Tata Nano is the cheapest car in the world. It is sold in home country India around Rs 1-lakh i.

e
approximately USD 2000. It is manufactured by Tata Motor Limited, the largest automobile
company in India. It’s Chairman, Mr Ratan Tata envisions that Tata Nano to become a “People’s
car“which is affordable by almost everybody. Tata Nano was first launched in India on 1st April
2009 and expected to be in Indian market by July 2009. Since launching, it has created a huge
buzz all over India. Within the first two days of lunching, it received 5500 booking. What makes
Tata Nano so cheap? Basically, by making things smaller, lighter, do away with superficial parts
and change the materials wherever possible without compromising the safety and environmental
compliance. It is said that Tata Nano has better millage than Toyota Prius and same gas emission
as a scooter.

Opportunities for Nano and Micro and Macro analysis of Tata Nano
India today is one of the two rapidly growing economies of the world. The growth rate of Indian
economy has averaged 8% in last three years. Today its gross domestic product has exceeded the
trillion-dollar mark and will exceed the next trillion-dollar mark by 2025, if the economy
continues to grow 8% and above. This has obviously increased demand as it put more money in
the hands of all segments of the Indian population. About 54% of India’s population had an
annual household income of less than Rs. 90,000, 41% had an annual income of Rs.90, 000 to
Rs. 2,00,000 and 4% had a household income of Rs.200,000 to 500,000. This data showed that
103 million people moved out of desperate poverty in the course of just one generation. This is
true across India. This is all the more impressive if we keep in mind that India’s population grew
by 352 million between 1995-2005. In effect there were 431 million fewer poor people in India,
today then there would have been if poverty rate remained at its 1985 rate of 93%. Also since
1991, when India started its liberalization process, there has been a sizeable growth in the middle
class. Because of all these changes and a predominantly young market, India is expected to
become the fifth largest market by 2025. This is due to a combination of rapidly rising household
incomes and a robustly growing young population. As one can make out, the income growth will
be one of the biggest drivers of increasing consumption, far outweighing population growth or
any change in savings behaviour. 80 % of consumption growth comes from rising incomes,
while 16 percent of the increase is due to growth in the number of households. Only 4 per cent
will come, from changes in India’s household saving rate. As incomes grow, the class structure
of consumption will change significantly as well. Consumption today is dominated by the lowest
and low-income segments, which together control 75 per cent of spend. By 2025, however, the
highest income segment will wield 20 per cent of total spending and the new middle class will
come to dominate, controlling 59 per cent of India’s consumption power.

The impact of Tata industry and its business policy is deeply impact on Indian economy is very
well known by each Indian, the recent launch of Nano (one Lakh Rs. Car) not just dream for
ordinary Indian, which brings new hopes and opportunity for Indian automobile sector. Indian
economy is not just dependent any particular sector, the key to success is lies behind its low cost
and high efficient manufacturing segment. Service industry specifically IT and BPO may face
the problem due to global recession but Mfg. segment is real strength of any economy as well as
chunk amount of purchasing power hold by strong and matured Indian market. The expected
revenue generation by nano project will be around 100. 000 cr Rs. for next three years and over
20 thousand new job openings sound strange but no more dreams for Tata. 

Social cost-benefit analysis.  The Tata’s started out with this ambitious project to cater to needs
of those customers who used a two-wheeler for a family of four. While the needs of that family
are now met, the million dollar question on all the environmentalists minds is the Nano’s adding
to the already chaotic traffic woes of Indian roads and while infrastructure is lagging far behind
development, can it play catch up before the Nano’s start hitting the road in thousands? Time is
the only test of this as I don’t expect much to change with any political party at the center or
state. Politics will always supercede infrastructure needs in this country. The real social cost-
benefit is as yet unknown in real terms.

Volumes reminds me that the entire concept of Tata Nano to achieve profitability is based on
volume sales. You have only 100000 cars, the volumes are not justified to even make a
breakeven, let alone any profit. You sell a million of those, and then you are talking business.
Now, will suppliers come to the party? Do they have what it takes to establish new facilities near
Sanand to source components to the Nano production line? Economies of scale have to be
exploited and diseconomies of scale avoided.

While Tata’s have cut costs at all levels, the real test of efficiency is also in its mileage and
safety. These two have a big “top of the mind recall’ for the discerning customer.

The automobile sector in India was severely impacted by the global financial crisis in the Indian
and global business environment. GDP growth slowed down substantially from 9 % in year 2008
to 6.7% in year 2009. Followed by high inflation and high material cost which lead to higher
vehicle prices and fuel prices, unavailability of finance or higher cost of finance as well as
gloomy economic conditions had slumped the demand badly. (Annual Report 2009) These
factors have tremendously pressured both Tata Motors’ commercial and passenger vehicle
industry which lead to sales declined.  In order to survive in this sluggish economy condition,
Tata Motors only has few options which are laid off workers, cut productions, cut cost and boost
sales with cheaper cars.Launch of low budget cars in the india boosted up sales and generate
working capital.

Socio-cultural Environment

ARAI is ensuring fuel-efficient, safe and less polluting cars in order to help create a better and
healthy environment for the society. Nano will be adhering to all of these.

Nano gives 23.6 kmpls as certified by ARAI.

85% of the cars in India are financed. The banks are giving finance options easily helping the
people who cannot afford to buy themselves. SBI is providing loans for Nano.

Economic Environment

Following economic factors are in favour of Nano.

Increasing road development

Higher GDP growth

Increasing Per Capita income

Cheaper (decline interest rates) and easier finance scheme

Political Environment

Nano since its launch has been in news due to Singur Controversy and shifting of plant to
Gujarat. Politics have till now brought lots of problem for TATA. Apart from that following
issues are also being raised frequently regarding Nano

Questions of safety

Mass motorisation

Used car market effects

Nano is has two has models up to BS III compliance.

The BS4 compliant engine for the Nano is under development and will be introduced in a year’s
time. The car will be offered in BS 2 and BS 3 emission norms only (The base Nano and the mid
Nano CX will be offered in BS2 and BS 3, whereas the top end Nano LX will be offered only in
BS3 emission norms).

But nature activists have been against Nano, since, according to them mass motorisation due to
affordability will create level of uncontrollable pollution specially in urban regions.

Technology Environment

By using breakthrough method of designing and production Nano costs lowest in the world.
TATA motors have also been working constantly in order to make it ready for the world market
and future technologies. For eg. TATA may come out with electric version of Nano.

Government Policies and Legal Environment

Following India's economic liberalization in 1991, the automobile industry was opened for 100
percent foreign direct investment. Since then India has been having high growth rate of 17%.
Also exports of automotive parts and cars have grown at annual rate 30%.

With issue of mass motorisation becoming bigger, new government regulation may come out in
order to control the situation.