Abstract

In March 2005, at the Geneva Motor Show, there was tremendous excitement about the unveiling of the world''s cheapest car manufactured by Tata Motors. Five years after Chairman Ratan Tata promised to build the world''s cheapest family car, the Tata Group seems to have almost finished the project. The Tatas are clearly laying big bets on the project. The Tatas are also closely monitoring the moves of competitor Maruti. By the end of 2006, Maruti''s new diesel plant will be ready, coinciding with the planned capacity expansion at Manesar, near its existing plant in Gurgaon. Maruti had earlier introduced diesel versions of its Zen and Esteem cars with Peugeot engines, but subsequently withdrawn them because of poor profit margins. By 2007, the Indica, which has little competition today, will be under attack from Maruti’s diesel vehicles. In such a scenario, the Tatas will not be able to afford to lose money on their new small car too. Do the Tatas have the staying power to make a success out of the $2,000 model? Or is it an idea that looks good on paper but is difficult to implement?

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

Tata; Ratan Tata; The world’s cheapest car; Tata Motors’ Engineering Research Centre; Maruti’s small car; Tata Motors’ marketing strategy; Target costing; Product development