Tata Nano

Nano – Tata’s and India’s miss!

Tucked in between the noisy and newsy headlines in India in the last week around Love Jihad, Rahul Gandhi’s religion, Ivanka Trump’s costumes in Hyderabad and other inanities, was a poignant news bit about the Nano car. Poignant, because it said that dealers have stopped placing new orders for the car and in the month of October, just a measly number of 57 cars were shipped. And this led to political jibes from Rahul Gandhi that the PM’s pet ‘Make in India’ project just died. He also tweeted that Rs. 33,000 crore of tax payer’s money and that too of Gujaratis’ turned into ash. Coming in the midst of a vitriolic election campaign in Gujarat, one can excuse politicians for spicing up their speeches without looking at the larger picture. The point is taking potshots at Nano’s failure is taking potshots at India. Failure of Nano is not just a failure of Ratan Tata or the Tatas but a blot on India.

Cut to year 2008, when Nano was first launched, it was the biggest story of India Inc. ever. When Ratan Tata initially announced that Tata Motors is working on a Rs. 1 lac (US$2500) car, it was met with excitement and skepticism in equal measure. So, finally when Tata did launch the car with a price tag of Rs. 1 lac, the world did look up and notice. Finally, here was a car which was conceived in India, designed and developed by Indians with indigenous technology and manufactured in India that broke all cost frontiers unimaginable by car manufacturers till then. Overnight, Ratan Tata was the toast of the nation.

Around the 2008-10 time period, whenever I met any foreigner from Japanese to Americans, our conversations invariably touched upon the Nano car and how this was pulled off. And those visiting India always wanted to see a Nano car on the road and take a picture in front of one. Selfies didn’t exist then! The Chairman of a well- known Indian group who drove a Camry, proudly told me that he was the first among to book a Nano in Mumbai and to get delivery as well. At that time, Nano was yet to be seen in big numbers in Mumbai. But on a visit to Colombo in 2011, Nano had already captured the “Budget Taxi” space there. Media was full of interviews of not just Ratan Tata but also of the R&D engineers who had designed the Nano.  Nano’s launch was the culmination of a series of stories in which India Inc. was part of then. It was believed that Nano would be a live case study for C.K. Prahalad’s “Fortune at the bottom of the pyramid” theory!

That was not be and the excitement around Nano soon started tapering. Unfortunate incidents of the Nano going up on flames on the road didn’t help at all. For a product which was expected to expand the car market by 65% or so, the sales was plateauing around 70,000 Units a year for 2-3 years before nose diving to what is a few hundred cars this year. The failure of the Nano car must be one of the most analyzed and discussed case study in B- Schools, I reckon. Most of what I have been reading, attribute its failure to the “positioning” of the car as the world’s cheapest car in the beginning.  The Quality failures adding “fuel to the fire”. Attempts to re-position the car as a “Cool Urban car”,… didn’t help either. I have a different view on the reasons for the failure of the Nano car. But will keep that for another blog.

In business, they say there is no room for emotions and decisions need to be taken based on just commercial considerations. The ousted Chairman of the Tata Group, Cyrus Mistry recently said that during his time it was decided to pull the plug on Nano as it didn’t make commercial sense, after attempts to revive the project failed.  As of now it hasn’t happened. The current Chairman Chandrasekhar has been more considerate, probably towing Ratan Tata’s emotional line. He has said that there is a need to take a more “holistic” view on the Nano project. And I tend to agree.

Nano was not a Tata story. It was and is an India story. Ergo, failure of Nano in a way is an indictment on the capability and potential of Indians. And as somebody said, “Nano was not an Idea. It was an ideology!” Ideas can fail. Ideologies need to linger! The failure of Nano soon opened up to “We told you so” and how can Indians pull it off” jibes. For a 3rd largest economy (GDP-PPP) in the world, India is yet to throw up globally renowned home ground brands. So far, it’s been the soft power brands like Ayurveda, Yoga, IIT and the likes which have been torch bearers for India globally. Let’s keep aside the Software brands like Infosys, Wipro,… aside for the time being. In one of my very early blogs (read here) on different styles of management, I had opined that for the world to recognise, acknowledge and adopt the “Indian style of Management”, we need stories of successful Indian companies and brands. Just like how the world adopted the American way or Japanese style when their companies were successful. And that opens the door for Indian companies, Indian products and we Indians in the global arena. Nano was uniquely positioned to be the 1st homegrown successful Indian product brand. There was an opportunity for India Inc. to have “arrived” in style. Not just that. Success of the Nano would have led to similar pushing of cost and design frontiers by other Indian companies in many other product categories. It would have opened the floodgates for Indian CEOs to apply the “frugal innovation” concept in other products. Hence my fervent hope that Nano should succeed.

So, when it failed as it has now, it has pushed back the India Inc. story by few years till we stumble upon the next Big Idea. In the meantime, Nano I believe, is slated to make a comeback in an electric avatar.  Will this avatar help Nano to claim the position of “the common man’s car” in Indian market that Ratan Tata originally envisioned 9 years ago? The world in no longer watching it with the same excitement of 2008. Away from the arc lights, the original billion dollar opportunity still beckons!

A quote alluded to Ratan Tata says, “I don’t believe in taking right decisions. I take decisions and make them right!” Nano might have been a glaring exception to this. For Ratan Tata’s sake, Nano-II should set the record straight. For India’s sake too.

It’s not just a car!!!

“It’s not just a car, it’s a caaaaar” goes the TV commercial for Nissan Sunny in India.  A drive from Chennai city towards ‘Oragadam‘ the place where this CAAAAR is manufactured in India throws quite a few pleasant surprises for an outsider.  Like getting to see tall residential projects by big Mumbai names like Hiranandanis and still further down of Godrejs in such off city places or stumbling upon a  Korean restaurant or for that matter  a Japanese snack/food/essentials joint in a remote place which has nothing to do with Korea or Japan.  Or is it?  For the locals these are not of any surprise though. We are in India’s car manufacturing hub in Chennai which now houses production facilities of big names like Ford, Hyundai, Renault-Nissan, Benz,..

It’s amazing to see what one car production facility can do to the area, the whole city, the state and its people.  And here we are talking of not just one but quite a few.  Car manufacturing while it generates direct jobs in 1000’s for the skilled factory workers,  engineers, middle level supervisors and managers it generates another few thousand indirect jobs.  Right from security people manning the gates, drivers / assistants/cleaners for the containers which ferry raw material inside and finished cars to the ports, catering people who have the onus of providing food to the workers in thousands, sundry contract labour for carrying out the odd jobs, in-house but outsourced maintenance workers/engineers, tailors who supply uniforms to the 1000’s of workers..,…  Also as Car production happens always in clusters, around it you have the whole campus of ancillary units which produce the various parts and so employ again a few thousands.    I also realized as I saw in Chennai, companies have a separate subsidiary to take care of the spare parts for after-market and its logistics. Then the effect spreads to the ecosystem which throws up things like the eateries – Korean/ Japanese,.. which I mentioned before to take care of the needs of the 100’s of expat Korean/ Japanese/ French/ American/ German staff who sweat it out in Chennai ( literally )as part of the production units of their respective companies.   Smart entrepreneurs start working around the needs of these expats and build highly profitable businesses just ‘catering’ to the needs of the expats may it be groceries/ food items/ their language newspapers/magazines and the works.  ( Heard ‘Saravana Bhavan’ will have a Japanese joint shortly to add to its list- wonder what will be the name though – ‘Sarazu’ may be??? ) While it does all this as far as jobs are concerned, Car production (unlike a chemical factory or pharma factory) doesn’t pollute the environment!

A huge IT park while it generates 1000’s of white collared jobs, it doesn’t do much to elevate the overall economy.  (It does elevate the cost of living as young things try to dispose their sudden rush of income in ingenious ways)  Unlike its southern counterparts AP and Karnataka which pursued an IT led growth and are now stuttering, TN derives its growth from a combination of Manufacturing, IT services and Agriculture.  It’s really unfortunate that though Karnataka houses the production facility of a global car giant like Toyota, it still couldn’t make ‘Bidadi’ where Toyota car is produced in India, a car hub by aggressively pitching for other car manufacturers.  ( Bidadi is now a tourist attraction thanks to Swami Nityananda!!!) It’s another matter that Toyota set up its facility in Bangalore due to reasons relating to history and not economics or geography.  It’s JV partner in India for a long time the Kirloskars were Bangalore based.  In the case of Andhra while Chandrababu Naidu, it’s erstwhile energetic Chief Minister was keen on getting the F1 track in AP and to get many of the IT majors set up base in Hyderabad,was not pursuing (or I don’t recall) any car manufacturer to put up a factory there!

Some may say that it’s not easy to set up car production anywhere and it needs an ecosystem of auto component suppliers, skilled workers, supply of engineers, access to ports, and continuous supply of electricity,…,..  Well it’s a question of whether the egg comes 1st or the chicken!  In today’s world if you order the egg 1st, it comes 1st and if you order the chicken 1st, you get the chicken 1st!!  So it’s up to the state to put the ecosystem in place and pitch for investments or get the investments and build the ecosystem around.  ‘Gurgaon’ before Maruti was well, just a ‘Gaon’!!!

The effect of these in the economy of Tamil Nadu is quite visible.  It is the 2nd largest economy among the states in India and it is the 2nd industrialized state in India.  It also leads the urbanization (44%) in India.

Soon it will be the turn of Gujarat to enjoy the benefits as it starts providing stiff competition to Chennai in becoming the next preferred car manufacturing hub in India.    Thanks to the Tata Nano unit in ‘Sanand’,  we hear that already many car manufacturers have planned to put their units around ‘Sanand’. As Chennai battles its woes without power, there are opportunities for other states to get the car manufacturing pie as India with its advantages of low-cost skilled labour, domestic growth, ancillary base,…,… is poised to become one of world’s largest car manufacturing base in the next 2 decades.

While I mentioned about the so many benefits a Car production unit brings to the economy, I must not forget the effect it brings to the pride of people associated with it as well.  Most of the car plants in Chennai while they produce for India are also big time exporters of the finished cars not only to developing countries but also to developed nations.  So much so that while I was in Hyundai the gentleman I met proudly said “if you see an i20 anywhere in the world, it would have rolled out of the Chennai factory!!!”   And somebody else said “Chennai is the Detroit of Asia”!

So Chief Ministers, if you want to pursue hi growth in your state, go after a car manufacturer!

Because “its not just a car, it’s a caaaaaaaaaaar!!!