Daybreak - How Tata landed a Punch on Maruti and also buried Nano’s ghost

Episode Date: February 19, 2025

Back in 2009, Tata launched an egg-shaped four seater hatchback that it was convinced would redefine mobility for the masses, Tata Nano. Initially priced at just Rs. 1 lakh, it was designed as the dream ride for the lower middle class. It was a bold and ambitious that unfortunately didn't quite take off. Auto experts say it was because of a combination of factors. But perhaps the biggest learning from the Nano fiasco was that car ownership in India isn’t just about wheels. It’s about status. Now, almost two decades later, Tata Motors has managed to dethrone India’s largest passenger carmaker, Maruti, to officially become the public’s favourite. And it’s all because of how it has positioned itself since the Nano. Take one of its most successful models, Tata Punch, for example. Last year, this compact SUV became the country’s best selling car. It managed to beat the iconic Maruti Wagonr and Swift which previously took the top spot for several years now.  So how did Tata Motors get here? In this episode we dive into its journey from the Nano to the Punch. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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Back in 2009, Tata launched an egg-shaped four-seater hashback that it was convinced would redefine mobility for the masses. I'm talking, of course, about Tata Nano. Initially priced at one-lack rupees, it was designed as the dream ride for the lower-mid class. It was a bold and ambitious bet. But unfortunately, the nano never quite lived up to its potential. Auto experts say that it was because of a combination of factors,

but perhaps the biggest learning from the nano fiasco was that car ownership in India is not just about wheels. It is about status. The Kien spoke to Vinkesh Gulati, the former president of the Federation of Automobile Dealer Association, which is the apex body of the Indian auto retail industry. And he put it quite simply. The market saw the nano as the quote unquote Garibki Garry, the poor man's car. The bottom line is nobody wants that.

Vinkesh said that a lot of people would rather spend a little extra and buy a royal endfield than be seen in a Tata Nano. It was obviously a big loss for Tata Motors, but it sure learnt a lesson. Almost two decade later, Tata Motors has managed to dethrone India's largest passenger carmaker, Maruti, to become the public's favorite. And it's all because of how it has positioned itself since the Nano. Just take one of its most successful models, the Tata Punch, for example. Last year, this compact SUV became the country's best-selling car.

It managed to beat the iconic Maruti Wagonar and Swift, which previously took the top of spot for many years. And it did that without explicitly positioning itself against Maruti's impressive lineup. Its pitch for the punch was quite simple. Here is an exceptionally safe car with strong features at a relatively affordable price. Vinkesh explained that Maruti never really anticipated the need for a competitively priced car with strong features and adequate safety. So, it simply continued banking on the idea that Indian buyers prioritized fuel efficiency above everything else. So, unlike Tata, it was ignoring a very apparent shift in consumer preferences.

By the time that Maruti and Hyundai recognized this trend and responded with their own SUVs, fronks and Exeter respectively, it was already quite late. Because by then, Tata Motors had established Punch as an aspirational product. and its other success story with the Neksen model only added weight to the punch. So, how did Tata Motors get here? In this episode, we dive into its journey from the nano to the punch. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha Sharma, and I Don't Chase the News Cycle.

Instead, every day of the week, my colleague Rahal Philipos and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 20th of February. The Tata Motors strategy is quite simple. It is not going to waste time trying to take on incumbents. Instead, it creates its own category, becomes an early entrant and then dictates the segment. An executive from the company told the Ken that this approach is way better than burning cash in an existing segment and fighting market leaders. Think about some of the most popular Tata models.

the off-road SUV Sierra in 1991, the nano in 2009, or the more recent models like Punch. You'll realize that Tata Motors' design thinking has always been to thrive on the first-mover advantage. And that is exactly what it tried doing with the punch. At some point, the company realized that customers wanted a small, affordable SUV that can navigate all the unexpected challenges that Indian roads have to offer. So, it employed three design studios in India, the UK and Italy, and after hundreds of sketches, they were able to develop punch. But the real reason that the punch took off was actually because of Tata Motors' more

premium SUV than Nixon. Now, what you need to understand is that cars in India are typically categorized into seven categories. A, B1, B2, C1, C2, D1 and D1. D2. These categories are determined based on their sizes and prices. So those in the A segment are typically many cars priced between 2 to 6 lakh rupees, while the ones in the D category are usually above 4.8 meters in length and priced over 20 lakh rupees. With the punch, Tata Motors was able to offer C-segment features in a B-segment car. So people who could not afford the more premium

Nexon were getting similar higher end features in the punch. This is a popular gimmick that a lot of automakers have relied on, particularly in the recent past. The South Korean carmaker Kia owned by Hyundai is the best example of this. Its compact SUVs, Seroes, Sonnet and Seltos, both have features few in their category have. Now, funnily enough, unlike the punch, the Nexon wasn't a big hit after it launched in 2017. After all, typically, city commuters prefer cars that are under four meters in length for everyday driving. But the tables turned after the year of its launch when the model managed to secure a five-star

rating from the global NCAP, which is a safety assessment program. It was the first time that an Indian-made car got that high rating. And it was a real full-circle moment for Tata Motors, because you see, back to the Back in the day, when Nano was around, there was a lot of controversy around some models catching fire. So the company earned a bit of a bad rep for building unsafe cars. But this changed everything. It re-established people's trust in Tata's cars.

And by 2021, Nixon ended up becoming the best-selling SUV in the country. It was clear by then that Tata had figured out the winning formula. More on that in the next segment. checked out $1 billion in 10 minutes yet? For those of you who haven't, it is our latest mini-series based on the Kent's inaugural case competition where India's smartest business

school students were asked what they would do with $1 billion if they were running a quick commerce company. In episode one, we dive into the two winning strategies for the OGE E-grocer, Big Basket, where both teams set out to leverage

the Tata ecosystem, but in radically different ways. which strategy is going to win? Well, tune in and find out. The links are in the show notes of this episode. Listen for free while you can, by the way, because this series is going behind a paywall on the 3rd of March. And now, back to the episode.

With the success of Punch and Nexon, Tata Motors realized that they had cracked the SUV space. So they decided to bring together multiple research and cross-functioning teams for this new product segment. And this caught the attention of not just customers, but also competitors. In April 2023, Maruti introduced Fronks, which was in the B2 category, much like Punch. And three industry stakeholders told again that it very strategically positioned the model below Brezer, its best-selling B2 segment SUV. One of the stakeholders explained that the idea was to pull numbers not just from Punch, which is a B1 car, but also.

Also from Nexon, which is around the B2 segment. But what ended up happening instead was that it cannibalized its own lineup, including the Bellino and Braza. Hyundai also went down that path in July that year when it launched its SUV X-Tor. It came up with a bunch of advanced features like a CNG variant, a sunroof, a wireless charger and six airbags. What ensued was a battle on design, features and perception. After Hyundai, Tata Motors launched a CNG version of the Punch, complete with a sunroof and

later six airbags. The competition was also playing out at dealerships. A senior executive at Cropix Auto, which runs multiple Tata Motors showrooms in Bangalore, told us that almost every buyer visited both Hyundai and Tata showrooms and would test drive both the Exeter and the Punch. Punch also faced rivalry from the other B2 segment SUVs like NIST. Sun Magnite, which was launched a year earlier at a similar price point, and Renault Kiger, which shared its platform with Magnite.

Both of these models earned a four-star safety rating, but struggled against Tata Motors due to their limited reach in India. But beyond branding, Tata Motors also leveraged its ingenuity to make crucial advancements. Stay tuned for more on that. Tata Motors tends to enter new segments and rewrite the rules, like it did with CNG vehicles. While Maruti, Honda and Hyundai all had CNG variants way before it did, Tata decided to take things one step further. It introduced two-cylinder CNG technology which provided reasonable boot space, which has always been

a major pain point for CNG buyers. And that's not all. Usually, CNG models were considered Underwhelming. They were never really offered in high-end cars. But Tata Motors changed that with the Nexon-I-C-NG. It even added premium features like a sunroof to the model, and the strategy ended up paying off. According to a company's spokesperson, the company's CNG passenger vehicle's sales jumped 71% from the previous year in 2024. Of the total punch units sold in that year, C&G variants accounted for about 35%. But now that the industry is moving towards electrification, this dominance could be temporary. While Japanese automakers, the likes of Toyota and Honda remained largely invested in hybrids,

Tata and Mahindra are all in on electric vehicles. So, the company's next big goal is net zero emissions in its passenger and commercial vehicle businesses by 2045. But whether this will happen or not depends entirely on how quickly consumers transition to EVs. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on 3rd. top of the Ken website.

Today's episode was hosted by Snikda Sharma and edited by Rajiv Siyah.