ProjectReport Nano

INDUSTRY - AUTOMOBILE FOCUS - TATA MOTORS

(NANO)

Marketing strategy analysis

GroupArya Dipta Dash (9)Manish Bhasin (23)Sunpreet Singh (50)Vineet Kr Maheshwari (60)

Guided byProf. Jaydeep Mukherjee

Agenda Environment Scan Market Size, Product Segmentation Targeting, Positioning, Price Marketing Recommendation

0.0%

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Passenger Car salesNumber Growth

050000

100000150000200000250000300000350000400000450000500000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Car Exports

Exports

Environment Scan Key Domestic Players Chosen

Maruti SuzukiTata MotorsMahindra and Mahindra

2011 – Recessionary period for auto industry

Increasing per Capita incomeYr 2011 USD 3608

Yr 2015 (Est.) USD 4965

Easier Finance options

Maruti Sales Numbers for Nov 2011

Source: Maruti press release of Dec-2011

Key developments Sub-800 cc optimism

Nov-2011: Maruti decides to enter with 660cc car

Nov-2011: Nano-2012 announced Sep-2011: EON launched by Hyundai

Market shares for big existing players going south

Fuel economy and costs have got highest priority in minds of majority buyers Diesel cars sales rose to 30% from 20% last

year Hybrid cars

MPV like Vans – Launches due in Diesel engines (M&M – Maxximo, Maruti – Ertiga)

2 wheelers sales/revenues continues to grow Bajaj Autos: 25% YoY growth in Nov 2011, 331k bikes sold (129k exports)

Increased focus on alternate fuels/hybrid technology M&M recently bought Reva to aquire electric automotive technology

Demand – Passenger Cars in India

2010

2568

3859

0500

10001500200025003000350040004500

1990

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Demand Curve

Demand (in th)

Source: http://www.indiastat.com

Market size: Appprox 4 million passenger cars /yr Potential buyers: 10 million (Income – 5k to 7k USD /yr)

Selected Company Tata Motors

Product: NANO Priced at Rs 1.53lac 624cc engine

Predicted sales of 250k cars/ yr

“It is 8 percent smaller — bumper to bumper — and has 21 percent larger seating capacity than Maruti 800” – Mr. Tata

Segmentation Segmentation basis

Demographic – Income level○ Roughly 300-400 million emerging

middle class population in India○ Roughly 80 million are categorized

as lower middle class with income <5 lacs

Psychographic – Lifestyle/Attitude○ Travel Habits○ Mileage preference

Over Rs 1.0 mn1%

Rs 501,000 to Rs 1.0 mn3%

Rs 301,000 to Rs 500,000

49%

Under Rs 300,000

47%

Price range based Segments (%)

NANO Targeting Target Segment (Micro-segments)

Low income group, family income < 5 lacs per annum

Nuclear FamiliesExisting users of 2 wheelersUser preference for running costs versus style

and comfort

NANO Positioning Common man’s car

Got labeled as a Cheap car

Promise: Travel together at low costs Fulfills the family’s dream of travelling together in the

comforts and safety of a car

Sty

le

Verna, CityEON

NANO

NANO-2012Swift, Desire

Honda City

Indigo

Bike/Scooter

Alto

Price

Created New Category

Competition

Maruti – Pallete, MR Wagon

Hyundai – Eonand more…

Competitive Forces

Industry Rivalry Little (Big market)

Bargaining power of Suppliers With rising volumes, Becoming

significant

Bargaining power of Buyers Very low price, Lesser

options

Threat of New Entrants MNCs with advanced technologies and appetite to compete on prices

Threat of Substitutes Compared with bikes, targeted

population of migration from bikes

TCO Comparison

Lowest cost of ownership acrossSource: http://cars.zimbly.com/2009/03/running-costs-nano-vs-competition/

TCO – Comparison for NANO

Assumptions• Average drive of 35 kms a day, 22x12 days/yr• Mileage of bike is 35km/l and petrol @ Rs 40/l

• Difference between M-800 and NANO is significant leading to higher consumer surplus for relatively same feature set.

• There is a room to create another variant with slightly higher price tag and address different segment

In Rs Lac

NANO Promotions and Channels Existing dealers of TM Financing - Rs 15,000 is all that one needs to

get it Issues

Existing Tata dealership difficult to scale for mass distribution

Confuses customers with NANO selling alongside Tata Aria/Indigo Manza

Communication Advertisements targeting nuclear family Low Cost

Marketing Strategy Recommendations Targeting and Positioning

Include Middle class into the target consumer segment Youth (18-25 years) East India - Low-cost models, low per capita income Replacement to bike

Product and Pricing Change the image of a ‘Poor Man’s car’ by improving interiors and

providing add-on features Increase price by Rs40-50k (possibly for Diesel variant i.e. Rs 2.15

lacs)

Promotion Down payment - sub 10k level College students – Competition, Test Drive

Communication Mass media – Regional TV channels, newspapers Message: “More Convenience, Safe, Lower Cost/km and easier

to maintain”, “compare it with two wheelers”, “For someone you care for”

Ease of maintenance○ Post purchase behavior is key to success

Marketing Strategy Recommendations

Marketing Strategy Recommendations Distribution

Create NANO exclusive showrooms to facilitate Next to shops where bikes are sold/serviced Direct to home delivery model may be used Easy to assemble kits – nearby garage Franchising for repair

○ Like Eureka Forbes

NANO Evolution

NANO Evolution Contd…

Thanks

Concept car Showcased at Auto expo in Geneva 2011

Sales and EBIDTA for 3 Cos.

GDP

Market Share in Passenger Cars

India Demographics

Source: http://populationcommission.nic.in/facts1.htm

Source: http://populationcommission.nic.in/facts1.htm

R&D Expenditure

Cost of ownership - breakup

Fuel Maintenance Repairs Insurance

Up to 6

months

74.2% 1.7% 0.7% 23.4%

36 months 69.9% 6.2% 4.9% 19%

Bibliography1 http://www.tatamotors.com/investors/pdf/2011/businessReviewQ2FY12.pdf

2 http://www.capitaline.com

3 http://www.siamindia.com/

4 http://www.business-standard.com/india/news/crisil-cuts-india-gdp-forecast-for-fy12-to-76/148625/on

5 http://www.hyundai.com/in/en/wcm/groups/webcontent/@in/documents/webvehiclecontent/290683.pdf6 http://www.mahindra.com/mahindra/resource.page

7 http://knowledgenetwork.thunderbird.edu/research/2010/08/24/vw-bric/

8 http://www.team-bhp.com/web/plugins/p2_news/printarticle.php?p2_articleid=11

9 http://www.indiacar.com/infobank/nfo_autocar/nfoautocar.htm

10 http://www.thehindubusinessline.in/2003/05/23/stories/2003052301990200.htm

11 http://cars.zimbly.com/2009/03/running-costs-nano-vs-competition/

12 http://www.thehindu.com/business/Economy/article1498167.ece

13 http://www.thehindu.com/business/companies/article438770.ece

14 http://www.siamindia.com/upload/AMP.pdf

15 http://www.businessweek.com/innovate/NussbaumOnDesign/archives/2008/01/new_distribution_system_for_indias_nano_car_from_tata.html16 http://blogs.hbr.org/cs/2011/01/learning_from_tatas_nano_mista.html