What went wrong with the Nano? And what must Tata do to bring it back on track>

Tata Motors racked up over 2,00,000 fully paid bookings, which with limited capacity translated into a potential four-year waiting list, at worst. The company could sell everything it made but just months before the Sanand plant was ready for full scale production, the highly-publicised incidents of the Nano catching fire battered the car’s reputation. After touching a high of 9,000 units in July 2010, sales have since fallen off a cliff to a shameful 509 units in November 2010.

What went wrong? It’s a combination of many factors. The plant relocation messed up schedules and with the long-drawn-out rollout and even longer waiting lists, potential buyers began to lose interest. Also, the first round of bookings became a lottery for many and hence it was hard to gauge the true demand for the car. The booking system alienated many genuine buyers who could not buy the car. The company opened sales in select States only a year later. Till now, sales are open in only 12 States.

However, it’s the spate of fires and the horrific sight of a Nano ablaze that is mainly responsible for scaring buyers away. Tata claims to have identified the cause of the fires and has introduced a raft of modifications and upgrades to sort out the problem. Some advertising experts say that Tata has been complacent after the huge bookings it received and didn’t implement a comprehensive advertising strategy to keep the Nano brand pumped up. But after the problem of fires and falling sales, advertising has been reactive.

There are other softer factors which Tata did not bargain for. Many potential Nano customers want the car but don’t buy it because they can’t drive! Tata should have foreseen this by taking a leaf from Maruti’s book. To tackle this issue, Maruti has heavily enlisted a lot of its first-time customers into Maruti-supported driving schools. Besides, many potential Nano buyers were not creditworthy and hence could not get loans.

This leads us to a larger question. Does Tata Motors know who the Nano customer really is? Tata is addressing an entirely new segment of people who never considered buying a car. This new segment, in which the Nano is the only player, will take time to develop. However, the Alto's record sales, helped in no small measure by the Nano’s recent price hike (a cardinal mistake), suggests that if people can afford a not-so-one-lakh Nano, they don’t mind spending a bit more on a tried-and-tested product.

However, one should not write off the Nano based on a few months of sales. These are very early days and the entire might of Tata Motors is behind this car to ensure its success. The company needs to quickly bring a Nano V2 with all the changes and improvements that have been on the anvil. Bringing forward the diesel launch would help too.

What Tata Motors has in its pocket are thousands of satisfied Nano buyers. They love the car’s space and fuel efficiency, which the Alto can’t match. If no more Nanos go up in flames, there’s nothing better than positive word-of-mouth to restore customer confidence. The recent 4-year/60,000km warranty will also help. It may be a long haul but we wouldn’t be surprised if the Nano does emerge from this mess to eventually take its natural place on the sales charts.