Effect of Nano Car on Automobile Market

8/7/2019 Effect of Nano Car on Automobile Market

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A Report On

Effect ofNano Car on Automobile Market

In The Partial Fulfillment of

MBA Degree

2009-2011

Rajasthan Technical University, Kota

Submitted To: Submitted By:

Mr. Rajat Rakesh Saini

faculty MBA- II sem

Apex Institute of Management and Science

Jaipur


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1. INTRODUCTION ABOUT NANO:

NANO: Not a small burden for Tata Motors

Kolkata, India The burst of flashbulbs and the limelight that the launch of the

Nano attracted globally last week may have enhanced Indias national pride and

its position as a small car manufacturing hub. But the worlds cheapest, and

perhaps smallest, car has also put extra burdens on its maker, Tata Motors,

already struggling under the weight of a huge Jaguar/Land Rover acquisition last

year and the global economic downturn.

Just one day after the launch, the global rating agency Standard & Poor's

downgraded the company to B+ from BB- and kept the company on credit watch

with negative implications. This means that the company could be downgraded

again in the near future, which could significantly increase its borrowing costs.

A combination of high debt levels and material deterioration in Tata Motors'

cash flows, derived from an adverse operating environment, will affect its credit

protection measures, said Standard & Poor's credit analyst Manuel Guerena. Any


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improvements the Nano may bring to Tatas cash flow can only be expected after

2010. Meanwhile, the capital expenditure required to fund Jaguar Land Rover and

Nano could result in negative operating cash flows for the company, he added.

Given the hoopla that surrounded the unveiling of the Nano in January last year

and the acquisition of Jaguar Land Rover last March, no one would have imagined

that Tata Motors Indias largest automaker and a part of the venerable Tata

Group would be struggling to fund its operations just a year down the line.

Thehidden economics of Nano car

At the price of Rs. 1 lakh price point (the price of the cheapest variant). So, why

would they still want to produce it?

Granted, the one lakh car has been a very successful branding campaign and has

got them a lot of publicity both in India and internationally. But there might be a

more economically rational explanation as well. Tata is going to manufacture only

around 50,000 Nanos a year. But the demand is likely to be far higher than supply.

Tata has come up with an innovative way to capitalize on this.

Booking for the Nano closes on 25th of April, and one must pay the full price up-

front to book a car. At the close of the booking, a random selection will decide

who gets the cars. The remaining customers can choose to get back the money or

lend it to Tata at 8%. Tata seems to be betting on the fact that a lot of people will

choose the second option. This is of tremendous use to Tata which gets cheap

money to finance its acquisition of Jaguar and Land Rover


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Tatas Nano, one mans gain, anothers loss

March 21st, 2009

SANAND - As Tata Motors is all set to launch Nano, the worlds cheapest car, on

Monday, residents in Sanand, where Tatas new Nano plant is being set up, are

upbeat at the prospects.

Residents were excited, looking forward to the jobs it would create.

The direct benefit of the project is the employment that it will create, but there

are several indirect benefits. It will create opportunities for the transport

business, hotel industry and all other small businesses will get a fillip, said

Ravubha Vaghela, a businessman.

But there were others for whom the wait seemed to be getting longer.

The project has definitely put Sanand on the world map, but I dont think the

workers and farmers will be much benefited out of it, said Bahadurbhai, another

resident.

Back in Singur, the mood is sombre despite the fact that the opponents of the

project achieved their goal by driving out the Tata Motors project.

It is shocking and very sad. So many boys and girls took training and were

dreaming of jobs. There were proposals for huge development. Singur residents

have been deprived of all that, said Srikanto Chatterjee, a resident.

Tata Motors Ltd moved in its ultra low-cost Nano car to Sanand in Gujarat

following violent protests at Singur in West Bengal.


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The plant to be built at Sanand, near Ahmedabad, is located on about 1,100 acres,

and will have an initial capacity of 250,000 units, which can be expanded to up to

500,000 cars per year.

TATA NANO

The Tata Nano is a rear-engined, four-passenger city car built by Tata

Motors, aimed primarily at the Indian market. The car is very fuel efficient,

achieving around 26.00km/l on the highway and around 22.00km/l in the

city. It was first presented at the 9th annual Auto Expo on 10 January 2008,

at Pragati Maidan in New Delhi, India. Nano had a commercial launch on

March 23, 2009 and a booking period from April 9 to April 25 , generating

more than 200,000 bookings for the car. The sales of the car will begin in

July 2009, with a starting price of Rs 115,000 (rupees), which is approximately

equal to UK1,467 or US$2,421 as of June 2009. This is cheaper than the

Maruti 800, its main competitor and next cheapest Indian car priced at

184,641 Rupees. Tata had sought to produce the least expensive production

car in the world for a starting price of Rs.100,000 (approximately US$2,000 in

June 2009).

Nano" means "small" in Gujarati, the language of the founders of the Tata Group.In English, the prefix "nano-" is often used to mean small. This derives from the

Greek root 'nanos', meaning dwarf.


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2. PERFORMANCE & SPECIFICATIONS

Performance: The 2-cylinder engine delivering 35 PS @ 5250 rpm and a torque

of 48 Nm @ 3000 rpm enables the car to have a top speed of 105 kmph and

negotiate inclines with a gradeability of 30%.

Fuel efficiency: 23.6 km/litre, certified by the Automotive Research Association of

India (ARAI) under mandated test conditions, which is the highest for any petrol

car in India.

Emission: The high fuel efficiency, coupled with a low kerb weight of 600 kg,

ensures that the Tata Nano at 101 gm / km has the lowest CO2 emission

amongst cars in India. The Tata Nano is BS-III* compliant and is BS-IV* ready. It is

also available in BS-II* norms.

Safety: The Tata Nanos safety performance exceeds current regulatory

requirements it passes the roll-over test and offset impact, which are not

regulated in India. It has an all sheet-metal body, reinforced passenger

compartment, crumple zones, intrusion-resistant doors, besides mandatory seat

belts and complies fully with existing Indian safety standards. Tubeless tyres

among which the rear ones are wider endowing extra stability enhance safety.

Warranty: 18 months or 24,000 km, whichever is earlier.


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3. VEHICLE SUMMARY

Name: Tata Nano

Model: Petrol

Manufacture: Tata motors

Also called: The peoples car

Assembely: charodi , sanand, ahamdabad, Gujarat

Engine: 624 cc(38 cu in)

Length: 3100mm(122 in)

Width: 1500mm(59.1)

Heigth: 1600mm(63 in)

Weigth: 680.4 kg

Car Body Type: Hatchback

Segment: A Segment

Top Speed: 90

Fuel Consumption: Highway 26.00

Fuel Consumption: City 22.0

ENGINE SPECIFICATIONS

Displacement: 624cc, 3 cylinder

Engine Type: Petrol

Maximum Power: 33hp

Maximum Torque:


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OTHER SPECIFICATIONS

Seating Capacity: 4

Tyre Size:

Steering: No Power Steering

Brakes: Front Disk, Rear Drum

Gears: 4 Manual

Fuel Tank: 30.00

Body Color Bumpers: Yes

Tachometer: No

Alloys: No

ORVM Indicator: No

Xenon Headlamps: No


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COMFORT AND CONVENIENCE

AC: Without Climate Control

Power Windows:

Central Locking: Manual

Remote Boot: No

Remote Fuel Filler: No

Rear Wiper: No

Rear Defogger: No

Steering Adjustment (Rake/Reach): No

Driver Seat Adjustment: Manual

Leather Seats: No

Door Mirror: Driver Side

Tinted Glass: No

Rear AC Vent: No

Folding Rear Seats: No

Sun Roof: No

Buttons/Controls on Steering: No

Auto Viper: No

Auto Headlamp: No


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ACTIVE AND PASSIVE SAFETY

Airbag: No

Parking Sensors: No

Fog Lamp:

Traction Control: No

EBD: No

ABS: No

ESP: No

4. Tata Nano Financing

Tata motors have entered into an agreement with the largest bank in the country

that is the State Bank of India which will manage the entire booking process. The

application forms for the Tata Nano will be available at a nominal price of Rs. 300

and the application forms will be available at various locations such as the Tata

motors showrooms, State bank of India branches, Tata indicom outlets, titan

show rooms and various other places like Westside and chroma stores.


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After collecting the nano application forms customers can opt for financing of the

cookin amount or could pay the amount themselves. Those of you who are

interested in availing financing can approach about fifteen banks and non banking

financial companies. The names of these banks and non banking financial

companies have been listed below. Tata Nano financing or loans can be obtained

from

y State Bank of Indiay Tata Motor Financey

State Bank of Patialay ICICI Banky State Bank of Travancorey State Bank of Mysorey State Bank of Hyderabady State Bank of Bikanery

State Bank of Jaipury State Bank of Indorey Axis Banky Punjab National Banky Federal Bank Corporation Banky Indian Banky Central Bank of India

To refer to the updated list of tata nano banks you can visit tatanano.Com. You

can even book the car at that website.Tata Motors has entered into agreements


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Much was made of the car's looks.

5. DESIGN

Ratan Tata, the Chairman of Tata Motors, began development of the world's

cheapest production car in 2003, inspired by the number of Indian families

with two-wheeled rather than four-wheeled vehicles.The Nano's


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development has been temperedby the company's success in producing the

low cost 4 wheeled Ace truck in May 2005.

Contrary to speculation that the car might be a simple four-wheeled auto

rickshaw, The Times of India reported the vehicle is "a properly designed

and built car ". The Chairman is reported to have said, " It is not a car with

plastic curtains or no roof it's a real car.

To achieve its design goals, Tata refined the manufacturing process,

emphasized innovation and sought new design approaches from suppliers.

The car was designed at Italy's Institute of Development in Automotive

Engineering with Ratan Tata requesting certain changes, such as the

elimination of one of two windscreen wipers.Some components of the

Nano are made in Germany by Bosch, such as Fuel Injection, brake system,

Value Motronic ECU, ABS and other technologies.

The Nano has 21% more interior space (albeit mostly as headroom, due to

its tall stance) and an 8% smaller exterior compared to its closest rival, the

Maruti 800. Tata offered the car in three versions: the basic Tata Nano Std;

the Cx; and the Lx. The Cx and Lx versions each have air conditioning, power

windows, and central locking. Tata has set its initial production target at

250,000 units per year.

6. Cost cutting features

y The Nano's trunk does not open. Instead, the rear seats can befolded down to access the trunk space.


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y It has a single windscreen wiper instead of the usual pair.y It has no power steering.y Its door opening lever was simplified.y It has three nuts on the wheels instead of the customary four.y It only has one side view mirror.

7. Price

Tata initially targeted the vehicle as "the least expensive production car in

the world aiming for a starting price of 100,000 rupees or approximately

US$2000 (using exchange rate as of March 22, 2009) 6 years ago, despite

rapidly rising material prices at the time.

As of August 2008, material costs had risen from 13% to 23% over the cars

development, and Tata faced the choice of:

y introducing the car with an artificially low price through governmentsubsidies and tax-breaks

y forgoing profit on the cary using vertical- integration to artificially boost profits on cars at the

expense of their materials industries

y partially using inexpensive polymers or biodegradable plastics insteadof a full metal-body.

y raising the price of the car.


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Model versions

At its launch the Nano was available in three trim levels.

y The basic Tata Nano Std priced at 123,000 Rupees has no extras;yy the deluxe Tata Nano CX at 151,000 Rupees has air conditioning;y the luxury Tata Nano LX at 172,000 Rupees has air conditioning,

power windows and central locking

y the Nano Europa, European version of the Tata Nano has all of theabove plus a larger body, bigger 3-cylinder engine, anti-lock braking

system (ABS) and meets European crash standards and emission norms.


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The base model will have fixed seats, except for the driver's, which will be

adjustable, while the deluxe and luxury models will get air conditioning and

body coloured bumpers.

Photographs of some Nano models at the Auto Expo 2008 in New Delhi.

Nano in yellow

The interiorof the Nano

Red Tata Nano : standard

model Rear of Tata Nano

in yellow

Engine: 2 cylinder petrol with

Bosch multi-point fuel

injection (single injector)

all aluminium 33

horsepower (25 kW)

624 cc (38 cu in)

Value Motronic engine

management platform

from Bosch


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2 valves per cylinder

overhead camshaft

Compression ratio: 9.5:1

bore stroke: 73.5 mm

(2.9 in) 73.5 mm

(2.9 in)

Power: 33 PS

(33 hp/24 kW) @ 5500

rpm

Torque: 48 Nm

(35 ftlbf) @ 2500 rpm

Layout and

Transmission

Rear wheel drive

4-speed manual

transmission

Steering mechanical rack and

pinion


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Turning radius: 4 metres

Performance Acceleration: 0-70 km/h

(43 mph): 14 seconds

Maximum speed:

120 km/h (75 mph)

Fuel efficiency (overall):

20 kilometres per litre

(5 litres per 100

kilometres (56 mpg-imp;

47 mpg-US))

Body and dimensions Seat belt: 4

Trunk capacity: 15 L

(0.53 cu ft)

Suspension, Tires &

BrakesFront brake

:

drum

Rear brake: drum


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Front track: 1,325 mm

(52.2 in)

Rear track: 1,315 mm

(51.8 in)

Ground clearance:

180 mm (7.1 in)

Front suspension:

McPherson strut with

lower A arm

Rear suspension:

Independent coil spring

12-inch wheels


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Diesel

Wheel sunplugged .com reported that an anonymous source claimed a diesel

variant would be available in September 2010.

Compressed-air engine

Tata Motors is working with a French firm on using compressed air as an

energy source. The company has tied up with Moteur Development

International (MDI) for this purpose.

Potentialeffect on Indian economy

Economic Times quotes:

Tata Nanos launch could expand the Indian car market by 65%, according

to rating agency CRISIL. The low price makes the car affordable for families

with incomes of Rs 1 lakh [100,000] per annum, the agency said. The

increase in the market is expected to push up car sales by 20% over the

previous year. The unveiling of Tata Nano, the cheapest car in the world,

triggers an important event in the car market. Based on the statement bycompany officials, CRISIL Research estimates the consumer price of the car

at around Rs 1.3 lakh. This brings down the cost of ownership of an entry

level car in India by 30%, the company said in a report.


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Violence continued throughout 2008 and on September 2,2008 Tata Motors

announced that they have suspended work at Singur. On October 2 ,2008 Tata

Motors announced that they are pulling out of Singur. On October 7 2008, it was

announced that the Chief Minister of Gujarat, Narendra Modi had signed an MoU

with Tata Motors for allocating land for Nano factory in Sanand in Ahmedabad

district of Gujarat.

Criticism, issues and problems

India has 8 percent of the worlds vehicle fatalities and less than 1 per cent of

its cars, with more than 90,000 people killed on the countrys roads every

year. Introducing a million Nanos into the mix may bring more and

unwelcome headlines.

Tata, which has the only crash-test facility in the country, said that the Nano

"exceeds current regulatory requirements". And while it is not a deathtrap

it has crumple zones, seat belts and strong seat anchors it is worth bearing

in mind that total vehicle crash testing (rather than just frontal impact),

airbags and antilock braking systems are not mandatory.

Without these, the Nano would not even be considered for approval in

Britain. Adding them would double its price in India, which is why they have

been omitted.

Tata Motors will offer a version of the Nano with these safety-features, including

an airbag system in its electric version. The Nano has an all sheet-metal body

made from Japanese and Korean steel, with safety features such as crumple


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zones, intrusion-resistant doors, seat-belts, strong seats and anchorages, and the

rear tailgate glass bonded to the body. Tires are tubeless.

Usedcar market effects

The Nano is alleged to have severely affected the used car market in India, as

many Indians opt to wait for the Nano's release rather than buying used cars,

such as the Maruti 800 (a rebadged Suzuki Alto), which is considered as the

Nano's nearest competitor. Sales of new Maruti 800s have dropped by 20%, and

used ones by 30% following the unveiling of the Nano. As one automotive

journalist summarises; People are asking themselves and us - why they should

pay, say, 250,000 Rupees for a Maruti Alto, when they can wait and get a brand

new Nano for less in a few months time, a car that is actually bigger.

8. Competitors

Rival car makers including Bajaj Auto, Fiat, General Motors, Ford Motor, Hyundai

and Toyota Motor have all expressed interest in building a small car that is

affordable to more middle-class consumers in emerging markets. The bulk of

demand there is for small cars because people are much more sensitive to fuel

prices. Rival car makers including Bajaj Auto, Honda and Toyota are leading the

way on so called cleaner gasoline-electric hybrids, and some environmentalists

argue getting prices down on these technologies is where efforts should be

concentrated. Inexpensive and eco-friendly electric-cars like Tara Tiny, Oreva

Super (both reportedly even cheaper than Tata Nano) and REVA pose even more


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significant danger to Nano. There are also rumors of Maruti Suzuki introducing a

lower priced version of Alto to counter Tata Nano.

WhoWill Buy the Nano?

It is highly speculated that the majority of the buyers for Nano (expected now in

2010) will come from the motorcycle users. But, this may not be as much as it is

anticipated, purely from the energy and pricing structure involved38. Energy and

transport experts are in no doubt that in a growing Indian economy; demand for

cars through 2015 will be persistent at 14% a year, maybe a little less in the

megacities with saturation39. The Nano car will be a success (similar to Maruti

80040 when it arrived in the 80's). However, as the experts predict, it is

inconclusive to say that the cheapest car in the world will be the new mode of


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transport for the middle income group and a majority of the motorcycles will shift

to buy the Nano, especially in the immediate future.

There is also some discussion of Maruti 800 (and other manufacturers) in

competition to the Nano in the similar price range.

9. CONCLUSION:

The Nano represents the spirit of breaking conventional barriers. From the

drawing board to its commercial launch, the concept, development and

productionisation of the car has overcome several challenges. It is to the

credit of the team at Tata Motors that a car once thought impossible by the

world is now a reality. It is not a car with plastic curtains or no roof its a real car.

The bulk of demand there is for small cars because people are much more

sensitive to fuel prices. Rival car makers including Bajaj Auto, Honda and Toyota

are leading the way on so called cleaner gasoline-electric hybrids, and some

environmentalists argue getting prices down on these technologies is where

efforts should be concentrated. Inexpensive and eco-friendly electric-cars like

Tara Tiny, Oreva Super (both reportedly even cheaper than Tata Nano) and REVA

pose even more significant danger to Nano. There are also rumors of Maruti

Suzuki introducing a lower priced version of Alto to counter Tata Nano. The

acquisition of land was initially criticised in February 2007, but later approved by

the Calcutta High Court in 2008. As political unrest and rains hampered the

construction, Tata Motors delayed the launch of Nano to September 2008.

Violence continued throughout 2008 and on September 2,2008 Tata Motors

announced that they have suspended work at Singur. On October 2 ,2008 Tata

Motors announced that they are pulling out of Singur. On October 7 2008, it was


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Webiliography

www.tatanano.com

www.tatamotors.com

www.google.co.in

www.wikipedia.com

Bibliography

Business Today

Times of india

India Today

Economics times

Effect of Nano Car on Automobile Market

Documents