India's Small Car Industry and its Emergence as

A Potential Lead Market for the Low-Cost Small Car Segment

[Background] [Objectives] [Proposed Methodology] [References]

A project of:

• Institute of Technology and Innovation Management (TIM @TUHH)

Project team: Rajnish Tiwari (project lead) and Andreas Lange

Project framework: The project work outlined in this proposal aims to contribute to the main study "The Role of Offshore R&D in Strengthening Competitive Advantage: Chances and Challenges in India"

Start: May 2008

Proposed duration: Three months

Project status: Completed (September 2008)

See abstract and table of contents of the project report, PDF, 36 KB

Key Results: India's Long March to a Global Auto Major: A Study of Government Influence on Industry Development in the Post-Independence Era; (PDF, 730 KB) (released: March 2009)

Background

In January 2008, Tata Motors introduced the Tata Nano, a 3,100 mm in length, 33 hp, four door, four wheel, full-fledged car at the price of Rs 1 lakh, roughly 2,500 U.S. dollars (Source: Tata Motors). It is the embodiment of the vision of Tata Group Chairman, Ratan Tata, to provide an economical replacement for the common occurrence of a family of four forced to commute through the streets of India riding on a single scooter (Gupta and Sriram, 2008). The Tata Nano may be viewed as a symbol for the mobilization of a rising nation, one that has significant implications for the global automotive industry.

Rising incomes, better financing for vehicles and improved roads are the combined drivers for strong growth of the automotive sector in India (KPMG, 2007). In the fiscal year 2006-07, the domestic passenger car market grew by 20%, making India one of the fastest growing passenger car markets in the world in absolute terms (SIAM, 2007; OICA, 2007). Thus, multinational companies from the likes of Suzuki, GM, Ford and Renault/Nissan have reacted swiftly and adjusted their India strategies by initiating partnerships and investments to capture market share and secure their global market positions (UNCTAD, 2007, p. 46).

Objectives

The utilization of homegrown frugal engineering as demonstrated by the Tata Nano, the strong domestic growth of the passenger car segment and the influx of foreign investment beg the question whether India is developing as a "lead market" for the global small car segment. This report aims to answer this question and does so by addressing the following points:

1. The development of the Tata Nano
2. Satus-quo of India's small car segment
3. Investments made by global automotive firms in India
4. The analysis of India's small car segment employing the "Lead Market" approach
5. Global implications of India as a "Lead Market" for the small car segment

Proposed Methodology

The study relies basically on desk research by combing resources scattered across various magazines, newspapers, government policy papers and the likes and examining them in the light of the "Lead Market" approach from management science.

Selected References (at project formulaion)

1. Beise, M., 2001, Lead Markets: Country-Specific Success Factors of the Global Diffusion of Innovations, Physica-Verlag, Heidelberg.
2. Gupta, I. and Sriram, R., 2008. Interview with ratan tata: making of nano. The Economic Times, Jan 11. [accessed 20 May 2008].
3. KPMG, 2007, India Automotive Study 2007, [accessed 20 May 2008].
4. OICA, 2007, Production Statistics, International Organization of Automobile Manufacturers, [accessed 20 May 2008].
5. SIAM, 2008, Industry Statistics, Society of Indian Automobile Manufacturers, [accessed 20 May 2008].
6. Tata Motors, 2008, Tata Nano, [accessed 20 May 2008].
7. UNCTAD, 2007, World Investment Report 2007, United Nations Conference on Trade and Development, [accessed 20 May 2008].

[ For further enquiries, please contact Rajnish Tiwari ]