The Nano Effect: DNA, 14th January 2008

Nano is significant for reasons that go beyond the obvious. More importantly, its success will be a reflection of the social transformation that can take place which will add weight to the process of economic reforms in the country.
The Rs1 lakh car may end up costing more, but will appeal to the common man. The definition of the common man is always tricky. People are judged by their possessions and way of living.
Class segmentation can be based on what one owns, which includes an automobile and dwelling as permanent possessions, and credit cards and shopping preferences, which characterise their way of life.
Consumer durable goods are now commonplace as even a poor slum-dweller in Dharavi has a TV set even though he or she may not have access to clean drinking water. Shopping malls have changed consuming patterns across urban areas. Nano would be the first inroad actually made into the automobile segment, which is significant.
Our consuming society is segmented into several classes: the super affluent (industrialists, film stars and CEOs), the affluent (private sector employees), the upper middle class (public sector employees and senior government officials), the middle class strivers (lower level government employees), the survivors (self employed, maids) and the poor (who cares?).
The first and the last get left out from all such analyses as they are either too rich and can get anything or too poor and cannot even dare to dream.
Which class will look at the Nano? The affluent classes may fancy it for their kids but the charm will disappear soon and the product cannot survive on the basis of ‘toy value’.
The upper middle class may also not be too interested except as a second vehicle. The car has been targeted as one for the common man, and this class would like to think it is above that. So we are left with the ‘strivers’ and ‘survivors’ who would actually keep this chain alive.
Out of the 220 million families in the country, 90 million are poor and 30 million affluent and upper middle class. This leaves 100 million in the other two categories, of which around 25 per cent would be the ‘strivers’, or 25 million families.
This is the initial target customer and would also hold out hope for the ‘survivors’. Presently the ‘survivors’ would at best own a two-wheeler which is probably financed by a bank. Nano offers them hope.
Nano is symbolic of the CK Prahalad theory of there being fortune at the bottom of the pyramid. The Tatas are just leveraging this concept and will probably take advantage of being the first mover.
To date, motor cars have been targeted at the affluent class, which looks for upgrades. The upper middle class would move over from a second-hand car to the middle-end cars.
This one clearly appeals to one who would upgrade from a two-wheeler to a four-wheeler or would skip the two-wheeler step and graduate directly to a car.
Reforms have generally been looked at as having benefited only the upper middle classes onwards, which is worrisome. Producers have geared consumer goods towards the other classes, but so far, there has been little done on the fixed assets side. The Tata foray helps to bridge this gap.
The less affluent will actually see themselves coming a step closer to the rich not just in terms of wearing Levis and Reeboks, but also by owning an automobile.
This will strengthen the safety valve which is provided by the middle class in an evolving society such as ours, which so far has been one of aspiration. Now it will be a part of the ‘economic Sanskritisation’ process that is taking place.
Is there a downside to this image? Banks and other finance companies will see big business opportunities here and will entice borrowers with funds to purchase the car.
There will be a tendency to overspend on their part and build up debt, which may not be a prudent development for this class. Credit cards offered on the roadside have already created a large number of debtors who have limited servicing ability.
This one will only add to it. They would tend to save less, which again may not be good for a class which by definition has to make greater provisions for the future given the commitments towards education, health and access to social amenities. Therefore, for this class, there is a downside of enticement with a high financial cost when priorities change.
But in capitalist business where individuals are free to choose, the fault does not lie with the producer but with the consumer. The question is where does one draw the line?