In 2008, when Tata Motors announced that it was developing a sub-$2,500 car for Indian consumers, the world sat up and took notice.
Heck, $2,500 was half the price of the cheapest car available in India at the time.
Given the country’s growing middle class, analysts thought that Tata’s new ride — dubbed the Nano — could be a runaway hit.
Apart from the Nano’s impracticality — including a trunk that can only be reached from inside the vehicle — many consumers doubted its safety. For example, there were early reports of electrical fires, and there was no way to add airbags to the Nano, even for customers willing to pay a premium.
But the Nano’s biggest problem was that Tata completely misjudged its target market. Motorcycles are hugely popular in India: they cost about half of what the Nano does, and many outperform the Nano’s two-cylinder, 38 hp engine. In the end, Indians preferred two very cheap wheels to four less-cheap ones.
But that hasn’t stopped Tata from dreaming up plans for world domination.
Europe & the U.S.
Before the Nano even arrived in showrooms, Tata revealed a European variant — the Tata Europa — which was scheduled for a 2011 release. (Note: never happened.)
Now, Tata’s at it again, dreaming even bigger dreams. According to AutoNews, the company’s head honcho, Ratan Tata, recently announced plans for a revamped version of the Nano for European and U.S. drivers.
Mr. Tata was unwilling to offer many specifics about the new model. However, he did say that its engine will be larger and that, unlike its Indian cousin, it will come with luxurious amenities like power steering.
Most intriguingly, Tata said that the vehicle will have a sticker price under $10,000, and it will arrive within three years.
In discussing the model’s prospects, he pointed to the popularity of small cars like the MINI Cooper and the Smart fortwo, implying that Tata’s lower price-point would lure away some of those consumers.
We hate to be so schadenfreudy so early in the work week, but it sounds as if Mr. Tata is setting up his company for a spectacular failure, the likes of which hasn’t been seen since…well, since the launch of the Nano in India. Or since Ashlee Simpson’s last appearance on Saturday Night Live.
Tata is correct when he says that small cars are popular in the U.S. today. However, as we pointed out last week, “small” ain’t what it used to be. Today’s small cars are generally well-made, spacious, and safe, compared to their predecessors.
And just being small isn’t enough: you have to have a great design to go with it. If he’d look at Smart’s blood-red balance sheets, he might understand that. Tata will have to make vast improvements to the Nano’s looks — not to mention its performance and safety features — before it has any hope of winning over American consumers.
But most daunting of all for an automaker like Tata is the question of how to sell its products.
Tata has no dealerships in the U.S., and therefore, no ready means of selling vehicles. True, the company owns Jaguar and Land Rover, but the likelihood of selling a cheap, sub-$10,000 microcar alongside five- and six-figure sedans and SUVs seems remote. Unless Mr. Tata plans to pull a Tesla, building “information centres” instead of “showrooms”, he’s got a very long row to hoe. (His colleagues at Mahindra, who are also based in Mumbai, can vouch for that.)
That said, Tata might have better luck in Europe, where customers are used to driving significantly smaller cars than we are in the U.S. Europe is also facing serious economic problems, which could make a cheap car more competitive than in the U.S., where the economy is slowly recovering.
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