Recent Business Publications

A lesson for Detroit - Tata Nano (San Francisco Chronicle)

A Radical Innovation, with the Potential to Revolutionize Automobile Manufacturing and Distribution
By GERARD J. Tellis
Published: March 31, 2009

On Monday, President Obama challenged the U.S. automakers to create a credible model to survive and succeed in the competitive global market. As of last week, that market has a new entry, the Tata Nano, launched in Mumbai, India.

Don't dismiss the Nano as a small, poor man's car that will cause a mere ripple on the world market. The Nano is a radical innovation, with the potential to revolutionize automobile manufacturing and distribution.

The tiny Nano incorporates three innovations, which together make it huge. First, the Nano uses a modular design that enables a knowledgeable mechanic to assemble the car in a workshop. Thus, Tata can outsource assembly to independent workshops that can then assemble the car on buyers' orders. This innovation not only removes costly labor from the manufacturer's side but also allows for distributed entrepreneurship on the dealer's side.

Second, the low cost of the Nano comes from a combination of its no-frills design and its use of numerous lighter components, from simple door handles and bulbs to the transmission and engine parts. The lighter vehicle enables a more energy-efficient engine that gets 67 miles to the gallon.

Third, at just 122 inches long, the Nano is one of the shortest four-passenger cars on the market, yet it allows for ample interior space.

These innovations have enabled Tata to introduce the Nano at a base price of $2,000, less than half the price of the next cheapest rival in India, the Maruti 800. The low price has triggered worldwide interest in the car and a surge of orders, even in a struggling auto market. It promises to make Tata a well-known name, even as the recent acquisitions of Jaguar and Land Rover have weakened the company financially.

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