Tata's Top 5 Failures: Tata Nano, Docomo & More

When we think of a company that's trustworthy and has been around for a long time, Tata’s name probably pops into everybody’s mind. From steel to desh ka namak, Tata makes everything. And let's not forget its ability to launch businesses that touch nearly every aspect of our lives.

The Tata Group started as a trading company in 1868 (making it older than India) and has become one of the country’s most renowned and successful conglomerates with a market capitalisation of over $365 billion (₹30.4 lakh crore) as of March 31, 2024.

It has also made its mark with successful businesses like TCS, Tata Power, Taj Hotels, and many more. However, even giants stumble sometimes.

Some projects by Tata crashed like a paper plane despite having an ambitious start and eager marketing. Here we'll be discussing some of the notable missteps of these companies and why they failed.

Top 5 Unsuccessful Projects of Tata Group

Here’s a look at the top 5 projects where Tata Group didn’t find much luck.

1. Tata Nano
2. Tata Telecommunications Neotel
3. Tata Steel's Corus Acquisition
4. Tata Docomo
5. Tata Motors' Aria and Bolt Models (SUV)

Without further ado, let's get started.

1. Tata Nano

Launched in 2008, Tata Nano was marketed as the world's cheapest car available at an accessible price of just ₹1,00,000. That’s how it got its famous nickname, “Lakhtakiya”, meaning something “worth a lakh”.

Tata launched Nano with a good vision of providing comfort and safe mobility with affordable pricing. After all, car ownership was and still is one of the biggest dreams of many middle-class families. Ratan Tata caught on to this pain point and introduced Tata Nano. It was popularised as “The People’s Car" at the 2008 Auto Expo in India, yet the project failed.

Tata Motors started with a goal of producing 2,50,000 Nano cars annually. However, the initial sales were only 30,000 units in 2009-2010. The highest sales were recorded in 2011-12, reaching 74,527 units. However, this figure soon declined to just 7,591 units by 2016-17. And ultimately in June 2018, the plant assembled only one Nano car before permanently shutting down the production. Just look at the downfall of Nano's in the below image ⬇️

So many things went wrong with Tata Nano:

• Its pricing was its main USP and also the prime reason for its downfall. Nano was perceived as a “poor man's car". Back then, cars used to symbolise social status and Nano, being a cheap car, repelled the aspirational buyers.
• But wait, there's a catch. Nano’s price wasn’t really ₹1 lakh. Its on-road price was ₹2.59 lakh instead. Naturally, anybody would feel that they’ve been scammed.
• Its compact size and limited seating space (can accommodate only 4 members at a time) was another reason for its low sales.
• On top of that, it also lacked modern features and safety amenities. There were no airbags in Nano, and it failed a crash test at 64 kmph, earning a zero-star rating for both adult and child occupant protection. The bodyshell of the car was also labelled as unstable.
• Due to all these discrepancies, it also attracted negative PR. Some of the initial models of Nano burst into fire on the road. These incidents further strengthened the fact that Nano has technical faults.
• Nano was facing backlash from everywhere. Yet, Tata didn’t do anything for the damage control.

All these unfavourable circumstances led to the downfall of something that could’ve been a revolutionary commodity for the aam aadmi of India.

2. Tata Telecommunications Neotel

Neotel Pty Ltd. (previously SNO Telecommunications) is South Africa's second national fixed-line communications operator. Founded in 2006, the company was acquired by Tata Communications with a 26% shareholding in 2009. In 2011, Tata re-acquired the company’s majority stakes, rising to 68.5%.

• Neotel reported a negative net worth of approximately ₹70 crore by the end of FY15. In the fourth quarter of 2016, its Earning Before Interest and Tax (EBIT) margin turned negative.
• However, selling the company wasn’t that easy. Poor financials were not the only reason for that. Tata Communications also faced regulatory hurdles in its attempts to sell Neotel.
• A key deal with Vodacom Group, which was intended to sell Neotel for about 7 billion South African Rand (₹3,200 crore), collapsed after 21 months of negotiations due to complexities in regulatory approvals.
• Despite getting approval from the Independent Communication Authority of South Africa (ICASA) and telecom regulators of the Southern African region, competitors like Telkom, Cell C, and MTN convinced the South African judiciary to reject the deal, citing market fairness and competition.

Ultimately in 2016, the deal was finalised and Tata sold 30% of its stakes in Neotel to Liquid Telecom (majorly owned by Econet Wireless Global). It paid 6.55 billion South African Rand (about ₹1,992 crore) to Tata Communications.
And this is how Tata had to put a stop to its Varchasv Ki ladai in South Africa.

3. Tata Steel's Corus Acquisition

Like South Africa, Tata wanted to enter other international markets as well. So, it decided to expand its steel manufacturing business overseas by acquiring Corus Group plc. It was a British-Dutch steel manufacturing company that was also the second-largest steel producer in Europe.

After the acquisition in 2007, It was remanded as Tata Steel Europe Ltd. Tata Steel paid a whopping $13.1 billion (₹5,41,68.5 crore) to acquire Corus.

The merger of these two giants had immense potential to grow in both the Indian and global steel industries. But unfortunately, this ended up on the list of failed acquisitions.

There were several reasons for its failure, like:

• The global recession of 2008 played a major role in the downfall of the merger. The demand for steel decreased due to the economic downturn, consequently affecting the growth of the company.
• In the meantime, the Chinese steel industry entered the European market, offering cheaper steel. Consequently, it witnessed massive growth, supplying about 48% of the world's steel consumption.
• Operational inefficiencies and leadership issues compounded the problems. The company failed to be present as an executive authority.
• Tata being an Indian company and Corus having European origin created cultural differences that started to reflect in the management as well. These issues were not discussed before the merger.

The Tata Steel-Corus Steel merger was a highly ambitious project of the Tata Group. However, it became the real-life "expectations vs reality" meme.  

4. Tata Docomo

Every time someone mentions Docomo, my mind involuntarily starts to sing that iconic jingle 🎜. What Jio is for Ge-Z today, Docomo was for Millenials in the mid-2000s. Almost every other person was a Tata Docomo user. In case you are wondering, “What are you talking about?" let me clarify!

Tata Docomo was a mobile network operator company, a fully owned subsidiary of Tata Teleservices. It derived its name from NTT Docomo, a Japanese mobile phone operator company that also invested in Tata Docomo in 2008.

Docomo was a revolutionary project in the Indian telecom sector that brought a one-paisa-per-second billing plan for telephone calls. It launched its operation on 24 June 2009 in Chennai.

Ratan Tata, Chairman of Tata Group, said at the launch that the per-second tariff plan "will create a paradigm shift" for phone users. And surely it did. Before the launch of this plan, the lowest time frame to calculate phone tariffs was one minute.

Sounds amazing, right? Well, it was. However, this project, like the projects we discussed above, failed as well. There were many reasons, CDMA Technology being the major one:

• Tata Docomo opted for CDMA  (Code Division Multiple Access) technology at a time when GSM (Global System for Mobile Communications) was becoming the global standard. This decreased Docomo's appeal as GSM was globally accepted and better marketed technology. So, consumers lacked awareness about CDMA and missed out on its benefits.
• Earlier, Tata was in partnership with GSM-based telecom operator Idea Cellular. Ratan Tata decided to opt out of this partnership to enter CDMA-technology-based telephonic services in 2003.
• Subsequently, Tata Docomo failed to transition to GSM technology, which became increasingly important with the rise of mobile data services. By not adapting, they missed out on the burgeoning demand for data plans that GSM providers capitalised on.
• Now, operating CDMA technology also came with extra costs. Docomo had to pay royalties to Qualcomm for the use of CDMA patents.
• Opting out of GSM-based technology was definitely a wrong move by Tata. At last, Tata had to sell 48.12% stakes to its joint venture partner, Aditya Birla Group, in 2006. The company couldn't survive even under the leadership of Aditya Birla Group.

The market dynamics shifted as Reliance Jio entered the market in 2016 and soon became India's favourite mobile by providing extensive 4G services with affordable pricing.

As of July 2019, all the Docomo users have been merged with Airtel network and are provided with Airtel telecom services.

If Tata Teleservices made better choices back then, maybe we would be using Docomo today.

5. Tata Motors' Aria and Bolt Models (SUV)

Tata Motors has been a go-to automobile brand for many Indians. It has given us some iconic models like Indica and Nexon. But there have been some notable failures as well. Tata Aria and Bolt SUVs are one of them.

Aria and Bolt were launched in 2010 and 2015, respectively. Tata Bolt was supposed to be a successor to the Indica Vista hatchback. Its remarkable feature was a 1.2 litre turbocharged petrol motor. Despite this, it was a flop and had to be discontinued in 2019.

Similarly, Tata Aria was based on Tata Xover’s concept that was showcased at the 2006 Geneva Motor Show. It was a mix of an MPV, a Sedan, and an SUV.

Despite being ambitious and innovative projects, both of them failed to get sales for several reasons:

And here we end the list of Tata’s flop ideas. These five projects show how even industry giants face setbacks.

The Bottom Line

So, we just learned that even the most successful companies can have their oopsie moments. But hey, who can be better teachers than failures and setbacks? If Tata Group of companies can overcome all these hurdles, so can you. After all, life is all about 👇🏻

Tata Group showcased a bold spirit and willingness to take risks. And let's be honest, every setback only adds to the journey of greatness.

Want to know how Tata became the giant it is today despite these hurdles? Check out this article on the trio that built the Tata Group from the ground up. And for more updates, subscribe to our newsletter.

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