’s future. “There is no subsidy from the West Bengal government for the people who have been left behind in Singur. And the export potential which was another opportunity has still not come in. So, I don’t think we will be able to make any money on this and right now quite a few of us are bleeding,” says the supplier.
With more than Rs. 1,000 crore of their investments stuck in the Nano project, suppliers have no way out, other than to hope that Tata Motors is able to turn the tide.