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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Please note:
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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Project Cub
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...
Serving an 'Ace'
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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.
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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...
The 'Ace' Effect
Analysts opined that Ace had changed the dynamics of the LCV market in India by creating a new market segment termed the SCV segment. Ace rapidly emerged as the first choice for transporters and single truck owners for city and rural transport. By October 2005, since the launch of Ace, LCV sales of Tata Motors had grown by 36.6 percent to 28,537 units due to the rising demand for Ace...
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The CompetitionThere 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...
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Outlook
Experts opined that the main reason for the success of Ace was that customers were given a product that looked and performed better than the existing alternatives.
Various value enhancers such as car-like features in the drivers cabin, attractive finishing, etc. helped improve the value perceived by customers...
Exhibits
Exhibits I: Picture of Tata Ace
Exhibits II: Product Profile of Tata Motors (As of June 2006)
Exhibits III: Sales Volumes of Tata Motors
Exhibits IV: Financials of Tata Motors
Exhibits V: Specifications of Ace
Exhibits VI: Features of Ace
Exhibits VII: Tata Ace Advertisement
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