Assignment 2.

Assignment 2

Task 1

Pricing Strategy for Tata Nano

Tata Nano is the cheapest car in the world. It is sold in home country India around Rs 1- lakh i.e approximately USD 2000. It is manufactured by Tata Motor Limited, the largest automobile company in India. It's Chairman, Mr Ratan Tata envisions that Tata Nano to become a “People's car“which is affordable by almost everybody. Tata Nano was first launched in India on 1st April 2009 and expected to be in Indian market by July 2009. Since launching, it has created a huge buzz all over India. Within the first two days of lunching, it has received 5500 booking. The figures keep increasing every day since the launching. What makes Tata Nano so cheap? Basically, by making things smaller, lighter, do away with superficial parts and change the materials wherever possible without compromising the safety and environmental compliance. It is said that Tata Nano has better millage than Toyota Prius and same gas emission as a scooter. (driving.timesonline.co.uk). Tata Motors Ltd.'s long-awaited Nano “people's car,” unveiled at the New Delhi auto show earlier this month, is a real car that is changing the way things are done in India. Indeed, Tata says it has filed 34 global patents for the vehicle's platform.

The Rs100,000 ($2,500) vehicle's interior affords more cabin room than Maruti Udyog Ltd.'s segment-leading M-800, seating four passengers and providing limited storage space under the hood. Vehicle weight is reduced by the use of an aluminum engine and replacing steel with lighter metals and plastic parts. The Nano's 0.6L 2-cyl. rear-mounted gasoline mill features multipoint fuel injection and is capable of 50 mpg (4.7 L/100 km) fuel efficiency. The car is equipped with a 4-speed manual transmission and can achieve speeds up to 65 mph (105 km), while meeting Euro 4 emissions standards, as well as safety regulations.

Tata also is offering an upgraded model with an automatic transmission, common-rail diesel engine and air conditioning, with, of course, a higher price tag to be announced later. For both the gasoline and diesel models, customers will pay an additional Rs20,000-Rs30,000 ($510-$765) for value-added tax, registration, insurance and transportation. (www.rediff.com)

Tata initially targeted the vehicle as "the least expensive production car in the world" aiming for a starting price of 100,000 rupees or approximately $2050 US despite rapidly rising material prices.As of August 2008, material costs have risen from 13% to 23% over the car's development,and Tata now faces the choice of: (tatanano.inservices.tatamotors.com)

introducing the car with an artificially low price through govt-subsidies and tax-breaks, or

foregoing profit on the car, or

using vertical-integration, or

partially using inexpensive polymers or biodegradable plastics instead of a full metal-body, or raising the price of the car

Much of India's low-cost production edge comes from cheap labor and a large part of the low-cost assembly in factories and plants is done through manual operations. However this situation is changing fast with companies wanting to increase productivity by automating their lines. Tata cut costs by minimizing components, particularly steel, and taking advantage of India's low production costs. Because of its size, it requires less metal, ...