Last week I was riding through the bustling streets of Bangalore when my colleague made a provocative statement: "I think the Tata Nano is going to be a flop."
It was a strong statement coming from an Innosighter. After all, we have been talking about the disruptive potential of the "people's car" — priced as low as $2,000 — for years.
"But look around," I said. "That family will surely flock to an affordable car that projects social status and provides a safe, comfortable ride."
I pointed to the husband, wife, and two children who were precariously perched on a scooter zooming in between cars to make my point. Even as I did so, though, I could begin to sense where my colleague was heading.
Anyone who has driven in India knows there is a remarkable efficiency on her chaotic streets. Every square inch of road gets used as scooters sneak in between gaps between cars. Dangerous? Sure. But it maximizes people per square mile in a way that boxy automobiles never could. Turning all of those scooters into Nanos would create a traffic nightmare.
"Here's the thing," my colleague said. "These consumers could already get a reasonable used car for the price of a Nano. And they choose not to."
He went on to detail how in the late 1990s he bought a used Maruti 800 for about Rs 1,05,000 (about $2,250). The car had features the base Nano lacks like a cassette player and air conditioning. He sold it in 2001 for Rs. 95,000 (or about $2,000).
"Most of the Nanos are being purchased as second cars or by the upwardly mobile that want to show off, "my colleague said. "People aren't buying the basic version .They are buying an upgraded version with air con and power windows. The Nano might do ok, but that's no 'people's car'."
Read the rest at Scott's Havard Management blog, Innovation Insights.
