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TATA NANO – THE PEOPLE’S CAR
GROUP 7, Section A - Arun Pathrose (11106), Harikrishnan B (11215), Vancheesh H (11157)
Read the case on Tata Nano as well as pages 199 to 216 of textbook (Sections 7.3 and 7.4 under
Chapter 7). Study the points discussed under these sections and explain which of them are
applicable, or not applicable, in the context of the design and development of Tata Nano.
The Tata Nano car was an ambitious project which realized the vision of Tata Group Chairman
Ratan Tata of making a “People’s car” – a safe and affordable car which was within everyone’s
reach. The aim of Tata is to create products for the larger segments – good and robust products to
be produced innovatively and get to the market place at lower costs. The origin of Nano came
from an observation by Ratan Tata in 2002 when he saw 4 members of families riding 2
wheelers. He wondered whether it will be affordable to conceive a safe, affordable, all weather
transport for such families. He announced his dream car project in 2003 at the Geneva Auto
show where he announced the cost that flashed in his mind – Rs 1 lakh car. The project started in
2004 and they had to follow a target costing approach since the cost of car should not exceed Rs
1 lakh. This was achieved by cutting down costs on parts and at the same time not compromising
on customer safety, comfort and performance of the car and meeting all regulatory and safety
requirements of the domestic market. Ratan Tata himself was directly involved in the project
participating in review meetings every month and also giving suggestions from time to time
during the development. The first prototype was ready and tested in 2007. In Jan 10, 2008, the
Nano was unveiled at the Auto Expo by Tata. The project had started four years earlier and they
had to face many obstacles including the rise in prices of inputs such as steel, tires etc and the
agitations in Singur where the plant was supposed to be installed; still, the standard version of
the car was launched at the promised price of Rs 1 lakh excluding VAT and transport.
We will discuss the points in Section 7.3 and 7.4 of the textbook.
1. Accelerated time to market
Tata announced the dream car back in 2003 but it took 6 years to realize the dream. The cost
of raw materials was increasing continuously during this period, but hitting the market was
not a priority for them. They spent tremendous time on making an innovative design to make
the car more acceptable to the customer and at the same time meeting their cost target. The

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engine design was changed three times, body two times, the floor plan 10 times and the wiper
11 times and each time they had to redefine targets and work with suppliers through the
redesigns. The longer time to market was also attributed to the delays caused by Singur land
issue and hence Tata as well as their suppliers had to relocate the facilities.
2. Rapid ramp up
The Tata Nano faced capacity constraint due to high demand. They had an annual capacity of
50,000 cars in the interim facility at Pantnagar. The interim facility was done due to the
decision to move the plant from Singur to Sanand, Gujarat which would have taken them 18
to 24 months. This forced them to start sales through booking mode.Hence, production
followed demand. The new plant in Sanand would have a capacity of 250,000 in 2 shift basis
and operating it on 3 shifts will increase it to 350,000. The company could also expand to
500,000 per annum at a later date. The capacity related decisions were a cause of concern
since several competitors like Renault Nissan, Hyundai etc were also planning to launch cars
for the low cost segment.Hence, Tata needed to decide whether they should be conservative
and let supply lag demand, which also puts them in a risk of ceding market to competitors.
3. Enhanced customer acceptance
Prospective car buyers generally want to learn about the engine, size and the performance.
The target of Nano was the ultra-low cost (ULC) segment, priced between two wheelers and
the Maruthi Suzuki and they took several measures to enhance the perception and acceptance
of the target customers about the Nano. Two wheeler owners had large switching barriers to a
car that cost Rs 1 lakh – trustworthiness, resale value, hidden costs, trendy etc. They did not
compromise on any of the factors and the Nano had excellent engine performance and low
emissions. A two wheeler user would also be comparing what he will be spending monthly
on the Nano compared to his 2 wheeler. Hence, they had a target for fuel efficiency, repair
and maintenance costs and also made sure that the suppliers do not overprice the parts in the
after-market and the pricing was worked out starting from prototype parts to production parts
and replacement parts.

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4. Strong proprietary position
The competitive advantage of the Nano is its low price and at the same time providing a safe
and comfortable car to the ULC segment. Great new products on one hand attract large
number of customers but at the same time, they also face the risk of imitation from
competitors. The Nano revolution triggered similar innovations across many companies like
Maruthi, Renault Nissan, Hyundai etc. But none of the companies could promise a price as
low as the Nano ($ 2198). The nearest price offered by the competitors is $ 3000 by Renault
Nissan and they were also not sure about how to do it.
5. Integrating Product and Process Development
Tata Nano project saw integration of both product and process development with the main
focus shifting towards cost reduction and customer acceptance. Here, such integration would
be helpful as these sort of projects would involve time pressures, which was evident in the
case of Nano project. In such cases, coordinating the new development process requires
special organizational and technical skills. Here, Tata was able to do it by forming a central
coordinating team with direct instructions from Ratan Tata.
6. Prototyping
Prototype of the car was developed in this case. This project was entirely innovative as the
entire design was based looking on a two wheeler as the base. Four long years was taken for
designing the entire vehicle, and involved many design changes throughout the project. It
even involved feedbacks given by Ratan Tata himself. They took extreme care while
launching the prototype to maintain the secrecy and it took them one full year to launch the
car after the successful testing of the prototype.
7. Learning by doing and Learning before doing
Nano project concentrated on the concept of learning by doing. This is because they had full-
fledged dedicated resources for their pilot testing. They implemented all they wanted in their
engineering design stage, kept on improving, made changes quite often till they were able to
achieve their goal of producing a people’s car which cost Rs one lakh. The engineers as it

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were seen were very much interested in finding various low cost substitutes for various parts,
studying application of various resources to bring down the cost.
8. Centralized Vs. Decentralized Process: Development and Technology Choices
The entire development process for the Nano project was centralized. It all started with the
formation of a core team of engineers who were involved in the designing and development
of the car, headed by Mr. Ratan Tata, who used to review the project continuously giving
feedbacks about its progress. Also, while setting up the manufacturing facility, they wanted
their suppliers to be close to them so that the cost involved in logistics part would be reduced
considerably. Also,it helped them to convey the changes made in their design to the suppliers
quickly, so that they could easilyadapt to the changes made to the design. Also, the
management was able to easily review the progress of the project as it was not scattered
across various geographies. This centralized process also helped them to quickly come up
during the time of distress, when the issue at Singur was at its helm. The centralized process
helped them to quickly relocate to a new location with minimum damages both with time and
money.