MUMBAI -- India's Tata Motors, in a major strategic shift, is aiming its first new car models in about four years squarely at the country's middle class.
The positioning of the Zest sedan and Bolt hatchback, to be launched in this summer, is very different from that of the well-known Nano, whose 100,000 rupee ($1,804) price tag put it within the budgets of those looking to move from two to four wheels.
An official at Wasan Motors, a Tata dealer in Mumbai, welcomed the launch of new models, saying it is high time for dealers to start selling new models.
Both the Zest and the Bolt have engine displacements of more than 1.2 liters, which makes them midsize cars in India, where most cars have engines of 800-1,000cc. The two models are expected to go for around 500,000-700,000 rupees.
India's biggest automaker has struggled recently, with passenger car sales falling for 11 straight months through February and sliding 37% on the year over that period, the largest drop among major carmakers operating in the country.
The slump is largely due to disappointing sales of the Nano, which was launched with great fanfare in 2009. Tata has sold a mere 240,000 Nanos over the last five years, falling short of the initial one-year forecast.
The Nano failed to catch the eye of India's increasingly demanding drivers, who are hungry for a taste of luxury in a growing economy. The new models are a response to those changing tastes.
The challenge for Tata is that the market for midrange cars is much tougher than it was five years ago, as rivals from Japan, Europe and the U.S. roll out new models. Japan's Honda Motor released the Amaze small sedan in the spring of 2013, which is selling strongly. Nissan Motor, another Japanese manufacturer, came out with the 1.2 liter Datsun Go compact hatchback, priced at about 300,000 rupees.
Loss of a leader
Along with trouble in the showroom, things are looking dicey at corporate headquarters. Managing Director Karl Slym, who was leading Tata's turnaround, died in January. Cyrus Mistry, head of parent company Tata Group, is currently running the business.
Tata Motors is still looking for a replacement for Slym, who had a long career in the industry, including stints at Toyota, and with U.S. carmaker General Motors in China and Canada. Before taking the job at Tata in 2012, Slym ran GM's Indian unit. The loss of its managing director has been a big blow to Tata, which benefited from Slym's extensive experience.
Slym fell to his death from a hotel room in Bangkok in an apparent suicide, although the investigation is continuing. He was apparently having family problems and reportedly argued with his wife on the night of his death.