When will Americans see the Tatas?
Posted on | July 12, 2010 | No Comments
Author:
Jason Voiovich
Ecra Creative Group
Key Points:
1. India’s Tata Motors is positioning itself for a run at the US market with the acquisition of Land Rover and Jaguar from Ford.
2. But it’s not those nameplates current players need to be worried about – it’s rather the $2500 Tata Nano.
3. The Nano is likely a game-changer in the market, offering US consumers the first legitimate sub-$5000 transportation option.
I just can’t resist the chance to talk about one of my favorite subjects.
Cars, of course.
With all the attention given General Motors, Chrysler, Ford, and Toyota these days, you’d be forgiven if something else came to mind when I mentioned India’s dominant automaker.
But with its recent acquisition of the Land Rover and Jaguar brands from Ford, Tata Motors is positioned to leave its home market behind and hit the world stage with a splash. The purchase gives the company the engineering chops and the street credibility it will need to compete in the American market.
Together, the Land Rover and Jaguar nameplates barely make a dent in the US auto market, having trouble (together) selling 100,000 units a year. However, Land Rover is the last surviving “4-wheel-drive” brand (alongside Jeep), and Jaguar retains a certain place in the luxury car pantheon (however tarnished its reputation might be at present).
One could make the case that Tata wants to use the brands as a foothold in the US market to bring in its other models. Specifically, the real game-changer: The Tata Nano.
If you haven’t heard of this little car yet, stay tuned. The Tata Nano is the least-expensive production car in the world, coming in at just over US$2500.
Yes, you heard correct. $2500.
That’s a car that goes on a credit card. I have a friend who spent more than that on an entertainment center last month.
Clearly, for $2500, you are not going to be getting a “Land Rover Light”. The Nano is the epitome of basic transportation – something you could envision weaving in and out of pedestrians on the crowded streets of Mumbai.
When it was first announced, the mainstream automotive press came to the collective conclusion that the American market didn’t really want a sub-$5000 car, especially one without the “features” US buyers have come to expect. They pointed to that other uber-cheap econobox – the Yugo – as an example of a tried-and-failed attempt to bring the ultra-cheap car into the US market.
But that was before the Great Recession.
And Tata is no Yugo Motors.
Yugo suffered from innumerable quality problems from the get-go, and could never shake its Soviet Block image. Tata, quite the contrary, couldn’t be more different. Instead of a tiny, recovering, Soviet satellite state-run enterprise, Tata is the largest automaker in the world’s second largest country. They make buses, trucks, SUVs, small cars – a variety that certainly rivals GM in the United States. And Tata is using its recent success to invest across the board in its product line.
It’s not a question of if the Nano will arrive on US shores, but when it will arrive. When it does, it is likely to hit the US auto market like a ton of bent sheet metal.
With its introduction, the Nano will effectively reset the bottom of the US auto market. If we look at the price continuum below, we can see the Nano clearly occupying the “low cost” end of the spectrum. Nameplates like Toyota, Ford, Honda, VW, Nissan, and GM still fit in the middle of the pack. Acura, Audi, Infiniti, and Lexus in the near-luxury group. BMW and Mercedes near the top.
The “danger zone” is aptly named for those nameplates who used to occupy the value-point niche. That includes the recent Korean imports, Kia and Hyundai. While Hyundai has made numerous moves (and probably should be placed in the mainstream market), the Kia brand is a world of trouble. Its hard to see buyers opting for a “slightly better Nano” for three times the cost.
But beyond problems for Kia as a brand, the Nano spells trouble for the entire small car segment – offerings from all of the major carmarkers attempt to compete in this segment as US buyers have expressed a renewed interest in low-cost transportation. Look at the comparison between (arguably) the top car in this segment – the Honda Fit – and an upcoming Tata Nano. Yes, the Honda is “more car” for the money, but is it $12,000 to $15,000 more car? I don’t think so.
What’s more, at about the same time Tata hits our shores, it can count on some pent-up post-recession demand from the US economy. College present? What about a Nano? How about a “buy a Land Rover for you, get a Nano for your college student” (ala “buy an Apple computer, get an iPod Touch”). I like it!
However, the auto business is not just about building the cheaper mousetrap. And that’s where Yugo went wrong. It didn’t spend the time cultivating an image in the mind of the US buying public – a “cult following” of sorts that the original VW Beetle was able to pull off 30 years ago. Yugo also didn’t spend the time and energy building the distribution network (read: Dealer network) it needed to compete during the “Saturday afternoon rush”.
Tata is far smarter than that. And even if it weren’t, it has far more money in its war chest than any current player in the US market. Along with some new Fiat introductions vis-a-vis Chrysler and perhaps a Chinese introduction or two, the US market may be very close to a micro-car invasion.
All that said, I think by 2013, we’ll need two definitions for “Tata” in the Urban Dictionary.
Related Links:
Tata Motors’ boss moves up a gear
Tata Motors Summary
Tags: Tata Motors > US auto market
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About
Jason Voiovich
Ecra Creative Group
Phone: 651.209.2778
Principal and co-founder of Ecra Creative Group, a Minneapolis, MN based creative services firm specializing in brand development, reputation process management, naming/trademark, and product launches to drive measurable business results.
