Nano launch – A challenge overcome

The much awaited Tata Nano will be finally launched on 23 March 2009 almost thirteen months from Ratan Tata’s announcement. The journey of the car launch was filled with debate, obstacles and criticism from its opponents. However, the Tata group has been successful in maneuvering all the posed challenges and is on the road to introduce the product with expectations to book an order of around 1 m cars in the first two weeks.
The Tata’s faced the following challenges:
To begin with the first challenge faced by the company was the mounting input costs to produce the 632cc engine car that lent it a competitive edge. In July there was a hot debate among competitors and industry experts whether the Tata’s could deliver the car at a promised sum of INR 1 lac. Input costs such as hot rolled coil steel prices increased by almost 42% to $675 per ton (since Jan 2008) and rubber tyre prices up by 5% in Q3 2009 (compared to Q2 2009). The company has witnessed a 10% increase in raw material costs since 2003. In order to balance the price increase the company had decided to cut the advertising costs by almost 6% from the allocated 10%. In addition to this, the company also made arrangements with Tata steel to avail discounts on the steel purchased.
The second challenge faced was that the company had to move its manufacturing facility from Singur in West Bengal to Sanand in Gujarat due to villagers protesting the government move of handing over their farmland to the Tata group. The plant shift resulted in a total investment of around USD 470 m almost double of the expected investment. This added to their existing cost woes.
However, the Tata’s continued steadily and overcame the obstacles at each stage with the final launch date set to 23 Mar 2009. Tata motors plans to adopt a direct sale model and the first batch of cars will roll out from the Pantnagar plant in Uttarakhand (With a capacity to manufacture 3,000 cars per month). The supply situation will become better when the company’s Sanand plant, near Ahmedabad, become operational (Initial capacity to produce 250,000 cars p.a). Presently the company has tied up with State Bank of India as the sole booking agent with a booking amount of around INR 70,000 per car. The company expects to book around 1 m cars within first two weeks from the launch date that is expected to materialize into a cash stream of around INR 7,000 crore. Thus the Tata motors success story continues.