Tata Motors: Serving an 'Ace' for Success

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Case Details:

Case Code: MKTG139
Case Length: 20 Pages
Period: 2001-2006
Organization: Tata Motors Limited
Pub Date: 2006
Teaching Note: Yes
Countries: India
Industry: Auto & Ancillaries

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It has always been our desire to anticipate demand and develop products to meet that need. We perceived that there would be a growing demand for a safe, reliable and versatile 4-wheel very light commercial vehicle for carrying goods and people. It would facilitate inter-city transport and extensively connect town and villages in rural India. I believe the Tata Ace will deliver excellent value to its owners and operators." ¹

- Ratan Tata, Chairman, Tata Motors Limited, in 2005.

"The reason for the popularity of the Ace is factors such as looks, pricing and efficiency, which were lacking in the light commercial vehicle segment so far. Even the international market has accepted it to be a unique product." ²

- A Mumbai-based auto analyst, in 2006.

The 'Ace' Delivers

In June 2006, the Society of Indian Automobile Manufacturers³ (SIAM) reported that the light commercial vehicle⁴ (LCV) segment in India recorded sales of 13,373 units in May 2006, up from 9,460 units recorded in May 2005, which constituted an increase of 41.4 percent.⁵

Analysts said that one of the main factors for the massive growth in this segment was the successful response to 'Tata Ace' (Ace), a mini truck produced and marketed by Tata Motors Limited (Tata Motors), India's largest automobile company⁶ , and part of the Tata Group .⁷ Ace, India's first indigenously developed sub-one ton mini-truck, was launched in May 2005.

Tata Motors decided to develop Ace, after a study it conducted found that customers wanted a last mile distribution vehicle⁸ that had low maintenance costs, higher driver safety, and better driving comfort. In line with these customer requirements, Tata Motors developed and launched Ace, which became a success in the market.

It was quickly sold out with demand exceeding supply, and created a new segment -the small commercial vehicle (SCV) segment, an area earlier dominated by three-wheel carriers.

In addition to targeting the domestic market, Tata Motors launched Ace in Sri Lanka in May 2006.

The company reportedly had plans to export Ace to other overseas markets like Bangladesh, South Korea, the Gulf countries, the CIS countries, and Africa.

It was reported that the company was also receiving orders for Ace from customers in the US and Western Europe. ⁹

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1] "Tata ACE to create a new mini-truck segment in India," http://www.dancewithshadows.com, May 17, 2005.

2] Prabodh Chandrasekhar, "Tata Motors gears up for Ace exports," http://www.businessstandard.com, June 20, 2006.

3] SIAM is a national industrial body representing 38 leading vehicle and vehicle engine manufacturers in India. It works on behalf of the automobile industry with government, national and international organizations.

4] According to Indian Motor Vehicle Act, 1988, light commercial vehicles are that category of goods or passenger vehicles whose un-laden weight does not exceed 7,500 kg.

5] "Car sales outpace motorcycle growth," www.financialexpress.com, June 10, 2006.

6] http://www.tata.com/tata_motors/index.htm.

7] The Tata Group is one of the oldest and largest business conglomerates in India. The Group comprises 93 companies, operating across six continents, and employs around 220,000 people. The Groups companies operate in sectors like engineering, chemicals, consumer products, services, and information systems and communications. (Source: www.tata.com)

8] Last mile distribution vehicle refers to a vehicle that travels a short distance, usually between 60-100 kilometers, and is used to transport goods from the outskirts of a city to its center.

9]"Tata Motors gears up for Ace exports," Business Standard, June 19, 2006.