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NATIONAL INSTITUTE OF FASHION TECHNOLOGY

HYDERABAD

CORPORATE SOCIAL RESPONSIBILITIES

CASE STUDY: THE BURNING WHEELS - TATA'S NANO!!!!
ASSIGNMENT 2


SUBMITTED BY: SUBMITTED TO:
GREESHMA V. MS. RAJYSLAKSHMI
KOMAL TAPASE ASST. PROFESSOR
SAI PRADEEP FMS DEPT.
SUSHANT
VISHAL







MASTER OF FASHION MANAGEMENT-III
BATCH 2013-2015
DEPARTMENT OF FASHION MANAGEMENT STUDIES
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ABSTRACT
The case explores how Tata Motors, India's largest automobile company, developed the
Nano, the world's cheapest car. The case focuses on the translation of Ratan Tata's vision of
a safe affordable car for the masses. The case raises questions around fire incidents of the
car, its ethical responsibility towards society and changing existing internal processes to
accommodate revolutionary new ideas that is solutions and their approach towards the
problem.
INTRODUCTION
Tata Motors Limited is Indias largest automobile company, with revenues of Rs.35651.48
crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment,
and among the top three in passenger vehicles with winning products in the compact, midsize
car and utility vehicle segments. The company is the worlds fourth largest truck
manufacturer, and the worlds second largest bus manufacturer.
Is there anyone who hasnt heard the story about how Ratan Tata conceived of the Nano as
safe, affordable alternative for Indian families?
The Tata Nano, one of the most ambitious projects of Tata Motors, started in 2003. It was
envisioned by the Tata Group chairman Ratan Tata himself. He found that Indians lagged
behind in car ownership, especially compared to the European Union and the Americas. Just
eight or nine in a thousand people owned a car.
The need for an innovation like Nano has to do something for the people of India and
transport. Unavailability and poor quality of mass transport is a common problem in India. In
a two-wheeler, father driving with elder child standing in front and wife behind holding a baby
is norm in this country. Thus, this is a relatively an unsafe mode of transporting a family. Thus,
with this in mind Tata Nano was created as a safer form of transport.
The only factor the customer knew in advance was its price tag of 1 lac as conveyed by Ratan
Tata. But why it was not a big hit and why is it still lagging to grab the market in spite of its
good and convincing features?

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CASE STUDY:
THE BURNING WHEELS - TATA'S NANO!!!!
By all accounts March 21 was an uneventful, muggy Mumbai summers day. Steaming traffic
jams were spread thickly over the city roads. Most people were sweating it out in BEST buses.
Nutan Sawant was not one of them. That day she was in a car. For as long as she could
remember, she had traveled on those lifelines of Mumbai: Local trains and buses. And then
in October 2009 her husband Satish heard about the launch of the Rs. 1-lakh (100,000 rupees)
peoples car. Last year after Diwali, I thought we could afford a small car, he recalls. He was
so keen that he jumped the queue by paying Rs. 15,000 to a Concorde Motors employee.
March 21 was when they had to collect it. Satish and his wife went to the Concorde showroom
at 10 a.m. Since Satish didnt know how to drive, Concorde arranged for a driver. It was a
great feeling for Nutan and Satish. They relaxed in the spacious rear seat as it glided through
the tree-lined roads of Prabhadevi. They had traveled 15 kilometers when Nutan sniffed,
turned towards Satish and asked the Rs. 2.26-lakh question: Do you smell something
burning?
Satish was unsure. And even more so when the driver said a new car could have such a smell.
They traveled a bit further and still the smell wouldnt go away. Nutan again expressed her
concern. When Satish or the driver did not pay any heed, she ordered the driver to stop the
car. A biker passing by drew their attention towards the rear part of the car. The Sawants and
the driver got out to look and saw smoke first and then fire. Satish or Nutan dont quite
remember the exact sequence of events except that in 15 minutes the entire car was
completely gutted. Sawant called Concorde. They towed the car away. The police, too, turned
up but were unsure of what complaint to register. The Sawants returned home by 2.30 p.m.,
without the car of course.
All that this car could achieve hangs in the balance because of the fire in Sawants car. Now,
this isnt the first time that cars have caught fire in India. But so many cars of a model in such
a short interval are worrisome. Just 17 days after the Sawant incident, on April 7, another
Nano caught fire on the National Highway 8 near Anand in Gujarat. These incidents are
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worrying customers about the safety aspect of Nano. For the Nano cars got fire while driving.
What the company says about it is It is a problem with the rear engine.
FIRST FIRES: IN A SMOKE CLOUD
Actually, Tata Motors calls them smoke. But there is rarely smoke without fire. So let us call
it the first round of fire incidents. There were in all five such incidentsthree were reported
in the media and two werentand they all took place last year.
The first incident was reported from Ahmedabad. A Nano (GJ 1KA 4648) parked at Vaibhav
Gokul Bungalows in Ahmedabad suddenly caught the attention of Jayanti Patel when he
heard a loud noise outside his house at around 12:30 p.m. on Sunday, Sept. 13, 2009. Patel
noticed smoke coming out of neighbor Ravindra Bhagats Tata Nano. With the help of a few
neighbors Patel broke one of the windowpanes and doused the fire emanating from around
the cars steering wheel. After almost 30 minutes and after pouring fifteen buckets of water,
they saved the Nano from any major damage.
Over the next month two similar incidents were reported from New Delhi and Lucknow. It
was a sticky situation for Tata Motors. All three ownersBhagat, Sunil Kumar Panwanda from
New Delhi and R.H. Rizvi from Lucknowexpressed concern and shock. I drove the car for
about two hours and then parked it at home. After an hour my kid [came] running inside
saying that the car is on fire. I rushed outside and saw the steering wheel burning, says
Panwanda.
Within no time Tata Motors attended to these cars, repaired and returned them to the
owners. It attributed the problem to a short circuit in the combination switch area. And then
the company said that it will carry out a pre-emptive check of all the 7,500 cars that it had
sold by then. As it turned out, the problem was indeed with the combination switch, a
steering column switch assembly that manages the cars headlamps, indicators and wiper
blades.
Tata Motors hasnt specified the underlying problem that led to the short circuit. This is all
that a company spokesman would say: The three incidents of fire that are being referred
to were actually not fires but noticing of smoke and localized meltdown of plastic parts due
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to short-circuit in these cars combination switches. As announced earlier, the issue has
been rectified.
If it was a design failure, it would have been seen in many more cars. So, it is likely that a
particular batch of combination switches was the problem, The next most plausible
explanation, which Tata must investigate, is that some suppliers cut corners. This gave rise to
a bad batch of faulty vehicles that somehow ended up in the market.
Tata Motors had had a spate of bad newsJLR acquisition issues, the commercial vehicle
market slowdownand it perhaps wanted to give some good news. And suddenly everybody
was under enormous time pressure. Tata Motors was forced to shift production temporarily
to Pantnagar in Uttarakhand and then post-Singur everything was put in fourth gear. Tata
Motors wanted the Nano out as quickly as possible. There was a lot of pressure from the top
management to launch the Nano even though they had concerns about the noise, vibration
and harshness of the engine. And the deadline was the Geneva Motor Show [March 2009].
A vendor knows his product very well but transferring that knowledge to Singur, Pantnagar
or Sanand in the short time frame was a challenge, adds the supplier. Some other suppliers
talk about how they had to ramp up from 3,000 units a month to 15,000 units a month of a
particular product.
In July 2010, Tata Motors sold 9,000 units of the Nano. This fell to 8,103 units in August, 5,520
units in September, and to 3,065 units in October. In November 2010, a festival month during
which it is considered auspicious to buy new and big ticket items, the sale of Nano came down
to just 509 units (85% drop from November 2009). This was despite the fact that the overall
sales for the Indian auto sector rose by 45% in October 2010
In August 2010 a Tata Nano car caught fire again. This was the sixth incident since launch in
March 2009. The August incident occurred three months after a company investigation
declared the car absolutely safe. These incidents have raised concerns amongst customers
about the safety of the car. Let us study various aspects of this case in respect to business
ethics and corporate governance.
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In a statement the company insisted that it was not recalling the cars and was merely
providing customers with additional safety features. The statement said that the Nano was a
safe car with a robust design and state-of-the-art components. The Tata statement said that
"customers can rest assured that there are no generic defects in the Tata Nano".
The company said an investigation by a team of internal and international experts had
concluded that the reasons for the fires were "specific to the cars which had such incidents",
rather than being a general fault. However the Tata statement says instances of "additional
foreign electrical equipment having been installed or foreign material left on the exhaust
system" had been discovered. On a hypothetical basis is it ethical for a company to deny a situation
which may exist that may result in risk to a customers life? If another incident occurs will this not
raise questions on corporate governance of the company?
1. Do the actions of the company in respect to these incidents reflect the companys
commitment to walk the talk?
2. Tata Nanos fire incidents Do they raise question on business ethics?
The substantial drop in the sales figures indicates that the customers may be unwilling to buy
Tata Motors version of truth. In your view what should Tata Motors do to regain the trust of
the customers? Here are two options to consider:
I. Do you think it is a good policy for an organization to acknowledge its mistakes and
rectify them?
II. Is it possible that organizations fear that if mistakes are publicly accepted, the
customers will legally sue the organization?
ROOT CAUSE OF THE PROBLEM:
In all probability it was a combination of all these factorssupplier quality, lack of integration,
design adaptationthat has led to a faulty batch of cars. There are no shortages of reasons for
the Nanos poor showing: production delays, fires, the stigma attached to buying a cheap
car. In order to bring Nano at cheap cost Tata reduced the use of quality materials which
affected the performance of the car.
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The combination switch had to be replaced because the Headlight Dim switch started
malfunctioning. Another issue was with accelerator cables. It gets broke frequently. Starter
motor behaved as if there was a loose contact. Occasionally the motor wouldnt crank when
the ignition switch was turned. Sometimes starter motor burnt off due to a malfunctioning
solenoid.








However, experts say it is a problem with the rear engine. "The rear engine does not have a
proper cooling system as a result of which the engine heats up leading to such an incident.
The summer season will be the toughest test for the Tata Nano," said Mahendra Dhruva,
national president, The Institute of Insurance Surveyors and Adjusters.
There is not enough space and ventilators are not enough to provide sufficient air circulation.
In cities where temperatures in the summer shoot up close to 48-50 degree Celsius, it is
difficult to manage this car if the cooling systems are not functioning properly, In a rear
engine, the air does not get circulated properly, which could lead to overheating of the
engine. The coolant capacity must be optimized and a different coolant other than ethylene
glycol, which is normally used, must be tried.
An unfortunate irony for a car touted as a safe. A safe car whose safety has been
questioned.

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REVIVAL OF TATA NANO: CAN THE WORLD'S CHEAPEST CAR MAINTAIN THE
MOMENTUM?
The sequential downfall of the Nano's sales figure compelled Tata Motors to rethink and
revisit its strategies.
ADDRESSING SAFETY ISSUES
As the major threat to the car's image was the fire incidents, engineers at Tata Motors made
some changes in the Nanos existing design, providing additional protection in exhaust and
electrical systems in view of some fire incidents.
FINANCING
Tata Motors Finance (TMF), the Tata Motors vehicle Finance Branch, announced a special
finance scheme for the Tata Nano, in which a buyer could get an easy loan with selected
documents in just 48 hours.
Tata Motors' efforts bore fruit with the sales figure showing signs of a revival after reaching
its lowest level in November 2010. Backed by the television advertisements, provision of
additional protection in the exhaust system, extended warranty schemes, incremental rise in
sales point in smaller towns, and the introduction of the 90% financing plan through its in-
house vehicle financing unit, TMF, this became possible. Sales of the Tata Nano went up
dramatically.






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CONCLUSION
The first aspect is regarding quality of goods sold. We believe that the Tata Nano needs more
safety features, like air bag, the reason attributed for the incidents is foreign material left on the
exhaust system or installation of foreign electrical equipment. The company is denying that there is
any failure of design. There is no way one can assess whether this is an accurate assessment or not.
Tata didnt put enough effort in pre-launch testing and research on the proposed cars rather,
they launch the cars in basic form, let the people use it and in the due course find out the
defects in the car, give free service for 3-5 years, and then based on the study develop the
new variants. THEY SIMPLY EXPERIMENT THEIR NEW PRODUCTS ON PEOPLE.
Tata Motors should assist in developing Indias infrastructure in order to accommodate the
increased number of vehicles on the roads. In addition, they should consider about ethical
responsibility towards society. Therefore, there are no chances of degradation of companys
reputation. In Tata Nanos case, the merchantable quality clause is debatable although the company
is stating the car is safe.
Our reasoning is simple, why are these incidents not occurring in other small cars. Maruti 800,
Maruti Alto, Santro and Tata Indica are other cars in the small car market segment. We have not heard
any similar case though these cars have been longer in the market. On a hypothetical basis is it ethical
for a company to deny a situation which may exist that may result in risk to a customers life? If
another incident occurs will this not raise questions on corporate governance of the company?






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BIBLIOGRAPHY
1. http://www.team-bhp.com/forum/indian-car-scene/77921-tata-nano-fire-incidents-
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raise-question-on-business-ethics/

3. http://indiatoday.intoday.in/story/tata-motors-to-replace-faulty-starter-motor-in-
nano-cars/1/166022.html
4. http://www.hbs.edu/faculty/Pages/item.aspx?num=38716
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