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Smart Car 2.0
The Tata Nano's plan to market the cheapest car in the world to India's urban poor went up in flames. Now the little car that couldn't is coming to the U.S.—and going upscale.

I’m not a car person. Living in Manhattan, with great public transportation, $12 bridge tolls, and $400-a month-parking, there’s no reason to be. But four years ago, like millions of others, I was captivated by the launch of a new car on the other side of the world—India’s tiny Tata Nano. So I found myself visiting an auto showroom in New Delhi to see what all the fuss was about.

By the time it hit the market, everyone in India knew the Nano’s creation myth. Tata’s chairman, Ratan Tata, had found himself pondering an image that is disturbing to anyone visiting the country: a motorbike weaving through the insane traffic with a family of four perched precariously on the back. Tata had an epiphany, which reflected his company’s long tradition of corporate social responsibility: why not build a car that could carry these families safely, a car that wouldn’t cost much more than a motorbike, a fuel-efficient vehicle (55-60 miles to the gallon) that would meet the aspirations of millions of people emerging from poverty without wrecking the planet?

Looking like a canary-yellow boiled egg on wheels, the Nano was billed as the cheapest car in the world, the “one-lakh car”—100,000 rupees, in other words, or about $2,000. Thanks to saturation media coverage and an aggressive social media campaign, Nano became a national buzzword. Before commercials, newscasters no longer said they were taking a short break; they were taking a nano-break. Tata predicted that Indians would buy a million Nanos a year. Around the world, too, the car became an exciting emblem of the new India, the nation of high-tech entrepreneurs, eight percent annual growth rates, and Slumdog Millionaire (which won the Oscar for best picture just a month before the Nano was launched). What was not to like?

Well, as it turns out, quite a lot. At the time, Tata’s idea seemed a paradigm of enlightened thinking. But four years later, the Nano has become a case study in the difficulty of achieving such dreams. The signs are that our path to a sustainable urban future may depend on something more prosaic than a grand vision and a noble purpose: what counts is what marketing types call “cultural drivers of brand perception.” And that lesson applies not just to the Nano, but to the challenge of introducing small, fuel-efficient cars here in the United States.

After four years, Tata has found fewer than a quarter of a million buyers for the Nano, and the great majority are not the first-time car owners at which it was aimed. For the most part, it has been bought as a second or third car, a chic toy for the wives and kids.

Tata Nano ad

So what went wrong? At first, the problems seemed transient. Plans to start production near Kolkata were aborted after farmers protested the appropriation of their land for the Nano assembly plant. Tata had built the brand on its claims of passenger safety, but TV news showed lurid footage of a handful of Nanos bursting into flames. Because of the increasing cost of raw materials, the promise of a “one-lakh car” seemed more hype than reality. The sticker price went up to about $2,800; the air-conditioned model was $4,000 (and driving in India in summertime without air-conditioning is a daunting proposition).

Monthly sales of the Nano peaked in April 2011, at 10,000. By April 2013, when the figure plummeted to fewer than 1,000, it was clear that the reasons for the failure ran much deeper than fires and farmers’ protests. The Indian auto blog ticked off a number of factors: most two-wheeler owners didn’t know how to drive a car; gas was too expensive for the target market—the Nano might get 55 miles per gallon, but a motorbike could get five times as much; but most important, Tata had blundered by making the Nano’s low price its main selling point. “Car ownership in India is greatly driven by aspirational value,” Team-BHP wrote, “and owning the ‘cheapest car in India/the world’ is not something one aspires to. Simply put, the Nano lacks the all-too-crucial status that first-time car owners are looking for.” Far from being a mark of prestige and upward mobility, owning a cheap car might even be a stigma.

Dain Dunston, an American corporate branding guru, had contributed mightily to the mystique of the Nano with a book he co-authored in 2011, Nanovation: How a Little Car Can Teach the World to Think Big and Act Bold. This summer, he wrote what sounded like its epitaph: “The passion to solve a great social problem and the elegance and ingenuity of the solution were no match for not understanding what the customer actually wanted.”

So Tata has just announced that it will do what any company does in these circumstances: rebrand. The Nano will no longer be a “poor man’s car,” but a “smart city car.” The image will be more luxurious, more youthful and cool—although, interestingly, it will also be greener, with the promise of even greater fuel efficiency.

So why is all this relevant to the future of urban transportation in the United States? The global business consultancy firm HIS, looking to a world of tougher environmental regulations and fuel economy standards, predicts a 29 percent increase in worldwide sales of “city-savvy” subcompacts in the next two years, and like any auto company Tata craves a share of that market. One reason for the Nano’s rebranding is that for the first time, Tata will be targeting Europe and the United States, where the concepts of green, cool, and upmarket intersect. To drive home the message, Jay Leno made a promotional video last year—dressed in a silvery brocaded kurta, backed by an Indian flag, and surrounded by Bollywood dancers—announcing that he planned to be one of the Nano's first U.S. buyers.

“We buy stuff left and right we don’t need. That’s dumb. We buy things without the least concern for the planet. That’s even dumber.”

The Nano will face several competitors in these new markets, like the Fiat 500, the Mini, and Europe’s own boiled-egg-on-wheels, Daimler’s Smart Car. The history of this nine-foot-long “ultra-urban” subcompact has been strikingly similar to that of the Nano. The first ones rolled off the production line in 1998, the result of an idiosyncratic partnership between the designer of the hip Swatch wristwatch, Nicolas Hayek, and the engineers at Mercedes Benz. The target was annual sales of 200,000, but like the Nano, the Smart Car never came close to that goal. Its track record has been particularly dismal in the United States. There was a brief blip in 2008, when gas prices rose to $4 a gallon, but since then it’s been downhill all the way (currently the price at India's pumps is around $4.35 a gallon). In January 2009, U.S. customers bought 1,776 Smarts; in January 2010, the figure was 278. Daimler’s losses on the brand were staggering—more than $5 billion—and just as the Nano’s losses were underwritten by sales of Jaguars and Land Rovers to India’s new elite (Tata acquired both brands from Ford in 2008), so the Smart’s losses were carried by Daimler’s luxury cash cow: the Mercedes.

The Smart Car had always prized itself on being green, especially with the European diesel version (never introduced to the skeptical U.S. market), which claimed 69 miles to the gallon. But when sales tanked, Daimler, like Tata, revamped the brand, doubling down on its chic, eco-friendly image. The Smart Car, said Daimler’s PR department, would be “the green spearhead of the Mercedes-Benz cars portfolio,” designed for consumers who see themselves as “quirky and passionate.” The catchphrase of the rebranding campaign was Against Dumb. “Why do so many smart people do dumb things?” Daimler asked in its ads. “We buy stuff left and right we don’t need. That’s dumb. We buy things without the least concern for the planet. That’s even dumber.”

Like many car companies, facing growing evidence that younger consumers are losing interest in buying their products, Daimler is also repositioning itself as an "urban mobility" company rather than just an auto manufacturer. It is pinning many of its hopes on car2go, its car-sharing subsidiary. Car2go, which was pioneered in Austin and Vancouver, offers per-minute and hourly one-way rentals with designated Smart parking spots, and local availability can be checked via a Smartphone app. Car2go plans to expand to 10 cities in North America and more than 40 in Europe in the next three years.

Daimler is also going electric, introducing a plug-in Smart that will be available in all 50 states by the end of this year. Just as Tata discovered that the low price of the Nano was a detriment to sales, Daimler is figuring that cost will not be a barrier for its new target clientele. At $12,000, the basic model will cost more than a low-end four-door sedan like the Nissan Versa. There will also be an electric version, which was rolled out in May in California and seven northeastern states with the toughest auto emission standards. This sells for $25,750. Alternatively, you can buy it without the battery, pay about $5,000 less, and get a battery-rental deal for $80 a month. Tata now seems to be following a similar logic, unveiling a concept model of its own electric Nano, the eMo (price tag $20,000) at the 2012 Detroit motor show.

It’s all a far cry from Ratan Tata’s original vision of serving a mass market of first-time buyers emerging from poverty in the developing world. My most recent trip to India was in April. In ten days in three major cities, I don’t think I saw a single Nano. But there were still countless two-wheelers, with new sales running at more than a million a month, careening in and out of the traffic, with dad driving and mom, toddler, and baby clustered behind him. The eco-friendly sub-compact is certain to be a critical part of the world’s urbanized future. But for better or worse, all the evidence suggests that its success will lie not with families like these, but with a cadre of affluent young professionals—and, above all, with the gurus of branding.

Image: Jaaziel

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George Black has reported from five continents, chronicling civil war in Central America, the democracy movement in China, and climate change in countries from Bangladesh to Peru. His most recent book, Empire of Shadows, is about the 19th century exploration of Yellowstone. MORE STORIES ➔
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if there is two wheel size...i will ask my friend to avoid as it is not wise to take a long drive during nights and unknown place and tyre gets punctured[as we don't know where is the next valconise - front wheel small and the back wheel bigger in size...we can't run for a long duration as it will spoil the vehicle balance] As some like me can't afford to hold a car for City drive and a car for long journey