Before the Tata Nano ever hit the roads, environmentalists issued ominous predictions about the impact of the world's cheapest car. If Tata Motors achieved its goal of shifting to the Nano some of the 13 million Indians annually who buy motorcycles, it would add hundreds of thousands, if not millions, of cars to the country's congested roads every year. Global efforts to cut carbon emissions and curb climate change would be for naught. The Nano became an emblem of the Malthusian downside of emerging-market success: increasing pressure on the world's limited resources.
We can all relax now. More than two years after the first Nano rolled out of the factory in July 2009, only 130,000 have been sold, and its monthly sales figures in India are well below those of more expensive vehicles like the Maruti 800 and the Ford Figo, popular brands in the next highest category of small, cheap cars. When Tata Motors launched the Nano, it was so concerned about being unable to meet demand that it offered prebooking and drew up a waiting list. This year the company even resorted to offering $400 cash discounts to perk up sales before the big Diwali holiday on Oct. 26.
Why would the world's cheapest car need a discount? Auto analysts recite a litany of missteps and just plain bad luck, from a supply chain disrupted by political protests to a safety scare to pricing that didn't quite hit the promised 100,000-rupee threshold to a market strategy that underestimated just how upwardly mobile Indian society has become. The resulting tale offers surprising lessons about developing-world markets: that price isn't everything and that creating aspirational homegrown brands, as well as entirely new consumer markets, is a tricky business.
The Nano's problems began well before production, when farmers who had been displaced by the original Nano factory in the eastern Indian town of Singur held a series of protests over inadequate compensation offered by the state, which has the right to acquire farmland for industrial development. Construction continued despite the controversy in Singur, which eventually became a cautionary tale of how India's outdated land-acquisition laws are stifling growth. After several violent clashes between police and protesters, Tata Motors chairman Ratan Tata abruptly shuttered the Singur factory. He decided to build a new one in the western Indian city of Sanand and insisted that the Nano would be launched as planned in spring 2009. The only way to do that was to temporarily shift operations to an existing plant and slash the first year's production target to 50,000, from 250,000.