Tata Motors Effects on Manufacturing

Tata Motors launched the universe ‘s cheapest auto, and besides revolutionized the manner cars are manufactured. It created a monolithic new market which had non existed earlier. Most automobile multinationals were concentrating their attempts on the top 10 % of the Indian population. Their effort was to convey to the market all the “ de-featured ” versions of their planetary merchandise lines.

In this study, we have provided a comprehensive analysis of assorted additions, losingss and tradeoffs associated with the reaching of Nano into the market of cars, within India and all over the universe.

I ) Feasibility and aspects impacting sustainability of Nano:

The assorted aspects of sustainability that are traveling to be discussed in the study are:

1. Sustainability with regard to Market Demand

2. Sustainability with regard to Market Competition

3. Financial aspect of sustainability

4. Normative aspect of sustainability

5. Sustainability of the ‘People ‘s Car ‘ Doctrine

1 ) Sustainability with regard to Market Demand:

Tata Motors focused on the 75 % of the Indian population which even today travels in two – Wheelers ( bikes, scooters ) and three-wheelers, with a monetary value scope of about $ 1,200.

i⤠Current Scenario of the Indian Automobile Sector:

Car industry in India is the 9th largest in the universe. After Japan,

South Korea and Thailand, India is the 4th largest exporter of cars. Many car makers of Indian beginning have expanded their operations across the Earth. In India the car sector has been turning abundantly. [ refer Appendix 1 ]

i⤠Creation of New Market as a Consequence of Product Innovation:

Rating bureau CRISIL has announced that, the consumer monetary value of Tata Nano would be around Rs. 1.3 Lakh. This will take to decrease in the ownership cost of a auto at the entry degree in India by around 30 % , and makes the low monetary value auto low-cost for households gaining one-year income of Rs. 3 Lakh and above that.

Consequence of the market demand on the sustainability of Nano:

The market demand for Nano is rather immense and will non acquire saturated within the following few old ages, for the undermentioned grounds

Factors of comparatively high significance:

Addition in the figure of in-between category households and buying power.

Opportunities in the market outside India.

Factors of comparatively low significance:

Demand for a cleansing agent auto

Second auto in the household market

Addition in the figure of in-between category households and buying power

The in-between category is increasing at a rapid rate due to the progressive growing of the state ‘s economic system. This comes with a important addition in the buying power and as auto loans proliferate and the car industry churns out low cost autos, a important part of the in-between category is nudged off their bikes and 2nd manus autos. This is a important market and does non present the hazard of acquiring diminished or making a impregnation degree. [ Refer Appendix 3 ]

Opportunities in the market outside India:

Nano is expected to be on the top of the wish list of the 1000000s of Chinese,

Brazilians and Russians expected to fall in the in-between category in the coming decennary. There is a immense potency in the abroad market for the growing of TATA NANO. [ Refer Appendix 4 ]

Demand for Eco-friendly autos:

Apart from the above mentioned factors, the eco-friendliness of Tata Nano

when compared to other autos in the little auto section can be a important factor in prolonging its market demand. However, in position of the buying power and consciousness of the Indian client market, this might non impact the gross revenues instantly.

Study of 2nd auto in the household market:

Factors for purchasing a 2nd auto

Social Status

Necessity of Transport.

Further, in Masculine states like US, UK, etc. Cars are a portion of the societal position. While in Feminine states like Norway, Japan and Scandinavia people buy merely so many autos so that they maintain their criterion of life. Below is an analysis on the 2nd auto in the household market in India

Component Cost per month

PETROL Rs 3000


LOAN Rs 2700

Entire Rs 6700

Table: Average cost per household per auto in India purchasing a NANO

Cost per auto per month = Rs 6,700 ; Cost for keeping 2 autos = Rs 13,400

Assuming that in-between category households do n’t pass more than 15 % of their income on conveyance, so the households total gaining ‘s per month is Rs 80,000/- p.m.

When compared to around 90 million having more than 2 autos in US, and around 20 million families in UK, this is a really little market. However, it might impact the market since the production is lower than the demand.

2 ) Sustainability due to Market Competition:

All the car makers are working on vehicles that will be priced to vie with Nano. The immense potency of this untapped and enormously spread outing underside of the market pyramid has been wholly noticed by the major auto fabrication companies.

aˆ? Renault SA of France and Nissan motor company of Japan have teamed up with Bajaj

Auto Ltd. to do a USD 3000 auto available to the Indian consumer by 2011-12.

aˆ? Ford Motor Co has announced programs to construct a new little auto in India with sticker monetary value of about USD 7500.

aˆ? Maruti purposes to counter the inflow of NANO with a two tined scheme. I ) First, it will cut down the monetary value of its largest selling theoretical account Alto.

two ) Second, it is traveling to establish its new theoretical account A- star.

aˆ? Toyota will be get downing production of 100,000 units a twelvemonth in the scope of $ 6,900 –

$ 7,850, in the outskirts of Bangalore in Karnataka. They will non instantly vie with Tata

3 ) Financial aspect of sustainability:

The two factors that are dealt with in fiscal sustainability are

1. Consequence of Gross saless and

2. Consequence of natural stuff monetary values and revenue enhancements.

i?¶ Effect of gross revenues:

The demand for Tata Nano is expected to be more than the production, at least boulder clay

2013. Therefore, gross revenues will be governed by capacity of its works. Assuming 5 % net income

border on each unit sold ( least net income border expected as per businessstandard.com ) , and gross revenues anticipations of 50,000 units in 2011, 1,30,000 units in 2012, 2,10,000 units in 2013, Tata motors would hold made a net income of around Rs. 300 crores by so. [ Refer Appendix 5 ]

i?¶ Effect of natural stuff monetary value and revenue enhancements:

The monetary values of natural stuffs of a auto are capable to broad fluctuations. [ Refer Appendix

6 ] . For autos with considerable net income borders like Maruti 800 ( mention appendix ) , the direct dependence of the merchandising monetary value on the natural stuff fluctuations and revenue enhancements is less. But, since Nano has a really low net income border, there is a smaller shock absorber and so, it is extremely dependent on the monetary values of natural stuffs and revenue enhancements.

Hence it is hard to accurately foretell the impact on the cost of Nano after 5-6 old ages. However, as of now, the unit is self-sustainable, and it is expected to stay so in the close hereafter.

4 ) Normative aspect of sustainability:

aˆ? Tata Nano in India:

India follows the Bharat emanation criterions. Currently Bharat phase 3 is applicable all over India. However from April, 2010 Bharat 4 will be applicable in 10 major metropoliss and NCR. Nano already complies with the Bharat 3 emanation criterions and can upgrade to Bharat 4 without any excess cost. Thus it can be safely assumed that the auto will be ordinance compliant for following few old ages without adding cost.

aˆ? Tata Nano Europa: Europe

However, even the elevated cost is rather low when compared to other autos in this section and therefore the market for the auto is unaffected.

5 ) S u st ain ab ilit Y of T H vitamin E ‘ Peop lupus erythematosus ‘ s Car ‘ Ph I losop H Y:

The chief purpose of the aˆzPeopleaˆYs CaraˆY doctrine is non to supply the cheapest available auto, but to supply a auto that is within the range of people who did non conceive of being able to afford a auto. For this to be sustainable, the basal monetary value of Nano should non be increased beyond a bound, wherein, the monetary values of an mean two Wheeler and the monetary value of Nano differ by a critical sum.


In this subdivision, the assorted facets related to the economic, societal and environmental effects are dealt with.

1. Economic Consequences:

The factors that are traveling to be discussed are a. Consequence on fuel monetary value rise

b. Tata Nano vs the used auto market section.

c. Effect on the growing of the car gross revenues profile.

d. Effect due to India going the hub in little auto production

a ) Consequence on fuel monetary value rise:

Assuming 20 % of the two Wheelers are traveling to be phased out in 6-10 old ages by Nano, and that the mean milage of Nano is 50 % of the milage of two Wheelers, harmonizing to the tabular array shown in the appendix, the addition in ingestion is about 0.4 % per twelvemonth. And therefore, it does non drastically affect the hiking in fuel monetary values.

B ) Tata Nano vs. Used Cars:

The possible consequence that Tata Nano would hold on the used auto market is

1. Heavy bead in the monetary values.

2. Peoples who would be purchasing NANO may stop up selling their 7-8 old ages

old autos ; and such autos would be pushed at much lower and attractive monetary values in the used/ 2nd manus auto markets.

3. The handiness of new autos at Rs.100, 000 would do the monetary value ticket of

Rs.250, 000 for used autos seem unreasonable.

So, people with sufficient buying power would travel for NANO while used- auto clients would lodge to the used-car section, and would in fact acquire

them cheaper due to the NANO consequence. The auto has created a new section in

itself. But the initial Numberss are excessively small to hold any impact on any other section.

degree Celsius ) Consequence on the growing of car gross revenues:

India, in car sector, is turning out to be a sourcing base for the planetary car big leagues. The rider auto and the bike section are set to turn by 8-9 per centum. The industry is likely to keep the growing impulse picked up in 2002-03. With the debut of Nano the rider auto section will acquire a farther encouragement to its growing rate. Tata Nano ‘s launch could spread out the Indian auto market and this addition in the market is expected to force up auto gross revenues by

20 % .

vitamin D ) Consequence due to India going a hub in little auto market:

Since there is a immense potency for little autos in India, all companies are

puting in India. This will do India a planetary hub in the little auto market. This will increase transit substructure, improved merchandise quality, more skilled workers, alterations in labor and revenue enhancement ordinances and increase in the graduated table of exports of automotives.

The cardinal factors are:

1. The incorporation of a mature vehicle funding system

2. Reducing the spread between Indian and International companies in footings of

research competency.

2. Environmental Consequences:

The factors that are traveling to be discussed are

a ) Addition in the figure of autos and ensuing congestion:

At the rate of 3 Lakh autos per twelvemonth, Tata NanoaˆYs part to the entire vehicular traffic would be really little, i.e. around 0.3 % addition every twelvemonth. But, as the vehicular distribution wonaˆYt be unvarying throughout the state, and will be concentrated in tubes and tier-2 metropoliss, it would do congestion in those urban countries.

B ) Air Pollution: ( HOW CLEAN IS THE NANO? )

Tata Nano is compliant with the stringent Euro 4 pollution norms and is therefore

much cleaner than the 2 Wheelers and older autos it will replace. NanoaˆYs catalytic

convertor is 80 % efficient, which is the highest for any auto in India.

Even if we consider the debasement of the catalytic convertor with clip, this would be a unvarying factor in all vehicles, so we need non see its consequence.

Positive Consequence:

We are in consequence replacing two Wheelers and the polluting autos with the much cleaner Nano.

Negative Consequence:

Since Nano will increase congestion in metropoliss, the fuel efficiency of all vehicles will diminish. This in bend would take to more pollutants being emitted per kilometre. Therefore, this factor would lend to an addition in pollutants being emitted.

Trade Off:

The overall consequence will be a combination of these two factors. Since the consequence on fuel efficiency due to congestion is non wholly predictable, the consequence on air pollution caused by Nano is really hard to foretell.

3. Social Consequences:

The factors that are traveling to be discussed are:

a ) Standard of Populating with regard to Nano users

B ) Employment creative activity

degree Celsius ) Traffic and Parking

vitamin D ) Consequence on public conveyance.

i?¶ Standard of Populating with regard to Nano users:

1. Cars are safer manners of conveyance, when compared with two Wheelers, both in footings of accident protection and protection from harmful gases.

2. It will animate a batch of people as they may be able to get something that would hold one time seemed about impossible at their income degrees. Hope is a large thing when you are fighting in a underdeveloped state.

3. Ford Model-T led to transmutation of population centres, monolithic displacements in attitudes toward metropolis and rural countries, flexibleness of employment and instruction, widening of societal positions through travel, and displacements in household kineticss and functions. The Nano may convey the same to India.

Generating employment for the state:

1. Benefits to Local constituent makers and Sellers:

aˆ? The little scale industrial units that industry and supply auto constituents, such as casting, forging, and bearings, will acquire a distinct benefit.

aˆ? Local Vendors will besides profit from the Tata Nano female parent works. Like the constituent makers, sellers will be able to salvage 2 % CST on the constituents.

2. Making extra occupations and developing chances:

aˆ? The Tata Nano undertaking is estimated to supply 10,000 extra occupations in the province where the works is located.

aˆ? The Tatas besides have other programs to construct electric autos and CNG discrepancies from the female parent workss. Hence, they have programs to put up an car academy and ITIs ( industrial preparation institutes ) to run into resource demands for the female parent works.

3. Making assembly programs:

aˆ? Ratan Tata said the company would promote local enterprisers to put in these units and develop them to piece the to the full knocked down or semi- knocked down constituents sent to them this would besides make off with the trader and trader ‘s border.

i?¶ Effect on Public Transport:

aˆ? Making barriers in India ‘s motor vehicle fabrication capablenesss would be counterproductive.

Possible inroads in public conveyance:

Replacing Auto-rickshaws:

1. In malice of the environmental concerns, the Nano can bit by bit phase out the car

( many of which still run on debased kerosine ) .

2. Scheme: Auto-Rickshaw proprietors, who soon buy a Bajaj Auto at Rs 1.2 hundred thousand, can

replace it with a Tata Nano spend a few 1000 on acquiring a LPG engine, and so charge clients at say Rs 10, alternatively of the present Rs 8.

Practical jobs:

Nano costs a batch more than an auto-rickshaw. Generally, an car driver would non desire to pass 30,000 or 40,000 rupees more merely for the interest of luxury and comfort of his

riders. They would purchase the cheapest and most basic vehicle that would be suited to their demands. Besides, there would be a recoil and force against those Nano drivers from traditional car drivers.

Since Taxis are by and large owned by bureaus which operate around 10s or 100s of

taxis, there would non be such a crisis if taxis displacement to Nanos.

Replacing Taxis:

Taxis in India cost around 4 hundred thousand. This is about 2 to 4 times the cost of a Nano. Nanos

are besides more fuel efficient than Taxis which would be of great benefit to Taxi drivers

who are ever driving.

III ) Nano – A riotous invention?

Disruptive invention, a term of art coined by Clayton Christensen, describes a procedure by which a merchandise or service takes root ab initio in simple applications at the underside of a market and so unrelentingly moves aˆzup marketaˆY , finally displacing established rivals. An invention that is riotous allows a whole new population of consumersaˆY entree to a merchandise

or service that was historically merely accessible to consumers with a batch of money or a batch of accomplishment.

Features of riotous concerns include:

a ) Lower gross borders, B ) smaller mark markets, and degree Celsius ) simpler merchandises and services that

may non look every bit attractive as bing solutions when compared against traditional public presentation prosodies. Because companies tend to introduce faster than their customersaˆY lives change, most organisations finally end up bring forthing merchandises or services that are excessively good, excessively expensive, and excessively inconvenient for many clients.

Tata Nano is an invention which is manner in front of its clip. It has raised hopes in the bosom and psyche of hapless Indians about having a auto. Given the monetary value point it seeks to fit and the likely volumes at that degree, the little auto from Tata Motors proposed to sell for Rs 1 hundred thousand could hold a major impact on the mode in which autos are manufactured in the hereafter.

On the other manus, as autos progressively get treated as consumer durable goodss and run the danger of going a trade good drama, merchandise distinction through better design and engineering is deriving importance. That means sellers have to provide the industry better merchandises at of all time falling monetary values. So Tata has to back up them in a manner which is different from the conventional. They have shifted the whole burden of auto research in the universe towards the ultra-cheap auto section.

Political Motivations:

Reasons for the West Bengal Government to ask for TATA:

The chief high spot of the pronunciamento of the left forepart, seeking power for the 7th back-to-back clip, was the industrialisation of the province. So, the first measure in the way of industrialisation was to ask for the TATAs to setup their little mill in Bengal.

Besides, the bing private sector was non ready to guarantee occupations to at least some per centum of the unemployed. Industrialization could bring forth more occupations every bit good as addition the repute of the province as a concern hub. So, the province authorities had to take the enterprise to rejuvenate the industrial state of affairs in the province.

Reasons to oppose TATA:

Initially the husbandman protest in Singur involved the disgruntled land-owners and provincials. They

formed assorted commissions to protest against the land acquisition. The resistance parties, who were comprehensively beaten earlier in the legislative polls, saw this as a aureate chance to publically take down and oppose their industrial policy. The administrative bad lucks made their undertaking

of opposing the whole trade much easier. Mamata Banerjee, President of the TMC, which was the

chief resistance party, spearheaded the run. Mamata felt the trade was undue and that the husbandmans had been wronged. So she took over the reins of the run, which eventually resulted in TATA drawing out. This whole run reaped rich dividends for her and her party, which is apparent from their resounding win in the 2009 Lok Sabha elections.


Tata, with the launch of NANO has created an environment where India is being looked upon as the cardinal hub for little size autos. Tata Motors received the aˆzGlobal Game ChangeraˆY award at the Innovations for India Awards 2008. All the major Indian and foreign companies are taking inspiration from NANO to bring forth a auto which can be cheaper and better than of all time imagined before. However NANO was an result of an attempt which involved a batch of research at the planetary degree. Its success is yet to be evaluated in India.

If India is to run into the demands of the planetary automotive industry and germinate into a finish for automotive production and gross revenues, it must hold better transit substructure, improved merchandise quality while keeping competitory monetary values, increased fabrication graduated tables, more skilled workers, alterations in labour and revenue enhancement ordinances, addition in the graduated table of exports of automotive companies, resources to back up possible planetary guarantee claims.

Two countries that could impact growing are

a ) Inability of the fiscal establishments to measure hazard of possible countryside purchasers

B ) Lowering involvement rates to fit the Western states. The bing buying precedences revolved around factors such as monetary value and fuel economic system.

degree Celsius ) The state ‘s inability to set about automotive research and development and is perceived as a spread between the domestic and the viing international companies.

VI ) Lu xu ry Co rp O rat vitamin E Acq u isit ion s B Y TATA ‘ s & A ; How Does it Sq U are u p humor H


Luxury corporate acquisitions like Jaguar & A ; Land Rover will give Tata Motors a critical footmark in Europe, which accounts for over three-fifth of JLRaˆYs entire gross revenues volumes. Jaguar and Land Rover will besides spread out the companyaˆYs merchandise portfolio, which comprises the Indica, Indigo, Sumo, Safari and Nano. While the Nano was good for trade name Tata, acquiring it noticed all over the universe, the acquisition of Jaguar and Land Rover puts it steadfastly in the map of the WhoaˆYs Who of car trade names. Tata Motors can besides profit from the world-class R & A ; D installations, and an established planetary selling web.

Besides while the Jaguar-Land Rover trade name image will work admirations for Tata MotorsaˆY ain image, there is a danger that it would thin the value of the British trade names. Therefore the Tatas demand to do it clear that they will handle the new companies as prized ownerships & A ; that they will take the necessary strivings to nurture and turn these trade names.

At the same clip NANO reinforces TATAaˆYs image as being capable of making universe category R & A ; D and its ability to successfully introduce & amp ; develop a new way interrupting merchandise. ItaˆYs a glowing testament of its technology expertness & A ; its ability to suppress hitherto unknown market & A ; developing one where none existed before. Thus both NANO & A ; JLR addendum each other in reenforcing the turning credence that TATA Motors as one of the taking planetary car manufacturers in the universe at present.


Stakeholders are individuals or groups who are straight or indirectly affected by a undertaking, every bit good as those who may hold involvements in a undertaking and/or the ability to act upon its result, either positively or negatively.

The term “ stakeholder battle scheme ” describes a broader, more inclusive, and uninterrupted procedure between a company and those potentially impacted that encompasses a scope of activities and attacks, and spans the full life of a undertaking. The chief characteristics of each single edifice block of the stakeholder battle scheme recommended to TML are explained in the diagram given below:

TML should hold followed a proactive stakeholder battle scheme & A ; should hold tried to win over the trust & A ; regard of the people involved in the Singur undertaking. Here is a list of the things that TML could hold done on its portion to avoid the Singur fiasco:

aˆ? Early battle with stakeholder:

TML should hold got in early and started battle with its stakeholders in Singur


aˆ? Long Term Planning & A ; Strategising:

. They should hold invested in hiring and preparation community liaison staff. They should hold made the attempt to personalise relationships through informal and societal interactions,

and work through their employees to construct links to local communities.

Appendix 1

Domestic market portions of the different types of vehicles

Appendix 2

Automobile gross revenues of 3-wheelers and 4-wheelers in India

Appendix – 3

Growth of in-between category ( Time vs Millions )

Appendix 4

Distribution of Per capita Income throughout the universe

Appendix 5

Effectss of Gross saless of Nano

Year Predicted

Gross saless ( in figure of units )

Gross ( as per figures given in instance )

Net income

2009-10 50000 Rs.5 billion Rs. 25 crore

2010-11 150000 Rs. 15 billion Rs. 75 crore

2011-12 180000 Rs. 18 billion Rs. 90 crore

2012-13 210000 RS.21 billion Rs. 105 crore


Rs. 295 crore

Appendix 6

Consequence of alteration of cost of natural stuffs on cost of NANO

Raw Material


March-2009 Change

in %

March-2010 Change

in %

Cold Rolled

Steel Rs 45,000 per

metric ton

Rs.32,000 per tone


Rs.35,000 per metric ton


Crude Oil US $ 100 per


US $ 49 per barrel


US $ 80 per barrel


Rubber Rs. 93 per kilogram Rs.75 per kilogram -19 Rs. 150 per kilogram 100

Engineering Rs.150-600 per kilogram Rs. 150-600 per kilogram 0 Rs.150-600 per kilogram 0

Figure: Change in the cost of steel per metric ton

Rs. 50,000

Rs. 45,000

Rs. 40,000

Rs. 35,000

Rs. 30,000

Rs. 25,000

Rs. 20,000

Rs. 15,000

Rs. 10,000

Rs. 5,000

Rs. 0

Cost of Steel in Rs. Per metric ton

2008 2009 2010

Cost of Steel in Rs. Per metric ton

Figure: Consequence of alteration in monetary values on Maruti 800

Rs. 196,000

Rs. 194,000

Rs. 192,000

Rs. 190,000

Rs. 188,000

Rs. 186,000

Rs. 184,000

Rs. 182,000

Rs. 180,000

Rs. 178,000

Ex-showroom Monetary values Of Maruti 800 in New


Ex-showroom Monetary values Of Maruti

800 in New Delhi

2008 2009 2010

Appendix 7


Tata Nano Maruti 800 Two Wheeler ( Hero

Honda luster )

Mileage 20 Km/L 15 Km/L 50 Km/L

Catalytic convertor Yes, best in

India ( 80 % efficiency ) Yes Available in some


( 23 % efficiency )

Emission criterions BS IV, Euro IV Euro III ( after

Alteration ) BS III

Appendix 8

Consequence of Nano on Car gross revenues

Appendix 9:

Comparing Nano with other autos in footings of milage and CO2


Car Tata Nano Maruti 800 Two Wheeler ( Hero

Honda luster )

Mileage 20 Km/L 15 Km/L 50 Km/L

CO2 emanation 101 g/Km ( lowest

among Indian Cars ) 109 g/Km ~50 g/Km ( for

mean 2 Wheeler )

Appendix 10: