1) Build out a network of dealerships versus utilize existing distribution networks (Mercedes, Volvo, Land Rover, Jaguar, etc.).
2) Import all completed cars from India versus setting up an auto manufacturing plant in the US or Mexico.
Retail Pricing Forecast
Before going in-depth with the strategic decision-making process, it is necessary to understand the basis for some key figures. An initial concern regarding bringing automobiles from India to the US involves the safety specifications that each market requires. The US and Europe have vehicle safety and emissions standards that far exceed those mandated of car companies in India. Everything from glass to plastic components and engine specifications need to be upgraded for an Indian car to meet US vehicle standards. Clearly this kind of transformation will add substantial costs to the Tata Nano car. The difficult question of what the new selling price will be in the US, however, is answered by the Tata CEO. Recently, the CEO, facing an audience at Cornell University, stated that should the Nano be introduced to the US market, the $2,000 Indian car would run in the $7,000 to $8,000 range. Further, Tata previously announced that the Nano Europa, a version of the Nano soon to be retailed in Europe, would sell for roughly $8,400 (6,000 Euros). Blending these figures, an estimated US retail price of $7,500 seems appropriate, as indicated in Exhibit 2. As is customary in the US auto industry, the customer will be expected to pay around $750 for the car’s delivery fee. This brings the total US retail price for the Nano to $8,250. This ultra-low price for a vehicle will garner mass appeal from the US market. Using the average Tata cost-of-sales, Exhibit 2 shows the details of expected revenues and cost-of-sales for US nano sales based on the demand forecast formed in Exhibit 1 of 92,000 cars over 3 years.
Other posts on Tata Motors related to US expansion:
Executive Summary: Tata Motors' Expansion into the US and other Foreign Markets
Tata Motors Recent Financial Performance and Customers
Method and Rationale for Tata Motors' Expansion into the US
Demand Forecast for the Tata Nano in the US
Tata Motors Expansion into the US: Retail Pricing Forecast
Tata Motors Expansion into the US, Build Dealerships vs. Dealer Network
Tata Motors Expansion into the US, Import vs. Auto Mfg Plant
Works Cited for Tata Motors Expansion into US
Schultz, Jonathan. "Tata Chairman Says U.S. Car Will Cost '$7,000 or $8,000'" Automobiles - Wheels. The New York Times, 15 Mar. 2011. Web. 06 Apr. 2011.
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