What Detroit can learn from the dirt-cheap Nano car
Would you believe that there is an automotive company today with a hit on its hands? Well there is, India-based Tata Motors (TTM), maker of the Nano -- not the uber-hip MP3 player, but the dirt-cheap, no-frills car. Despite production delays that caused the Nano to only be on sale from April 9 to April 25, the company raked in an impressive $512.6 million in the car's first month.
More impressive is the fact that these sales were made in a country that sold just 1.5 million passenger cars last fiscal year. What is also interesting is that a majority of those purchasing the Nano went for the "luxury edition," which comes complete with air conditioning and power windows. Just 20 percent of the customers purchased the cheapest version of the car (which runs $2,050) and the final 30 percent chose the mid-range model.
And those figures could be just the tip of the iceberg. The company's website has seen a massive amount of traffic, roughly 30 million vistiors from March 23 through April 25, in addition to the 1.4 million people who have checked out the tiny-wheeled, nose-less vehicle in stores.
Among the production snafus were farmer protests that caused a last-minute factory relocation. A replacement for the plant is being brought on line now, but not before the end of the year -- meaning only 100,000 cars will be delivered by late 2010. Shrewdly, the company has turned the forced scarcity into a marketing bonanza, holding a lottery in which it will randomly select the lucky first 100,000 owners.
So what can other car companies take from this lesson? First, how about providing a well-built, low-priced automobile? In the the lastest round of auto data, Toyota (TM) reported a 42 percent drop in sales, Ford (F) a 32 percent drop, General Motors (GM) a 34 percent, Honda (HMC) 25 percent, and Nissan (NSANY) a 38 percent plunge in sales.
No, Tata's Nano sales aren't going to turn around the fortunes of the troubled automaker overnight -- but as word spreads, it is entirely possible that the company as a whole will surge. Imagine if American car companies decided to follow the same model. Make a smaller, stripped-down car in a stripped-down economy. Yes, Yugo tried this before, but I believe I could have lifted that car (and I was in junior high at the time). While the Nano looks Spartan, it's a substantial, sporty kind of Spartan.
Let's see if the larger automakers learn anything from Tata and start to produce a more basic car for a more basic price. It certainly couldn't hurt, right?