Tata Motors mulls letting assemblers brand Nano

S Kalyana Ramanathan / London November 2, 2009

We call it Nano, they don’t have to, says Vice-Chairman Ravi Kant

Seven months after the launch of Nano, Tata Motors is toying with the idea of letting local garage assemblers put together the world’s cheapest car and also sell it under a brand of their own.

The company, which is revisiting the concept of distributed manufacturing mooted by Chairman Ratan Tata when he first talked of the Rs 1 lakh car several years ago, will become the world’s first to attempt such a "federal" structure of manufacturing.

Speaking at The Economist Innovation conference in London on Friday, Tata Motors Vice-Chairman and former managing director Ravi Kant said with the new Nano plant likely to start commercial production in the last quarter of this financial year ending March 2010, the company may allow enterprising assemblers to set up micro-assembly sites across the country, with each producing some 10,000 cars a year.

Ravi Kant"We call it Nano, they (assemblers) don't have to," said Kant, who received the The Economist Innovation award 2009 (for business process) on behalf of Tata for developing and rolling out the world's cheapest car.

Experts, however, said handing over the branding power to small assemblers may not be easy. For one, the perceived and actual safety of a car has always been associated with the brand.

Tata Motors will have to be extra careful about safety concerns after a small number of Nanos sold in India reported technical problems last month, forcing the company to conduct a preemptive audit of the quality of cars already shipped as well as those in the inventory.

“The Indian car market has still not come to this stage. Given that a car like Nano is three or four year’s investment, customers will still go for established brands from strong OEMs (original equipment manufacturers; in this case Tata Motors). So this idea may not fly very well,” said Abdul Majeed, leader, automotive practice, with PricewaterhouseCoopers in India. There would also be concerns about after-sales services and spare parts, he added.

Ratan Tata spoke of distributed manufacturing when he first went public with his desire to make a Rs 1 lakh car, as Nano was referred to for years until it was christened. Though this idea was never officially abandoned, the company spent the next few years absorbed in developing the car and setting up the new plant, which had to be shifted in a hurry from Singur in West Bengal to Sanand in Gujarat owing to problems over land acquisition.

The Sanand plant is expected to go into commercial production in the January-March quarter of 2010 with an initial capacity of 250,000 a year, scalable to 350,000.

Nano is expected to be launched in Europe in 2011. Although its price here is yet to be decided, Kant said it may well be the cheapest to hit these markets. On the potential competition to Nano, Kant said it might take a combination of a global car maker and an Indian one to mount a credible challenge. “I am not saying it cannot be done alone, but we clearly have the first-mover advantage,” he said.

NANO FCTS
* 80 per cent of Nanos sold in India so far are the middle-and top-end versions (priced way above Rs 1 lakh)
* 45-50 per cent Nanos are chauffeur-driven in India
* Tata Motors holds 37 patents connected with Nano
* Assemblers from over 50 countries have shown interest in it
* During its six-and-a-half years in development, the material costs of Nano went up three times, but the car came out on the promised price