Target Pricing and Tata Motors’ $2,500 Car
Despite India’s rapid economic growth and growing market for consumer goods, transportation options in the world’s most populous country remain limited. Historically, Indians relied on public transportation, bicycles, and motorcycles to get around. Less than 1% owned cars, with most foreign models ill-suited to India’s unique traffic conditions. Most cars had unnecessary product features and were priced too high for the vast majority of Indians. But Ratan Tata, chairman of India’s Tata Motors, saw India’s dearth of cars as an opportunity. In 2003, after seeing a family riding dangerously on a two-wheel scooter, Mr. Tata set a challenge for his company to build a ‘people’s car’ for the Indian market with three requirements: It should (1) adhere to existing regulatory requirements, (2) achieve certain performance targets for fuel efficiency and acceleration, and (3) cost only $2,500, about the price of the optional DVD player in a new Lexus sport utility vehicle sold in the United States.
