Business

Tata's Nano: A Small Car with Large Consumer Surplus? Ref. No.: ME0012

“Since, promise is a promise the standard dealer version will cost Rs 1 lakh,”1

– Ratan Tata, Chairman, Tata Sons “We designed the Nano to offer a new form of transport to the people of India and maybe later, to the rest of the world.”2 “…if economists are to play their part in shaping the canons of economic policy fit for a new age, they will have to build on the foundations of consumer’s surplus.” 3 – J.R. Hicks, Nobel Laureate British Economist

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“Tata unveils Rs-1 lakh People’s Car ‘Nano’”, http://ibnlive.in.com/news/tata-unveils-rs1-lakh-peoples-car-nano/56046-7.html, January 10th 2008 Njoroge John,“The Nano – the World’s Cheapest Car”,http://www.independent.co.ug/index.php/news/todays-news/90-todays-news/ 905-the-nano-the-worlds-cheapest-car, May 7th 2009 Currie John Martin, et al., “The Concept of Economic Surplus and Its Use in Economic Analysis”, http://www.jstor.org/pss/2230317 “Tata Motors: Profile”, http://www.tatamotors.com/our_world/profile.php

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This case study was written by Akshaya Kumar Jena IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources. © 2009, IBSCDC. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner.

Background Reading: Chapter 5, “Demand and Consumer Behaviour”, Economics (Paul A. Samuelson and William D. Nordhaus)

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Tata Motors, set up in 1945 to manufacture locomotives, is India’s largest automobile company. With over 4 million of its vehicles plying in India, it not only stands out as the market leader in each segment of commercial vehicles but also takes rank among the top three passenger vehicle producers of the country. India’s first fully...