Case Study on Tata Motors

Tata Motors, earlier known as Tata Engineering & Locomotive Company Ltd. (Telco), was established in 1945 after its parent company, Tata Sons purchased a plant that manufactured passenger carriage under frames for the Indian Railways, from the Government of India. Telco used the plant to manufacture steam locomotive boilers and other engineering products, under the name Telco. The company also entered into collaborations with Marshall, Sons & Co, UK to manufacture steam road rollers, and with Krauss-Maffei to manufacture steam locomotives.

In 2001, Tata Motors experienced a difficult phase with severe losses due to the decline in vehicle sales, spiraling manufacturing costs and a capacities expansion plan that cost Rs 13 billion. The difficult phase prompted the company to completely re-examine the market and customer requirements. This re-examination threw up several interesting findings.

On May 5, 2005, Tata Motors commercially launched the Ace in Bangalore. At the launch function, the company said that Ace was being introduced at the right time, when the development of road infrastructure was being emphasized and goods distribution movement was increasing. Ravi Kant (Kant), Managing Director, Tata Motors said, "Development of road infrastructure has led to an increase in the distribution of goods across the country, based on the hub-and-spoke model. Recognizing the growth trend and anticipating the need for a last-mile distribution vehicle, we had developed Tata 207DI, a pick-up vehicle designed to carry larger and heavier payloads in the sub-two ton category.

We also anticipated an opportunity in the sub-one ton payload segment, which is witnessing significant growth and is being serviced by 3-wheelers. Ace is being positioned at this market."

Ace was initially launched only in the Southern states of India, namely Karnataka, Tamil Nadu, Andhra Pradesh, Kerala, and the Union Territory of Pondicherry, as they were considered as key markets for small tonnage vehicles.

There was some initial skepticism among a few analysts on whether Ace would really impact the sales of three-wheeler vehicles.

One reason was that Ace was a four-wheeler vehicle and had to compete with three-wheelers, which were priced much lower than it.

Three-wheeler vehicles had witnessed rapid growth, from 96,000 in 1990-91 to over 300,000 in 2004-05, despite their poor design and limited capacities, mostly due to their low prices.

Questions:

1- Understand the aspects related to the new product development process in the Indian Light Commercial Vehicles (LCV) segment of the Indian automobile industry.
2-Understand the impact of Tata Ace on the three wheeler cargo vehicle/ very light commercial vehicle market segment in India.