A noble project to mobilise rural India safely, the Tata Nano was a failure. Today we examine the reasons why.
The Tata Group is one of India’s oldest and largest industrial conglomerates. It encompasses a hugely diverse range of manufacturing and service companies, including steel, chemicals, consumer products, home appliances, energy, telecommunications, hotels, finance, investment and, since 1954, motor vehicles. Tata’s first domestically designed and built car was the 1998 Indica, a supermini-sized five-door hatchback that went on to become the country’s best selling B-segment model(1).
Ratan Tata, chairman of Tata group from 1990 to 2012, is the great-grandson of Jamsetji Tata, who founded his first company, a cotton mill, in 1868. Ratan Tata is recognised and highly regarded for his philanthropic and charitable work in India. Having launched the Indica, Tata recognised that the car was selling mainly in urban centres.
It was simply too expensive for the rural poor, whose only form of motorised transport was a motorcycle. These were often ingeniously (over)loaded with family members and their chattels, which may have looked amusing to onlookers, but resulted in frequent accidents, sometimes causing serious injury or death.
Tata regarded this as unacceptable and turned to the task of providing a safer form of mobility for the rural poor. He set his designers a challenge: to develop a small economy car that would accommodate four adults safely and in relative comfort. It must conform to all current and prospective safety legislation. It must be economical to run and cost no more than roughly twice the price of a typical small motorcycle.
An early prototype that was little more than a tubular-framed quadricycle with a canvas roof was rejected as simply too basic and uncivilised. Tata consulted with I.DE.A., the Italian industrial design company that had styled the Indica. It designed a neat four-door egg-shaped monobox car that was just 3,100 mm (122”) long and 1,390 mm (54¾”) wide. It stood on a wheelbase of 2,230 mm (87¾”) but was unusually tall at 1,650mm (65”) which made the interior remarkably roomy for such a small footprint. Thanks to the short wheelbase, small 12” wheels and its rear-engined layout, the turning circle was just 4 metres (157½”).
Costs were ruthlessly cut to the bone wherever possible. The wheels were fixed with just three studs. Only the driver’s door had an external lock and door mirror. The external fuel filler was deleted in favour of a cap on the tank under the bonnet. Contrary to appearances, there was no tailgate: access to the rear luggage area was via the passenger doors and the rear seat had to be removed to access the engine, a Tata designed 624 cc all-aluminium inline twin-cylinder unit, attached to a four-speed manual gearbox. The basic model even dispensed with heating and ventilation: the eyeball outlets and space for heater controls in the dashboard were simply filled with blanking panels.
In a press interview in early 2008 about the project when the prototype, which was called Nano, was revealed, Ratan Tata was asked how much the new car might cost. In an almost throwaway manner, he said, “About one Lakh”, which was 100,000 Rupees, or $2,500 (£1,250) at the time. Hence, it immediately became known as the One Lakh Car and that soubriquet would cause Tata many problems when the Nano was finally brought to market.
Championed by Tata, the new car had already taken on the mantle of a national project to improve the lives of poor Indian citizens throughout the country. Tata strong-armed suppliers into providing components at near cost-price, promising them enormous volumes of orders. Annual domestic sales were forecast at 250,000 units and there were plans to either export or build the Nano locally in overseas emerging market countries in Africa and South America.
The Nano project had also been envisaged as a way of bringing industry and employment to West Bengal, an impoverished rural state in the far east of the country. In 2006 it was announced that, with the agreement of the state government, a new factory would be built outside the town of Singur. Unfortunately, the local population was wedded to its agricultural traditions and wanted the land purchased for the factory instead to be distributed for farming.
The argument that the factory would bring much greater employment and prosperity to the area than the alternative use fell on deaf ears. The backlash, and mass protests supported by opposition political parties, forced Tata in September 2008 to relocate its proposed factory to Sanand, a city in the state of Gujarat in the west of India.
Unusually heavy monsoon rains delayed the building of the new factory and it was mid-2009 before production was able to begin in earnest. Such was the expected impact of the Nano that sales of small used cars fell by around 30% in anticipation. Over 200,000 prospective customers paid a deposit to pre-order Tata’s revolutionary new car.
Behind all the positive news, there was, however, a major problem: Tata had never publicly contradicted the One Lakh Car expectation, but the Nano cost considerably more than that to build, despite all the efforts to extract cost from the design. The first 100,000 cars were indeed priced at 100,000 Rupees, but the entry price was then increased by 78% to 178,000 Rupees.
At that level, the Nano was still the cheapest car on the market, but it cost the same as, for example, a nearly new Maruti 800. This was a locally built version of the Suzuki Alto, and India’s cheapest car after the Nano. The 800 was seen as a proper car and its sales, which had fallen sharply in anticipation of the Nano, quickly recovered.
There was another problem with the Nano, one of image. All the advance publicity had focused on the car’s promised cheapness. The launch advertising promoted it primarily as an alternative to a motorcycle. This fixed in buyers’ minds the perception that the Nano was (only) for those who could not otherwise afford a car. At 178,000 Rupees, the latter group could not afford a Nano, so stuck with their motorcycles, and almost nobody else wanted to be seen in one.
Inevitably, there a number of quality issues with early production cars from the new factory. Putting these issues right delayed production and many of the pre-orders were cancelled, even some that would have qualified for the one Lakh introductory price. It took two years before the Nano reached 100,000 sales and the majority of those sales were not to rural first-time car owners, but to urban dwellers looking for a cheap second car for city driving. The Nano’s diminutive size and tight turning circle made it perfect for this role. This encouraged Tata to think about a different export market and customer demographic for the Nano, a city car for Europe.
A heavily revised Nano with the suffix Europa was unveiled in late 2009 at the Geneva motor show. This had a new Euro5-compliant 1.0 litre three-cylinder engine, five-speed gearbox, wider tracks front and rear and larger 14” alloy wheels, ABS and traction control, twin airbags and electric power steering. Larger bumpers to comply with European crash regulations added 200 mm (8”) to the overall length.
All this extra equipment and a better-appointed interior meant that the Nano Europa was expected to cost between £4,000 and £5,000 in the UK. Unfortunately, when the Nano was subjected to Global NCAP crash tests by the German ADAC in 2014, it scored a disastrous zero stars for adult passenger protection, killing all hopes of European exports.
Sales continued in the Indian market at levels far below expectations. The best annual total of around 75,000 units was achieved in 2011/12, after which sales declined steadily. A facelift and the addition of a tailgate in 2015 made no perceptible difference to sales. Attempts to find an alternative fuel source for the Nano, including compressed natural gas, electricity and even compressed air, came to nothing(2). Production finally ended in June 2018.
Over nine years on sale, a total of around 276,000 Nanos were manufactured. Tata consistently lost money on the Nano but, because of its hoped-for societal significance, persisted with it for far longer than pure commercial logic would have justified. Ratan Tata envisioned the Nano as India’s people’s car in the mould of the Ford Model T, VW Type 1 and Fiat 500. Sadly, it was not to be, but was instead a heroic failure.
(1) The Indica endured a brief parallel life as the ill-begotten 2003 MG Rover CityRover, recently covered by DTW and to be found here.
(2) There are rumours that a new EV version of the Nano will be launched in 2021.