How did Tata misjudge demand for its new Nano car?
First deliveries of Tata’s Nano, the world’s lowest-priced car, are expected to hit the road in July. It’s lean, light, fuel-efficient, and in high demand in some of the world’s largest markets. But there’s one problem: Most people won’t get one for a long time yet.
When you spot a major gap in a market, it’s always good to know how you’re going to fill it. But in a flurry of questionable production forecasts, India’s Tata Group has ended up with a major shortfall.
While the company copes with raging demand for its cost-busting, €1,650 vehicle, it actually has production capacity of only 45,000 cars this year. A dedicated new plant, in Sanand in Gujarat, India, won’t be ready until sometime in 2010. Even then, it will have an annual capacity of only 250,000 to 350,000 cars.
That wasn’t what company Chairman Ratan Tata initially had in mind. “The business plan shown to me was looking at a figure of 200,000. I said, ‘200,000 cars is crazy. If we can do this, we should be looking at a million cars a year, and if we can’t do a million, then we shouldn’t be doing this kind of car at all,’ ” he recalls.
Tata is now running a lottery for the first cars off the production line, but that could still mean an 18-month wait. Worse, if you don’t win a lottery ticket, it could be years before you get your hands on the Nano’s basic, rigid steering wheel. Europe probably won’t see one until 2011.
But when it comes to manufacturing innovation, the car gets a big gold star and provides a powerful example of how technology can achieve more with less.
It’s all about saving cost, manufacturing time, and weight. The Nano seats four people, but weighs in at just 600 kilograms — 200 less than a Mercedes Smart car and close to half the weight of a conventional hatchback. That helps deliver fuel efficiency of roughly 56 miles a gallon.
But can Tata capitalise on all this revolution?
