ANIL (COST)

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St FRANCIS XAVIERS DEEGREE COLLAGE

COST ACCOUNTING

PROJECT ON TATA NANO

SUBMITTED BY: SUBMITTED TO:

ANIL.J.HIRANI Mr.VINAY SHARMA


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CONTENTS

ACKNOWLEDGEMENT

INTRODUCTION

IDEA GENERATION..

COMPETENCIES OF TATA NANO

PROCUREMENT OF RAW MATERIAL.

CONCEPT TESTING AND DEVELOPMENT.

PRODUCT DESIGNING .

PRODUCT DEVELOPMENT....

COST CUTTING FEATURE..

VARIANTS OF NANOPRICING STRATEGY.

PROMOTION STRATEGY

DISTRIBUTION CHANNEL..

OBSTACLES TO NANO.

FUTURE PLANS...

CORPORATE RIVALRY

SWOT ANALYSIS

CONCLUSION..

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ACKNOWLEDGEMENT

An acknowledgement is the expression of ones thanks giving to the people who have extendedtheir help in every possible way. Help is a voluntary fulfillment of duty, which, all the peoplementioned below have performed it to their maximum possible, in a way giving us and ourresearch the utmost importance.

At the onset, we wish to express our gratitude to Mr. VINAY SHARMA, faculty at St FRANCIS

XAVIER DEEGREE COLLAGE for COST ACCOUNTING, their keen interest, constant supportand help in completing this report successfully.

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INTRODUCTION

Under this project we have taken the launch of tata nano by tata. In this we have tried toexplain the entire value chain in launch of tata nano and various which have been takeninto account or dealt with while launch of tata nano. We have taken into account the

whole process from idea generation to selling of tata nano. This project has helped us alot in knowing about various issues which takes place while launch of product.

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IDEA GENERATION

I Saw families riding around on scooters with the kids standing up and the mothercarrying a baby and sitting pillion and decided to do something about it. It started as aquest for an affordable transportation solution Ratan Tata source : - business standard .

Seeing an opportunity in the great number of Indian families with two-wheeled vehicles,tata motors began development of an affordable car in 2003. The purchase price of thisno frills auto was brought down by dispensing with most non essential features, reducingthe amount of steel used in its construction , and relying on low- cost Indian labor.

It all started with the dream translated into a reality on the 10th of January, 2008 at theAuto Expo.

The concept behind the creation of the peoples car was to fill the status void that was feltby the middle class families.

After, the generation of the idea the next step is screening of idea:-

1) A scooter with two extra wheels at the back for better stability?2) An auto-rickshaw with four wheels?3) A three wheeled car like a closed auto-rickshaw?4) A four wheeled car made of engineering plastics?5) A four wheeled rural car?6) Rolled up plastics curtains in place of windows?7) A four wheeled open car with safety side bars?

But the market wanted a car and if they build a peoples car and not something that

people would say, ah thats just a scooter with four wheels or an auto-rickshawwith four wheels and not really a car

Trying to build a car cheap enough for motorcycle buyers seems to make sense nowbut seemed crazy several years ago when Ratan Tata, long time chairman of Tatamotors, first mentioned his dream of building a one lakh car in 2003. they arestill saying it cant be done , he says, insisting that it can and will. After we getdone with it, there will hopefully be a new definition of low cost

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COMPETENCIES OF TATA NANO

ExpectationsAccording to one report, India as well as other nations, such as European nations,

have great expectations from the Nano and are keenly and eagerly awaiting it,especially the electric version of the Nano.

Modular designIn fact, Tata envisions going even further, providing the tools for local

mechanics to assemble the car in existing auto shops or even in new garages createdto cater to remote rural customers. Nano innovations are also there.

Pricing strategyTata initially targeted the vehicle as "the least expensiveproduction carin the

world" aiming for a starting price of 100,000 rupees or approximately $2300 US

despite rapidly rising material prices Export expectation

Being worlds cheapest car it is expected that not only India demand for Nanowill go rise at global level. Since it meeting Euro-4 norms at this price so this istaking as a future of small car segment . Reputation and Acceptance of Tata After launch TATAs have shown the world what Indian engineering is truly capable of

Enthusiastic supportTata Motors is receiving preliminary and some very enthusiastic support in the

media and officials, even from Europe, for the electric-version from India as well as

other-nations. The enthusiasm is even higher than that for the petrol-version

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http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Production_carhttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Production_carhttp://en.wikipedia.org/wiki/Europe


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PROCUREMENT AND SUPPLYERS OF RAW MATERIAL

1. BOSCH

2. CAPARO

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3.Continental motors

4.Delphi

5.FAG Kugelfischer

6.Ficosa

7.BEHR GmbH & Co

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8.Vistoen

9.TRW

10.Saint-Gobain

CONCEPT TESTING AND DEVELOPMENT

Before starting the project, wagh did something no one at tata motors ever had: he talkedto customers. The three-wheeler men inevitably insisted on a cheap, dependable truckthat could go from village to market carrying, say, a ton of onions or potatoes, one night,as sunset approached, wagh stuck with one rickshaw driver. He says, I kept asking thequestion. Why? Why? Why do you want a four-wheeler? wagh remembered. Finally, hegot the real answer. It turned out it wasnt really a problem of transportation of vegetableif I had a four-wheeler, I would have better marriage prospects in my village, the youngman said. Drivers of three-wheelers are looked down upon in India. Wagh realized thatfour wheels had emotional, not just practical appeal.

Thus the new product was now to be developed.

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The car was to cost Ross. 1 lakh on road.

1) The car should be built on a different platform than conventional ones.2) It must be meeting all the safety and regulatory requirements.3) The car has to be designed so that it can be exported to other countries as the

domestic demand may not materialize as per projections.4) The car must be a beacon for the Indian automobile industry and prove to theworld that we are capable to take any challenge and come out worthy winners.

That quest to build the worlds cheapest car hasnt ended. The mission began back in2003, when Ratan Tata, chairman of Tata motors and the $50 billion Tata conglomerate,set a challenge to build a people car.

Tata gave three requirements for the new vehicle: it should be low-cost, adhere toregulatory requirements, and achieve performance targets such as fuel efficiency andacceleration capacity.

The design team initially came up with a vehicle which had bars instead of doors andplastic flaps to keep out the monsoon rains. It was closer to a quadricycle than a car, andthe first prototype, even a bigger engine, which boosted the power by nearly 20%, wasstill dismal. But failure didnt stop them they quickly realized it was necessary to bringeveryone on board. Everyone from manufacturers to vendor development teams wereasked to be a part of decision-making.

The body had to be changed because Ratan Tata, over six feet tall himself, wanted it to beeasy for tall people to get in and out of the car. The attention to detail paid off: when thecar rolled onto the dais at the auto show in New Delhi in January, and Ratan Tata steppedout of the drivers seat with ease, it made an immediate impact.

The Nano, however, affords both safety and status. the innovation wasnt technology;it was in a mindset change

PRODUCT DESIGNING

Since the car had to be built within a cost of Rs. 1 Lac, no conventional design wouldwork as the costs shall be higher and so the entire car has to be redesigned.

The design has to question the need of each and every component from the point of view

of its necessity of existence and also the minimum requirements of its functionality.TATA used the concept of Disruptive Technology which was cheaper than existingTechnology, much higher performing, is convenient to useand brings radical changes.The Guiding factor was that the cost has to be minimized for each componentYet maintaining its basic functionality.

The Alternatives are:

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1. Reduce Consumption of Material being used.2. Alternate Suppliers to get same material at fewer prices.3. Use alternate materials

The design was outsourced to Italy's Institute of Development in Automotive

engineering, but Tata himself ordered changes along the way. Most recently hevetoed the design of the windshield wipers. His solution: a single wiper instead of twoThe target was very clearly defined that within the given cost structure of 1Lakh all thecomponents have to be allocated a maximum priceand the samehad to be achieved using the available alternatives.The Guiding factor was that the tax structure, on materials and manufacturing,must support the final cost of Rs. 1 Lakh.

The Decisions were:1. Establish factory in a tax free zone.2. Get the tax advantages on infrastructure development.

3. Get the suppliers to establish base near the factory.4. Get the concessions from state government

In short select a manufacturing location where all the advantages could be achieved.

PRODUCT DEVELOPMENT

And finally the product was developed with the following features.

1. Engine Capacity Bosch 624 c.c. twin cylinder.2. Low capacity, Lighter, sufficient with better Power Rear Engine to reduce the

transmission length using a balancer shaft.3. Speed Manual Gear Box.4. All Aluminum Engine.5. Higher thermal conductivity than cast iron, Lighter and so better mileage.6. Engine Management System by Bosch.7. Superb control over emission and smooth acceleration.8. Dimensions L: 3.1m, W: 1.5m, H: 1.6m.9. Less length but more inner cabin space due to height. Comfortable leg room.

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10. Independent Front & Rear Suspension McPherson Strut in front & Coil spring& trailing arm in rear.11. Better ride than Maruti 800.12. Single piece ribbed steel body with safety features such as crumple zones,intrusion resistant doors, seat belts, strong seats & anchorages.

13. Safety requirements are adequately met.14. Single Wiper in place of two.15. Cost effective.16. Tube less Tires.17. Weight reduced by 2 Kg. Cost reductions 200 Rs. And in line with modernvehicles.18. Instrument console in the centre.19. Elegant to look at and can be used both in Left Hand & Right hand version.

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COST CUTTING FEATURE

The nanos design implements many cost-reducing innovations.

1) The nanos trunk is only accessible from inside the car , as the rear hatch does notopen.

2) One windscreen wiper instead of the usual pair.3) No power steering, unnecessary due to its light weight.4) Three lug nuts on the wheels instead of the usual four.5) Only one wing mirror.6) No radio or CD player.7) No air conditioners8) No airbags9) 623cc engine has only 2 cylinders.

VARIANTS OF NANO

The Tata Nano will be available in four variants which are:-

Tata Nano standard

Tata Nano Deluxe

Tata Nano Luxury

Tata Nano Europa

Tata Nano Standard: The car will be priced at Rs one lakh and twenty three thousand.The car will have no air conditioning, power windows, central locking etc. This standardvariant will have the following features

Seat Belts.

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Speedometer.

Odometer.

High mounted Rear Stop lamp.

Centrally placed exhaust.

Driver seat adjust-sliding

Folding Rear Seats.

2-Spoke Steering wheel.

Grey bumpers and interiors.

colors: Ivory White, Racing Red and the Summer Blue colour.

Tata Nano deluxe: the deluxe model will have the additional features of air conditioning,metallic paint, power windows, tinted glasses, central locking and power steering. Thedeluxe variant will come in the following colors: Champange Gold, Lunar Silver , Ivory

White, Racing Red and Summer Blue.Tata Nano luxury: The luxury Tata nano will have additional features of

Tripmeter.

Anti lock braking system

Front Power windows.

Central Locking.

Front and Rear fog lamps.

Floor console with glass holder.

Anti-Glare inside rear view mirror.

colors: Sunshine Yellow, Champange Gold, Lunar Silver.

PRICING STRATEGY

Tata initially targeted the vehicle as the least expensive producting in the world-aiming for a strating price of 100,000 rupees or approximately $2000 US despite rapidlyrising material prices.

As of august 2008, material costs have risen from 13% to 23% over the carsdevelopment, and Tata now faces the choice of :

Introducing the car with an artificially low price through govt-subsidies and tax-breaks, or

Foregoing profit on the car, or

Using vertical-integration, or

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Partially using inexpensive polymers or biodegradable plastics instead of a fullmetal-body, or

Raising the price of the car.

An increase price on the nano will likely decrease demand.

PROMOTION STRATEGY

Enough use of one of the most important element of promotion mix ,publicity reduces thenecessity of other promotional devices for nano.

Nano got publicity in the following ways:-

Publicity as One lakh car by mouth to mouth.Auto expo 2008,New Delhi & Geneva

For other type of promotional activities, cost factor that is 1 lakh price tag is to bekeep in mind.

ADVERTISING:- TV & other mass media will be less effective thus too much moneywill not be invested in this regard . Mainly word of mouth advertising will get moreemphasis.Internet will be a major media for advertising.

SALES PROMOTION:- already a low priced product financing facilities will beprovided through Tata motor financing ltd and other banks.Online booking facility will be available.

DISTRIBUTION CHANNEL

Distribution network planning and strategising is full swing, despite the current shutdownat the main Nano plant in Singur, West Bengal. Tata has rejected the agreement between

Trinamool Congress and the CPM-led state government in West Bengal saying that theycould not compromise on project land.

It is being said that Tata Motors is going ahead with its distribution and financing plansfor the Nano car. Besides, the car maker is also given a thrust to the retail and financemodels too. Tata Motors is implementing a hub-and-spoke model for Nanosdistribution, which would mean that it would involve increasing dealership points as wellas adding sales and customer touch points.

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Tata Motors has said that dealerships based in bigger cities will be responsible forlooking after these touch points, which could be located even in the remotest corners ofthe country. As per the plan, the Tata Nano dealers in the cities would play the role ofhubs. They in turn will undertake the effectiveness of other sales and customer touchpoints, which would play the spokes. As per plan, Tata Motors would launched the Nano

across the country.

Tata Motors has reportedly decided to focus on semi urban and rural markets to sell thepeoples car. It may be recalled that Ratan Tata recently had conveyed optimism thatNano will be launched on time, saying that all obstacles in its path would be removed.

The Tatas are also going in for mass production of the Nano and this is expected to bedone very soon. Though work at Singur has come to an almost standstill, it is expectedthat Tata Motors will be able to keep its promise for launching the Nano at the price thatit promised, on the promised deadline. The Singur faciliy, located around 40 kilometersaway from Kolakata, has been seeing ryots on the war path with the government beingurged to return the 400 acres of land taken away from them for the plant.

OBSTACLES TO NANO

However, Due to the Singurland dispute, the "Stalled Car Factory" is "CostingJobs, Splitting Neighbors in West Bengal

Tata's problems in West Bengal are scaring off other industries hoping to locatehere, including Infosys, a software maker that wanted to build a business park thatwould provide 5,000 jobs.

Due to ongoing opposition to Tata's Singurcar-factory by Mamta Banerjee, whodemanded land to be returned from the factory, Tata Motors took decision to pullout of Singur. Tata Motors is manufacturing Tata Nano at its Pantnagarplant.

Tata Motors announced it was pulling out its Nano small car industrial projectfrom West Bengal's Singur and blamed the Mamata Banerjee-led Trinamool

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Congress, which spearheaded the protests against the factory, for the 'painful'decision.

While existence of Tata Nano could lead to high industrial growth , the exit leadwest Bengal a loss of more than 80,000 crore .How ever Tata has to suffer interms of delay and settlement cost .

FUTURE PLANS

After all the applause for being the cheapest car in the world, the Tata Nanois back in the

news again. Tatas drawing up plans to build an electric and hybrid model using itsplatform.

The Nano was built to fulfill the basic transportation needs of a family but the carcompromises on nothing, be it safety, mileage, performance and emissions.

The Tata Nano is compared to legendary cars in the market like the Ford Model-T whichbrought a revolution in the automobile industry.

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A Tata Group report says Its not only a car for Tata its a platform for some higher endmodels too which will be sold at higher prices and will give greater profits.

Most probably these higher end models will be sold in the international markets. Tataalso have plans to introduce variants in Brazil, Indonesia, China and Russia.

The Bajaj Chetak and Maruti 800 created history in the Indian automobile industry; theTata Nano also has all the fire power to redo the same thing.

So there are pretty good chances of India and global markets to have aTata Nano petrol,a Tata Nano diesel, a Tata Nano Convertible, a Tata Nano Station Wagon, a Tata NanoElectric and a Tata Nano Hybrid variants in the coming years.

CORPORATE RIVALRY

Tata nano was envisioned as the four wheelers for those who can only afford twowheelers, due to its affordable price Nanos impact on two wheelers sales has beenwidely debated, nano will also affect sales of higher priced cars or will motivate

competitors to reduce the prices resulting lowered margins for rest of the industry.

It has been speculated that money to sustain such a prolonged protest involving thousandsof TMC party workers came from rival Two/four wheeler lobby. Bajaj auto is alsodeveloping a low cost car together with Renault-Nissan to rival Tata Nano.

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SWOT ANALYSIS

STRENGTH: - price, mileage, style, brand name, all weatherVehicle, first innovation at such low price.

WEAKNESS:- fiber body, low suspension power,Low engine capacity, light vehicle, notSuitable for Hilly areas.

OPPORTUNITY:- bikers can be motivated, auto rickshaw.

THREATS: - Other competitors (bajaj, maruti)

CONCLUSION

Emerging markets are a fertile ground for innovation. The challenge of reachingdispersed, low-income consumers in emerging markets often spurs significant

innovation. As customers gain more power, they will demand more tailoring and value-added

service to meet their needs. Companies that innovate on this dimension are likelyto be richly rewarded.

World is getting tougher day by day being unique is a competitive advantage.Expectations to Nano has proved this .

After 100 years to Henry Ford , Tata has proved him again not only he came outof the expectations but also came out with a platform for Indian auto sector .

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So this as per this project conclusion can be draw as a future car not only ofIndian but also if exported than could be to the world.

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