Tata launched the Tata Ace mini-truck in India in 2005 at a price of Rs. 225,000. It targeted the small commercial vehicle segment of 0.75 to 1 ton payload that was dominated by three-wheelers. The Ace was an instant success, achieving its annual sales target of 30,000 units in under a year. Its compact size, low cost of operation, and maneuverability in crowded Indian cities enabled it to capture over half the market share in the segment. The Ace's success encouraged Tata to double its production capacity and launch variants like the Ace Super to expand its market reach.

1. Tata: Serving an ACE!!
Somendra (154)
Subhro (160)
Suvansh (163)
Vikram (171)
Vivek (175)
Yuvraj (178)

2. • Launched in May ‘05 at a price of ₹ 2,25,000
($5000) and capacity of 0.75 tons2
• Compact
size • Cost-effective
• Shorter •Created a
turning new product
radius category
• Met the annual sales target of 30,000 units in
less than a year
• Encouraged TATAs to double the production
capacity

3. Indian Commercial Vehicle Sector
Three wheelers
India: World’s largest market in 2005
₹ 1,00,000 ₹ 2,00,000
–
0.5 to 1 Tons
18 to 30 KMPL
₹ 4 to 5 per ton per KM

4. Market Share
8% 7%
8%
Bajaj
26% Piaggio
Force Motors
M&M
51% Others
Low cost Ape: First to Minidor: Loyal Durable and
alternative to a taxi offer diesel following in rural extensive sales and
for passengers engine markets service network

5. Four wheelers
• Cargo usage accounted for 83% sales
• Growth of 22% vs 14% in case of three wheelers
Started at ₹ 3,50,000
1.2 to 7.5 Tons
9 to 10 KMPL
₹ 7 to 9 per ton per KM

6. Market Share
5%
5%
6% Tata Motors
33%
M&M
Swaraj Mazda
Eicher Motors
51% Others
• Overloading: Reduced vehicle acceleration, fuel economy and top speed

7. Road Transportation in India

8. Urban areas in 2006
Poor delivery methods resulted in damaged goods,
longer lead times and shrinkage

9. Rural areas in 2006
• Roads were poorly paved and lacked markings
• Farmers need not require large commercial
vehicles to transport their harvest

10. Options for farmers
This resulted in spoilage and waste of time

11. Fuelonomics in 2006
• High fuel prices and lower income made Indian consumers very cost
conscious in their transportation decisions
• Price of diesel was 70% of the price of gasoline on a per gallon basis
Gasoline
Diesel

12. Diesel for goods transportation
• Diesel engines were more efficient
• Diesel was the preferred fuel

13. Government initiatives
• Implementation of Bharat
Stage III emission standards
in 11 cities
• Large-tonnage trucks were
not allowed
• 95% completion of Golden
Quadrilateral, a 5800
kilometer highway network
connecting the four major
cities

14. Overview of Tata Motors

15. A Journey…
In 1954, it entered 1993: Formed joint
into a 15 year In 1969, TELCO ventures with
Tata Engineering 1994: Formed joint
collaboration with started designing Cummins Engine
and Locomotive 1980: TELCO ventures with
Daimler Benz, to and manufacturing Company to
Company was launched the for Mercedes Benz to
manufacture their own develop high-
established in ton, 407 truck. market cars in
medium-size commercialized horsepower &
1945. India.
commercial vehicles. emission-friendly
vehicles. diesel engines.

16. 1998: Introduced
the Tata 2005: Acquired
2006: Formed a
Indica, the first 2004: Acquired 21% stake in
2002: Launched 2003: TELCO joint venture with
large scale Daewoo’s Hispano
the sedan model changed its name Marcopolo to
passenger car commercial Carrocera, a
variant, Indigo. to Tata Motors. manufacture
indigenously vehicle business. Spanish bus
buses in India.
developed in manufacturer.
India.

18. 2001: ₹ 5 billion loss Largest ever for a private sector company
–

19. Strategy !
• Cost reduction
• Quality improvement
• New-product introduction
Truck penetration Per capita GDP & Road Density

20. > 45 ton
<2 ton
“cheap, nasty, rugged vehicle for India”

21. The Ace team!
• Girish Wagh (30, then) + 5 full-time
employees
• 1st team to
– Implement cross-functional teams for product
development
– Make extensive use of 3P (product preparation
process)

22. Customers
Marketing
Team ACE Suppliers
Dealers

23. Budget
₹ 2.2 billion
Whopping
₹ 17billion!!

24. Market Research
• “from the customer, for the customer”
• VOC analysis – >4000 truck and 3-wheeler
operators

25. Best of both the worlds!
Price Maneuverability
Fuel Efficiency
Additional Payload Comfort
Durability
Safety

26. High
Status
“feel
good”
Better
marriage
proposals!

27. Price target!
₹ 12 lac
-

28. Segmentation
• Functional market segmentation
– Ace’s core market: 750-1500 kg over 100-200 km
Ace Customer Base
1st time
purchasers
3 Wheeler
40%
45%
Pick up/LCV
15%

29. Segmentation
• Customer Market segmentation
acquisition price performance
constrained sensitive
13% 7%
balanced
perspective
25%
ROI sensitive
55%
Customer Type

31. Customers!
• Performance sensitive: status, brand image
and speed; willing to pay a higher price for
features
• Balanced-perspective: owner-entrepreneurs;
justified on ROI + comfort and convenience
• ROI-sensitive: lowest cost per mile of
transport; fleet owners/operators
• Acquisition price-constrained: future
potential

32. Economics
• More economical than a 3 wheeler in a long
run
• Operating cost economics:
– Ace: ₹ 6.7/ton/km
– Competitor: ₹ 7.88/ton/km
– Industry average: ₹ 8.54/ton/km

34. Overloading Capability

35. Computer aided design
Stress points –
High strength steel
Semi monocoque design:
Low cost, highly durable, ride quality of a
car !

36. 4 cylinder diesel engine from an MNC?
Developed 2 cylinder diesel
engine based on Indica’s
platform: Cost sharing, just the
right performance, rotary fuel
injection pump to meet
emission standards without the
electronics system
ENGINE?????
1 cylinder less powerful diesel
engine: three wheeler’s use it !!

37. Safety, Comfort and Aesthetics
Customers preferred flat faced vehicle:
M1/N1 Class safety norms Commercial vehicle look, more utilization of
length which is otherwise ‘wasted’
Crash test simulations to
make a fully safe flat faced frontal
design !!

38. Sourcing and Production
More outsourcing but less vendors
•Could convert fixed cost into variable cost
•Fewer risks to supplier
•Tata motor’s wage rates were higher!!
Aggregate outsourcing
•Educate supplier in production and
design process
•Sole supplier for each part
•E-sourcing: 20% cost reduction
Production at existing underutilized plant in Pune
(west)
•Tap Tata motor’s existing vendor base
•Lower outbound freight cost: demand from southern and
western states

40. Marketing
Emotions Dealers were educated in
operating – economic analysis
A sense of ‘feel good for your job’ India’s first minitruck
and ‘free yourself’
Marketing materials in local
languages Ace – ‘small is big’
Chinna annai (tamil) = little elephant

42. Distribution

43. • Ace rollout in phases beginning with five states
in the western and southern parts of India –
strongest three wheeler demand!
• 1S dealership format – Responsible only for
sales - Minimum infrastructure required
• Within 3 months – 300 new distribution points
set up
• Suvidham – Avoiding service bay at dealerships
– Training rural mechanics

44. Consumer Finance

45. • Team wanted to ensure the initial acquisition cost
not to be a deterrent
• Financing through its own arm
• Several banks followed suit
• Dealers educated customers about technicalities
of financing
• Third party financiers offered five-year loans
instead of three-year loans

46. Market Launch and Response
• Launched in May 2005, priced at Rs. 225000
• Expectation exceeded – Sold annual target of 30000 in
less than a year – Although available in only 25% of the
country
Post Launch Survey
33% Previously used three wheeler
30% Previously used an LCV
54% Buying first commercial vehicle
Covered whole market!!!

47. Against the expectations of gaining popularity in
rural areas, Ace usage was as follows:
Usage
7% 2%
Intra-city
35% Inter-city
56%
village-to-city
Inter-village
However, one expectation was fulfilled indeed –
Overloading of Ace by approx. 30% of rated
capacity

48. The Way Ahead….

49. Two fold strategies
• Indian Market Strategy
 New Model Variants
Tata Ace Super Ace
Variants
‘MAGIC’ Ace ‘One ‘CNG’
Tonner’

50. New Regional Markets

51.  Potential Competitor Response
• Piaggio-
• Bajaj –
• Maruti –
• Others – Hyundai, Daihatsu etc. ????

52. Export Market Strategy
 Emerging markets similar to India
 Emerging markets more developed than India
 Developed Markets
 Countries for expansion
o Sri Lanka
o Nepal
o Bangladesh
 Electric Version for US, UK markets

53. Additional Considerations
Plant Resizing or New Plant

54. • Ace as a platform for New Product
Development –

55. Thank you!