The larger Nano issues

As mentioned in my earlier post, if it succeeds, Nano will be a major business triumph making them Tata the dominant car manufacturer replacing Maruti.

Tata has officially launched the Nano as the world's cheapest commercial car. This is expected to lead to a rise in car ownership in India. It is considered beneficial if one is to believe the media hype surrounding it.

As with all issues, the Nano launch will have its pros and cons, its supporters and critics.

The pros

1. An affordable car to a larger population base in a country where transport facilities overall are very poor.
2. Greater mobility as a car can carry more people over longer distances, also it is less tiring as it is compared to riding a bike.
3. All households having an income enought to afford two bikes will now afford a car.
4. It helps leverage the advantage of the improving inter city transport infrastructure (albeit slowly)
5. With a larger car owning population, the government will be under more pressure to ensure good infrastructure (hopefully)
   

The cons

1. The demand for fuel will go up significantly if the car is a major hit across the country.
2. The number of road fatalities will go up what with an already poor record at current traffic volumes.
3. The poor won't have much benefit except maybe a little less strain on public transport.
4. The generally poor infrastructure and endemic corruption in corporations will mean that urban India will have more traffic stress.
5. Cities will suffer additional traffic congestion.
6. Traffic pooling, though nice in theory, is unlikely as people who buy a Nano won't keep it at home.

I might have missed a few obvious ones in both of the above. For me, as of now the cons outnumber the pros.

Nano - Tata bid to capture Indian Car Market

Though one does not know the actual cost breakup of the Nano, it is likely that Ratan Tata won't mind selling it at a slight loss. In spite of all the hype about nation building, this is a purely business decision.

• Manufacture low end product and deliver to capture market even if at an initial loss.
• Move up the value chain using the leverage as the dominant car manufacturer.

Tata already has some penetration on the car segment through its Indica series. The Nano will strongly challenge Maruti's long hold as the numero uno car manufacturer. If it succeeds, Ratan Tata deserves full credit from a business perspective as he was willing to take that risk.

In the next post, I will look at some of the pros and cons of the Nano for India as a whole