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The Indian car company, Tata Motors, launched its super-cheap, no frills car in Mumbai today. The Nano goes for $2050, and while it sounds like a perfect time to sell a car that’s half the price of a Vespa, it actually winds up being bad timing. Plus, Tata made a mistake that typifies the kind of thinking that got us into this economic mess.
There’s nothing wrong with the idea behind the Nano — open up the car market to the world’s poor. The problem is that Tata Motors might not be around to see that come to fruition.
In January 2008, Tata showed off the Nano prototype to cheers from across India. Surely, this was a sign that India’s economy was on a bigger stage. And on cue, as if Tata was trying to prove that point, in March, the company bought Jaguar and Land Rover from Ford for 2.3 billion. Most of it was leveraged by a $2 billion bridge loan.
The company took on huge debt at exactly the wrong time because refinancing quickly become impossible with the credit crunch. Tata also couldn’t get money to build a new factory that was supposed to build the cars, so production was delayed. Now, despite its price, the Nano is being unveiled in about the worst car market possible.
Bloomberg concludes the low price coupled with the timing will force Tata to take on even more debt:
“If you try too many things, you may fail,” said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp., which manages $3.1 billion. Tata Motors needs “deep pockets to pour in money” into reviving Jaguar and Land Rover, he said.
Wasn’t it enough of a task to try and create a whole new car market? Did you really need to buy two luxury brands and try to turn them around at the same time?
Even the company that’s making the simplest car in the world had to make things complicated.
It’s the same story we’ve heard over and over. AIG couldn’t just do what it did best – sell insurance. No, it had to get into complex financial instruments that wound up rotting the company and its good name. Citigroup couldn’t stay a bank. It had to become the one-stop Goliath for everything financial, living way beyond its means all the while.
There’s a reason KISS, as a rule, works. When you don’t follow it, you do usually wind up looking stupid.
As for the Nano, I’m sure there are lawnmowers with better engines. It doesn’t have air bags or antilock brakes. Extras include – air conditioning, power streering and the radio. For these reasons, there are no plans to sell it in the US.
But it does have one thing going for it that I think many Americans are craving right now.
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