Column : The Nano that wasnt

Written by Rishi Raj | Updated: Aug 16 2011, 08:17am hrs
The slowdown in auto sales has been well recounted in the news pages by now. Beginning this fiscal it hasnt exactly been rocking like the previous two years, but what has not been noted is that the same numbers signal the end of a big dreama dream that promised to change the motoring landscape of India, something that would have wiped off two-wheelers and mopeds from the Indian roads. Yes, we are talking about the small, R1-lakh car, Nano, from the house of Tatas. Not only was this seen as an engineering marvel considering its shape, size and price, but also promised to add car to the aam aadmis dream of roti, kapda, makaan aur mobile.

Surely such promises and hopes were a little dashed when three years ago the bookings for the Nano started and only some 2 lakh-odd consumers showed interest. And then there were teething troubles, shifting of the plant from Singur in West Bengal to Sanand in Gujarat. In between also came some manufacturing defects but they dont matter much because recalls happen even in cases of noted global auto majors like Honda and Toyota. Still, three years down the line, the car has failed to deliver on all the promised fronts. This, in a way, tells a larger story of a good product a little late to enter the market, and also demolishes certain myths about consumer categorisation and aspirations in the Indian market, something that one hopes marketers would keep in mind in future.

The latest auto sales numbers for the month of July have gone down for all the major manufacturers, including Maruti and Hyundai. But what strikes is the dismal sales of the Nanothe number slipped to 3,260 units from 9,000 units in the corresponding month last year. This is not a one-off case; since the beginning of this fiscal, sales of the Nano have sequentially declined. In April, the number stood at 10,012 units, May (6,515 units), June (5,452 units) and July (3,260 units). Interestingly, Nanos sales during 2010-11 have been lower than Tata Motors hatchback Indica!

Now, the lower sales are understandable for cars being produced by the likes of Maruti-Suzuki and Hyundai because of the sentiment factorrising interest rates on car loans as well as rising fuel prices. Ideally, such factors should have propelled sales of Nanolower cost and higher mileage. Erroneously, most of us see the auto market as a monolith. For instance, the quarter has certainly seen declining numbers for car sales but when it comes to two-wheelers, sales have been rising.

Now lets see the logic behind the birth of the Nano. Since a vast majority in India use two-wheelers because of the affordability factor, it was felt that a car like Nano would make them upgrade to a car and make their lives better. If this was the case, sales of Nano would be on a rising curve instead of the reverse. Further, in times like this when interest rates and fuel prices are on a high, Nanos sales should have only increased because consumers should have cut back on buying a Maruti 800, an Alto or a Santro and instead opted for a Nano. Since the difference in price of a Nano and a motorcycle isnt much, the formers sales should not have been affected if motorcycles are still selling like hot cakes.

Herein lies the fault in looking at the two-wheeler market as a monolith. The two-wheeler market comprises of three kinds of consumers: (a) the rural folk who prefer it because of utility and terrain, not the cost factor, (b) the urban college-going youngsters who prefer it because of style and power, not because of affordability, and (c) the low-income office-going strata for whom affordability is a factor. The first two categories either own or can afford to own a car and their choice would never be a Nano. This brings us to the third category, whose size isnt that big to fuel sales of the Nano. Even this category has aspiration levels such that when it plans to buy a car, this is not at the entry level but a little higher than that, so the Nano goes out from here as well. This brings us to a fourth categoryretired government officers in tier II and III cities who are living off their pension and whose old Maruti 800 has also started pinching them! No wonder Tata Motors has recently started talking about the scope of the Nano in tier I and tier II cities.

The other car manufacturers understood this very well and therefore were never perturbed with the coming of the Nano. In fact, the former managing director of Maruti, Jagdish Khattar, had put it best when he said that going by the logic that two-wheeler buyers would upgrade to a Nano, they would come to Maruti for their second upgrade, so why worry

The larger picture is that the auto market in the country has been hugely transformed in the last 20 years. These are not the days of entry level cars like Maruti 800 as can be seen by its falling sales. Maruti had to invent an Alto. Sales of Santro have dwindled and Hyundai had to come up with an i10. True, players offering mid-size cars are getting into making small cars but they are not exactly entry level small cars but what are called premium compact cars categorised as the A2+ segment by the industry. In fact, the growth of the A2+ segment (Swift, i10 etc) is higher than the A2 (Alto, Wagon R etc).

Somewhere, Tata Motors too realises the end of the Nano dream, and thats why it has also started talking about a bigger and costlier Nano. But the point is, once it becomes bigger and costlier, it doesnt remain a Nano any more.