Tata Motors - NANO Story

After the legendary Ford Model T, the car that ‘put America on wheels’, there has not been a single model that has revolutionized the automobile industry. (Model T was the first car to be produced on an assembly line and it was sold at $850, in 1905). But today, the Model T seems to have a competitor emerging from the unlikeliest of challengers in the form of TATA NANO from the stable of Tata Motors, India. So what is revolutionary about it? It comes with a price tag of $2500 (40% cheaper than the closest competitor – Chinese Alto $4112). The whole world seemed to have taken notice and is gearing up to the launch.

It was conceptualized by Ratan Tata, who seemed to have revitalized the Tata Giant moving at a trot to a gallop. The motivation was to give the Indian middle class family of four, travelling precariously perched on a motorcycle, a better, safer and cheap alternative mode of transportation. One of the lesser known brains behind the project includes Girish Wagh and his team of engineers. Girish Wagh is also credited with the earlier success Tata Ace, the 4 wheeler road carrier that has reached far corners of rural India.

The project has had its fair share of troubles and is going to see much more going ahead. But you cannot expect a revolution to go unchallenged. The problems faced include the SEZ land acquisition issue, unimaginable price ceiling, protests by environmentalists and even floods at the production site. But the project seems underway in spite of all these. And Ratan Tata has assured that they will stick to the promised price and hence give wings to the aam-aadmi’s dream.

So how actually has the dream price been conquered? Innovation!! Not revolutionary invention, but a series of small, marginal and significant improvements. In fact Tata Motors has filed for 34 patents for the project. Ranging from the basic engineering design to even the supply chain, every link has produced its frugal best for the project.

The car has a rear engine, that is connected to the rear wheels directly thus saving on steering columns which have been kept hollow as they do not have to support the weight of the engine. The engine itself was made of aluminum, thus saving on weight and cost. The car has only one side rear view mirror and only one wiper. In the interiors, the HUD (Head-Up-Display) has been kept simple with an odometer, fuel level and turn indicator. Also the glass used in the HUD was not anti-reflective, as the natural angle it made, allowed it to be visible. The car as well uses a lot of adhesives rather than expensive welding. Also the interior parts were made such that, they just fit into each other rather than requiring screws to hold them. The tubeless tyres have been kept small owing to the lesser weight and have been spaced as far as possible in the frame, compensating for their small size. The bulbs used for the lights are standard ones as against longer life ones.

Every part used on the Nano, is customized and not the standard used in other small cars. The suppliers play a crucial role in achieving the 1 lakh price tag. Almost 85% of the car is produced by third party suppliers. All of them have agreed for razor thin margins, owing to the large volumes that Tata Motors has promised. Most of the parts have been priced at the variable cost. Also Tata Motors had aggressively bid with the suppliers, sometimes starting at 50% of the bid price received by them. Some suppliers like Exide have almost forgone the entire margin, just for being associated with the project, as the breadwinners for them are in different category. The breakeven for these suppliers can even take almost 2 to 3 years. Tata motors even plans to assemble the car at the dealer points from the dealer kits delivered to them.

After the legendary Ford Model T, the car that ‘put America on wheels’, there has not been a single model that has revolutionized the automobile industry. (Model T was the first car to be produced on an assembly line and it was sold at $850, in 1905). But today, the Model T seems to have a competitor emerging from the unlikeliest of challengers in the form of TATA NANO from the stable of Tata Motors, India. So what is revolutionary about it? It comes with a price tag of $2500 (40% cheaper than the closest competitor – Chinese Alto $4112). The whole world seemed to have taken notice and is gearing up to the launch.

It was conceptualized by Ratan Tata, who seemed to have revitalized the Tata Giant moving at a trot to a gallop. The motivation was to give the Indian middle class family of four, travelling precariously perched on a motorcycle, a better, safer and cheap alternative mode of transportation. One of the lesser known brains behind the project includes Girish Wagh and his team of engineers. Girish Wagh is also credited with the earlier success Tata Ace, the 4 wheeler road carrier that has reached far corners of rural India.

The project has had its fair share of troubles and is going to see much more going ahead. But you cannot expect a revolution to go unchallenged. The problems faced include the SEZ land acquisition issue, unimaginable price ceiling, protests by environmentalists and even floods at the production site. But the project seems underway in spite of all these. And Ratan Tata has assured that they will stick to the promised price and hence give wings to the aam-aadmi’s dream.

So how actually has the dream price been conquered? Innovation!! Not revolutionary invention, but a series of small, marginal and significant improvements. In fact Tata Motors has filed for 34 patents for the project. Ranging from the basic engineering design to even the supply chain, every link has produced its frugal best for the project.

The car has a rear engine, that is connected to the rear wheels directly thus saving on steering columns which have been kept hollow as they do not have to support the weight of the engine. The engine itself was made of aluminum, thus saving on weight and cost. The car has only one side rear view mirror and only one wiper. In the interiors, the HUD (Head-Up-Display) has been kept simple with an odometer, fuel level and turn indicator. Also the glass used in the HUD was not anti-reflective, as the natural angle it made, allowed it to be visible. The car as well uses a lot of adhesives rather than expensive welding. Also the interior parts were made such that, they just fit into each other rather than requiring screws to hold them. The tubeless tyres have been kept small owing to the lesser weight and have been spaced as far as possible in the frame, compensating for their small size. The bulbs used for the lights are standard ones as against longer life ones.

Every part used on the Nano, is customized and not the standard used in other small cars. The suppliers play a crucial role in achieving the 1 lakh price tag. Almost 85% of the car is produced by third party suppliers. All of them have agreed for razor thin margins, owing to the large volumes that Tata Motors has promised. Most of the parts have been priced at the variable cost. Also Tata Motors had aggressively bid with the suppliers, sometimes starting at 50% of the bid price received by them. Some suppliers like Exide have almost forgone the entire margin, just for being associated with the project, as the breadwinners for them are in different category. The breakeven for these suppliers can even take almost 2 to 3 years. Tata motors even plans to assemble the car at the dealer points from the dealer kits delivered to them.