Cheap car for China?

The New Year has brought us the much anticipated low cost car (christened the Nano) from the Indian car manufacturer Tata Motors. Tata Group chairman Ratan Tata expressed his noble intentions "to bring the joy, pride and utility of owning a car to many families who need mobility". While Nano will be launched as a first step only in India, Tata has announced its plans to sell the vehicle in other markets around the globe.

The question that immediately pops into mind is: Would the Nano succeed in China? A superficial view to China’s auto market may prompt a "yes, why not?" China is still a developing car market, and there are also many families in the mainland who need mobility and would be proud to own a car.

Tata insists very much on the fact that the new Nano satisfies technical requirements such as emission and vehicle safety standards requested by international markets. Selling cars is not only about meeting government regulations, though. It is above all about understanding consumer needs.

On the mainland, beside the universal need for basic transportation, we identify highly relevant emotive drivers for car purchase, such as showing success, gaining self-confidence and caring for family. Chinese consumers do pay attention to the niceties of vehicle performance, safety aspects and interior design. How can a car in its basic version – the one which causes the sensation as cheapest car in the world – then attract Chinese car buyers by proposing a 33hp engine and renouncing airbags? And how can it withstand severe competition by proposing only rudimentary equipments, without radio, power steering or air conditioning?

Tata says that the Nano will be better equipped for the international markets, with the price tripling or even quadrupling. If this is the case, the Nano will become nothing more than a "regular" competitor in the market, competing particularly with numerous Chinese domestic brands which altogether hold a dominant position in the micro car segment.

It seems that the idea of vehicle downsizing is not really fitting for China, where the car market is moving upwards and owning a car is also an indication of the owner himself moving upwards. To find a foothold in the Chinese market, Tata would need to explore how to make the product attractive by adding value to the vehicle – functional or emotional – while still keeping the cost low. Evidence of success in doing this does exist in other parts of the world. Who thought three years ago that the Dacia Logan, conceived by Renault as low cost vehicle particularly for Eastern Europe, would eventually succeed in the highly developed, Western European markets?