$2,000 car with early promise falls out of favor in Asian mar

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Several years ago, I was all excited about a $2,000 car called the Nano being introduced in India by Tata Motors, the maker of Jaguar. But the car has proven to be a big bust in the Asian market.

I’m reminded of the words of former Continental CEO Gordon Bethune: It’s possible to make a pizza so cheap no one will want to buy it.

Bethune knew that if you keep cheapening your product, with worse and worse service, people won’t buy what you’re selling — no matter what you charge. With that wisdom, Bethune turned his company around by giving a good product and making people want to buy Continental tickets. (The airline has since been acquired by United and will likely be phased out as a brand.)

It would seem that the Nano is the cheap pizza in this case. While it had some early popularity, the Nano has since fallen out of favor. One of the problems was safety issues with spontaneous combustion in some early models. Unless you have a hankering for smores as you drive down the road, it’s not a good idea to go flambé in your vehicle!

But ultimately, the Nano really failed to find its niche in the market. It was designed for a Third World market where entire families are accustomed to riding around on a single scooter with all their shopping bags. I recall being at Costco World Headquarters in Washington State and seeing a picture in the lobby from their store in Taipei showing a Taiwanese family with merchandise on a scooter stacked 10 feet high!

So the makers of the Nano thought they could build an affordable car to get people off the 2 wheelers. But that didn’t work because 2 wheelers are cheap and get great fuel economy. A Nano at $2,000, however, is still too pricey for many poor Third World families. At the same time, a poorly built $2,000 car is cheap enough to be stigmatized by the middle class.

Gordon Bethune was right again. Nano made a pizza so cheap (yet too costly for others) that nobody wanted to buy it.

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