Cater Racing

9-108-011

REV: JANUARY 3, 2008

KRISHNA G. PALEPU

VISHNU SRINIVASAN

Tata Motors: The Tata Ace

In the last 40 years, we created the capacity to build 400,000 vehicles per year. In the next five years, we

plan to double that. We believe we are at a unique time in our company’s history. In order to generate the

growth we envision, we will have to think creatively and develop unique products like the Ace.

— Ravi Kant, Managing Director, Tata Motors

The Tata Ace was a small four-wheeled commercial vehicle launched by Tata Motors in May 2005

at a price of 225,000 rupees (Rs.) ($5,000)1 with a payload capacity of 0.75 tons2 (see Exhibit 1 for a

picture of the Ace). The Ace cost 50% less than any other four-wheeled commercial vehicle in India

and was significantly cheaper than pickup trucks with similar payload capacities found in

international markets. Unlike other commercial vehicles, the Ace, with its compact size and shorter

turning radius, could maneuver through India’s narrow urban streets and cost-effectively transport

small loads to villages and towns in rural areas. Prior to the launch of the Ace, the small-load

transport segment was served by three-wheeled vehicles known as auto rickshaws (see Exhibit 2 for

a picture of a typical commercial auto rickshaw). However, three wheelers were noisy, unsafe, and

slow and could overturn when carrying large payloads.

By offering a niche vehicle that met the unique needs of the Indian transportation sector at a price

comparable with that of a three wheeler, the Ace created an entirely new product category (akin to

Chrysler’s introduction of the minivan to the U.S. market in 1983) and was an instant hit with the

public. The annual target of 30,000 vehicles was sold in less than a year, despite the product’s being

available in only approximately 25% of the country. In October 2005, encouraged by this success, the

company announced that it would double annual production to 60,000 units. In January 2006, the Ace

won BBC Top...