With GenX Nano, Tata Motors takes another shot at entry-level car market

Mumbai: Seven years after Tata Motors Ltd delivered the first Nano, then billed as the world’s cheapest car with a Rs.1 lakh price tag, the jellybean-shaped car has come full circle in terms of price and positioning.

On Tuesday, Tata Motors took the wraps off the GenX Nano, priced between Rs.1.99 lakh and Rs.2.89 lakh, in yet another attempt to revive sales of a car it had launched in July 2009 as an affordable, entry-level vehicle, but which never quite took off.

Tata Motors has also introduced two variants—XMA and XTA—with an easy-shift automated manual transmission (AMT). The XMA variant, priced at Rs.2.69 lakh, will be made-to-order and available for sale from August. The top-end XTA variant is priced at Rs.2.89 lakh and will be available after the national launch. All prices are ex-showroom, Delhi.

With the low-cost positioning of Nano having done more harm than good to the brand, the launch of the new generation car is aimed at repositioning the model as a slick city car targeted at young buyers.

Besides the easy gear shift, bigger fuel tank and boot space, and enhanced safety features, Tata Motors has packed the new generation car with bells and whistles including connectivity features like bluetooth.

With the automated manual transmission, the Nano becomes the cheapest automatic car in the world.

Ever since the Nano was introduced in 2009, the company has offered many attractive schemes to woo buyers, but none have helped. In the year ended 31 March, the company sold 16,901 Nanos, the least since the car’s introduction.

The company is hoping this time it’ll will be different. Tata Motors hopes to wean away first-time buyers from rival brands and compel them to upgrade from two wheelers to the Nano.

According to Mayank Pareek, president of the passenger-car business at Tata Motors, the proportion of buyers who opted for the Nano as their first car has gone up to 47% from 20% when it was launched. In other words, 80% of those who bought the Nano seven years ago used it as an additional vehicle.

Puneet Gupta, principal analyst at the sales forecasting and market research firm IHS Automotive, says that the strategy of upgrading the car may not work.

“Upgrading the product is not really an answer. They need to target the right kind of customers,” he says.

At the new price, the model may find merit neither among urban buyers, who are upgrading to pricier models and moving away from entry-level cars, nor among the rural buyers for whom the Nano will now be more expensive.

The share of small cars in the passenger vehicle market fell from 68% in fiscal 2010-2011 to 52% in fiscal 2014-15 while the share of higher-priced segments (sedans, and multipurpose and urban sports utility vehicles) rose from 24% to 41% in the same period.

Even within the small car segment, demand has moved from entry-level small cars to premium hatchbacks, Abhijeet Naik and Nitij Mangal, analysts at investment banking firm CLSA, wrote in a research report in February. “Indian consumers are clearly up-trading to higher-priced PV (passenger vehicle) segments, and we expect this trend to continue in coming years,” they wrote.

Pareek of Tata Motors expects entry-level models to be back in demand in a country where a low-car penetration ratio—only 22 out of 1,000 people in India own a car—makes a strong case for the Nano. Tata Motors also plans to expand its dealer network from the current 450 to 1,500 over the next five years.

“From July onwards we will be adding one sales outlet everyday,” Pareek said.

On 21 April, Tata Motors launched scheme called “Power of 1+1” that will let existing Nano owners to exchange their old cars for the new GenX Nano, offering them a special bonus of Rs.20,000 in addition to the price of the old car.

The Nano customers can also enrol into a referral programme that could help them win a cash prize of Rs.5,000 for every referral that results in a sale of the car.

Tata Motors has tied up with financiers to offer attractive interest rates on car loans. The Mumbai-based auto maker has already reached out to 160,000 out of the existing 265,000 Nano owners through direct mailers. Of this, more than 11,000 owners have got their cars evaluated and are willing to trade in their old car for the new one, said Pareek.

The company is also looking at innovative marketing and brand promotion activities ranging from tie-ups with television networks to offering an experiential tour of Nano’s factory at Sanand in Gujarat, said Delna Avari, head of marketing at Tata Motors.

Will the effort pay off? One analyst doesn’t think so.

“The trouble with the Nano is the brand itself. Over the last seven years, people have seen it as a cheap car, and it will be tough for the model to shed that image,” said the analyst at a market research firm who didn’t want to be identified.