Mumbai :A moment of silence, please, for the world’s cheapest car, which has all but died in India. It was almost 10 years old.
The Nano’s death was confirmed by production numbers: Tata Motors Ltd. produced 1 unit in June, down from 275 in the same month last year. Exports were zero, versus 25 in June 2017. The company acknowledged that the car in its “present form cannot continue beyond 2019.”
The expiry of the “people’s car,” as Tata Motors branded it in 2008, holds lessons for automakers hoping to make it in India: While consumers may be value-conscious, cutting costs to the bone in pursuit of a gimmicky claim to fame is no use if the end result is a second-rate vehicle with a tendency to catch fire.
The Nano’s failure to sell stands in stark contrast to the rest of the Indian car market. From motorbikes to cars and trucks, growth in every segment is picking up. Passenger vehicles, including SUVs, jumped 38% in June. Commercial vehicles climbed 42%, while two-wheelers – which dominate the market – gained 22%.
Maruti Suzuki India Ltd., the nation’s biggest carmaker, posted volume growth of more than 40%. Even a newly defined segment, the quadricycle – a vehicle that weighs less than 475 kilos – is showing signs of an uptick.
This is a market where electric vehicles are non-existent and the chatter over fancy ideas such as future mobility and autonomous vehicles, which pervades the rest of the auto world, is muted.
Still, Indian automakers have tried to get innovative. A widely held view is that they have largely misread the value-oriented psyche of a proud and aspirational middle-class, which scorns handout-like product propositions.
The much-touted Nano – hailed as a “milestone in frugal engineering” – fell short on safety, ran behind schedule and produced questionable crash test results. Eicher Motors Ltd.’s Multix pickup truck that doubled up as an electricity generator was also unsuccessful. Both companies have written off millions of dollars in investment costs.
Tata remains hopeful: A spokesman for the group said the Nano “may need fresh investments to survive.” Yet the evidence suggests that pursuit of the lowest price above all else was misconceived. A more realistic view is that India is squarely a high-volume, few-models game and consumers are focused on value – which means getting as many features as possible for their money.
Large numbers haven’t led to price wars yet, and probably won’t for a while. Indeed, India’s car market has the brightest profitability outlook globally, according to Nomura Holdings Inc. analysts.
Take Hyundai Motor Co., for instance, which has the second-biggest market share after Maruti Suzuki. With some input costs rising, the South Korean carmaker has raised prices of several models and, after decades in India, has started repositioning itself as a high-end brand.
Maruti Suzuki is following a similar trajectory. The company has begun churning out higher-margin vehicles, with its Baleno, DZire and Brezza models now accounting for a larger part of the sales mix than the more basic Alto and Wagon-R.