Tata Nano - History

History

After having successfully launched the low cost Tata Ace truck in 2005, Tata Motors began development of an affordable car that would appeal to the many Indians who drive motorcycles. The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low cost Indian labor, as well as a new design concept called Frugal Engineering.

“Frugal Engineering” was a term coined in 2006 by Renault Chief Executive Carlos Ghosen to describe the design process behind the Tata Nano. This type of design concept was designed to better the those at the bottom of the pyramid. However, “A Study on Consumer Perceptions & Expectations for Tata Nano” shows that the bottom of the pyramid is not very aware of what they are getting when purchasing a Tata Nano. While that paper may seem to focus on the Indian contribution, the Nano was a truly international effort. “Tata turned to Germany’s Bosch for a new engine-management system; Italy’s I.D. E. A. Institute and Trilix for styling and exterior design; India’s Sona Koyo for lightweight steering shafts; America’s Johnson Controls for the seating system; Japan’s Toyo for the engine-cooling Germany’s Behr for the heating, ventilating, and air-conditioning system; and India’s Madras Rubber Factory for tougher than normal rear tires.” So to call it the Indian Car is understandable, but misleading. The Nano is an excellent example of LAPD. The "LAPD (lean principle applied product development) process is implemented with utilization of external sources of knowledge and utilization of the digital technology that support the product development process in order to complement the weakness of technological capability." While the Nano is engineerd from the bottom up, the existing economies of scale from other manufactures are not to be ignored. For the Nano, Tata motors chose to "outsource 85% of the Nano’s components and use 60% fewer vendors than normal to reduce transaction costs and achieve better economies of scale".

The introduction of the Nano received much media attention due to its low price.