Tata Nano versus Renault-Nissan ULC: who wins?
By: Dr Peter Wells, Wednesday, November 11, 2009, AutomotiveWorld.com
Tata Motors has succeeded in stealing a huge share of headlines with their provocative Nano, an exercise in automotive minimalism that many thought could not be achieved yet alone emulated. But in the intense global competition of the automotive industry few OEMs are going to enjoy an uncontested market space for long.
Tata may have defined the ultimate in value-for-money motoring and created an entire new segment in cheap chic, but now Renault-Nissan has claimed that its partnership with Bajaj Auto will result in the ULC model by 2012 at a cost that will be 'lower than any car today made in India' according to Carlos Ghosn.
Tata has enjoyed a three-year window of opportunity with the Nano, but lost much of the potential advantage with the disastrous decision not to go ahead with the original plant in Bengal.
In other words, Tata has enjoyed a three-year window of opportunity with the Nano, but lost much of the potential advantage with the disastrous decision not to go ahead with the original plant in Bengal. Plenty of other OEMs, including Ford, General Motors, Volkswagen and Hundai are said to be lining up similar low-cost cars for emergent markets and indeed the austerity-prone markets of the West, though Renault has been the first to break cover on the issue.
This raises a series of questions. First, is it a believable announcement? Renault-Nissan has been prone to making strong strategy statements in the past which, rather like the strong styling statements of the cars, have not always come off.
Second, can Renault-Nissan really embrace the 'reduce to the max' philosophy that permeates the Nano? The historic tendency of most established OEMs has been to increase content, cost and complexity on their cars; it is not immediately evident that the discipline and attitude required are embedded in the corporate culture - and to this extent in the case of Renault-Nissan the link with Bajaj makes more sense. The difficulty of designing down to a price should not be understated, particularly when companies operate with global design rules and standards.
Third, and possibly most problematically, are any OEMs prepared to operate double standards with respect to their cars in different markets? Put bluntly, is Renault-Nissan or any other major OEM prepared to sell cars that are potentially more polluting and / or less safe in emergent markets when such cars would not be allowed in their own domestic markets?
Many of the leading OEMs have nurtured the upward drift of their brands to extract higher margins per unit over the years, but this sort of development could easily return the car to commodity status.
Fourth, what happens to revenues and profitability if the low-cost segment really takes off outside these emergent markets and becomes an important segment in the more mature markets? Many of the leading OEMs have nurtured the upward drift of their brands to extract higher margins per unit over the years, but this sort of development could easily return the car to commodity status.
It is necessary and understandable that the major OEMs need to adapt to the demands and requirements of different markets. At the same time, the automotive industry is a global business and requires globally consistent, coherent brand values to be seen as good corporate citizens. Achieving a car that costs less than US$2,000 is only part of the battle; managing the long-term impact on the global business may well be more difficult.
Dr Peter Wells is a Reader at Cardiff Business School, where he is a Co-Director of the Centre for Automotive Industry Research and leads the automotive industry research programme within BRASS, also in Cardiff University. Dr Wells is also a director of AutomotiveWorld.com's sister website AWPresenter.com. He can be contacted on wellspe@cardiff.ac.uk.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Published on Wednesday, November 11, 2009
Webinars
Free e-newsletters
Our free E-Newsletter service is an excellent way of staying up to date with news and features from around the global auto industry.
