Tata reiterated its threat to invest the the U.S. and Europe with their bargain-basement Nano car. At an event held today in Toyko, Tata’s Vice Chairman Ravi Kant said that “Tata Motors now plans to take it forward to the developed markets in Europe and in the U.S.,” The Nikkei [sub] reports. “Now plans?”
Tata had announced plans for Europe in 2008 (nothing happened). Mr Kant himself said in the beginning of the year that “we also recognize there is a market (for the Nano) not only in developing countries, but possibly in the developed countries.” (Sound familiar? He must have a stump speech.) Again, nothing happened. Nightmare scenarios of Tata and BYD flooding the U.S. and “blow up the distribution chain” by selling cars via “warehouse stores or electronics stores” made the rounds. Nothing happened. Dealers continue to die like dinosaurs without the help of cheap Indian or Chinese cars. Meanwhile, Tata struggled with getting the Nano produced in India, and in China, the sheen is off BYD’s halo.
Major barrier to entry: Tough regulations in Europe and the U.S. In Europe, a car must be EU certified before you can sell it. In the U.S., you self-certify, but woe is you if NHTSA buys a car at a dealer and it’s not within spec. Might as well close down.
When Kant announced the impending arrival of the Nano at U.S. shores last January, he said that “for the United States we need a car which has a larger engine and we need additional crash test modifications and we are in the process of doing it.” Today, he said in Tokyo: “The car we are going to be making for Europe meets European regulations.” Sound familiar? European tests are demanding. Guess where most applicants from low cost countries fail? In the crash with pedestrian dept.
While Western companies struggle with building low cost cars that emerging markets demand, producers of low cost cars in emerging markets struggle with their entry into overdeveloped and saturated markets.