Now that Ratan Tata has unveiled the much anticipated $2,500 Tata Nano at the Delhi Auto Expo, the two big questions are what does the People’s Car mean for existing foreign players like Ford, GM and Suzuki who have set up operations in India and what impact will it have on Tata’s aspirations for the high-end Jaguar and Land Rover brands it’s trying to acquire from Ford.
Tata Nano - People’s Car?
Ford and GM are in pretty bad shape here in the U.S., mere caricatures of their once glorious selves.
With the Chinese Chery expected to enter the American market in the not too distant future (and further decimate what’s left of the U.S. auto makers), Ford and GM were betting big on sizable markets in developing nations like India.
And why not? After all, as the New York Times reported yesterday, car sales in India are growing at over 20% annually compared with 3% globally.
But Tata Motors has thrown a spanner in the works of Ford, GM and Suzuki in the form of the People’s Car now christened Tata Nano.
American auto companies with their fat pay structure for senior executives and crumbs for the rest have little to show in their cars by way of innovation. The only way Ford, GM and Chrysler can sell their ugly boxes in the U.S. is through massive discounts, no-interest loans or by dumping them on the rental car chains.
The only mantras U.S. car makers know are layoffs and outsourcing. And both those shibboleths are not going to help them in India when they compete against the Tata Nano.
It’s hard to see how Ford or GM can effectively compete against a $2,500 car assuming the Tata Nano is a decent effort.
Ford sales are already slipping in India and the company is making some noise about a small car. Seems like an effort to create FUD (Fear, Uncertainty and Doubt) in the market.
GM seems to have done well in India in the first half of 2007 but we remain skeptical that they can maintain the momentum.
Most likely, Ford and GM will have to curb their enthusiasm and kiss their