Motor Vehicle Industry in India: A of Tatas Nano Car Pricing - Case Study Example

Motor Vehicle Industry in India: A Case Study Tata’s Nano Car Pricing Motor Vehicle Industry in India: A Case Study Tata’s Nano Car Pricing Introduction Company overview Tata Motors Limited is an automotive company founded in 1945 by Jamsetji Tata with its headquarter in Mumbai India. It deals in automobiles with several production lines including commercial vehicles, coaches, buses, military vehicles, construction equipment and parts. The company also acquired majority stake in Italian design and engineering company that has allowed them to also deal in designing motor vehicles and other engineering works by its subsidiary Tata technologies Limited. The company has several assembly plants in India, South Africa, Thailand as well as UK. This is in addition to the research and development situated in those same parts of countries. Its first commercial vehicle was manufactured in 1954 with a company called Daimler- Benz (Bhaktavatsala, 1993). After acquiring stakes in a Hispano Carrocera which specializes in manufacturing buses and coaches and from then, decided to also venture in bus and coach manufacturing. The company has been involved a spree of acquiring stakes in companies or forming joint ventures with other car manufacturing and then doing the same production. Examples of the companies it has partnered with through acquiring their stakes or through joint ventures or even buying include, jaguar Land rover, Hispano Carrocera, Marcopolo, Daewoo, Trilix and many others. This is in a bid to cut on the cost of having to start a new product altogether. Tata is an Indian company that with a vision to manufacture cheap and affordable vehicles targeting Indian population whose middle class has been rising with time. Its first fully indigenous passenger car was launched in the year 1998 and nick named it the Indica. In an attempt to manufacture even more cheap and affordable cars for the Indian population who prefer travelling together with their family members, Tata launched in 2008 a small but spacious car called Tata Nano. This car was the cheapest world-wide by the time it was launched. Question One The company in trying to set affordable but right prices for its Nano cars seem to have had some considerations in mind including profitability to the company, economic status of Indians, the prices of Nano Parts, and the installations that are put in it. The company’s design of the car makes the car cheap by not having expensive stereos that normally accompany expensive cars. The company worked from top downwards to arrive at this affordable car to many. They first set the highest price then worked downwards to design and develop a car with materials that would add up to this amount. The number one reason why any company apart from Non-Governmental Organization operates is to maximize profits. There is no company that can operate to make losses. However, Tata must have considered this factor but not in a way to maximize the profits from the production of one car but from production and sale of them in large numbers to maximize economies of scale. This is due to the low prices of the car that permits less profit from a single car but more from the sale of many. Then the low component parts involved the use of a cheap engine that cost about $700 something that cost twice less than the western manufactured engines. The car did not have in its design a radio, the seats were fixed so that they don’t recline back or forward. This was followed by a streamlined production assembly methods. In fact the whole car involved a complete cut down of prices on every component of the car leading to the production of the cheapest car ever according to its carriage capacity. Question Two Tata’s primary pricing objectives were also related to the factors that influenced the pricing of Nano. However, the objectives seemed to be a long-term strategy aimed at not only beating competition but also being the number one preferred brand for Indians and other middle income economies. These objectives included developing customer loyalty, beating competition and meeting the strict budget requirements that is the case for middle income Indians and also making a car that is very easy to market in its target markets. The other factor that had the impact on the decision to tag the car at this cheap price is the operation base. India has an increasing population of middle class who works on tight budget but would still love to travel with their families in a single car. Indians prefer to have their families in one car and considering that the car was designed originally for Indians, having double doors with a capacity to carry more than two passengers was a good idea for low-income Indians families. The third reason for pricing Nano car that cheap was a strategy for Tata Company to beat the ever rising competition in the automobiles industry in India. India has about 65 million people driving cars and this pose a potential to be customers for Tata. The best way to lure especially the population of Indians below 25 years who yearn to drive but with not sufficient income is to offer them this low cost vehicle to start with. This is then expected to result into some kind of loyalty by the same customers so that later on when they have sufficient income they can graduate to but more expensive Tata cars in future following the trust developed from the Nano car. This is a better way for beating competition especially for young customers (Bhaktavatsala, 1993). Conclusion Currently, India may not have strict regulations on the same but things change and such regulation may come in future plus other countries have them. To market Nano to these other countries, Tata will have to change its strategy on the same. With the current rate of competition, Tata should not just think about the basic car as the solution to everybody’s desire to own a car but rather differentiate their services just like other competitors are doing. India being ome to Tata does not guarantee customer loyalty especially with the many trade agreement being signed that make the whole world a village. References Bhaktavatsala, P. (1993, February 20th). Structural configuration and stategic investments:I ndian automobile industry. Economic and Political weekly. Tatas Nano steers into Low Pricing. (n.d.). Read More