Business Today

Lessons from Tata Nano for Reliance Jio

Over the years, Nano's sales have gone through several dips and surges. At its peak, the previous version of Nano - the current version is GenX Nano - hit sales of 10,475 units in March 2012. In recent years, sales have been going only southwards.

twitter-logo Manu Kaushik        Last Updated: September 10, 2016  | 14:49 IST
Lessons from Tata Nano for Reliance Jio

Manu Kaushik, Associate Editor, Business Today
In April, about three months prior to its launch, Tata Motors started taking pre-launch orders for its much-hyped Nano, the world's cheapest car that was priced at Rs 1 lakh. Some people booked the car thinking that they would sell it in the black market for a premium, expecting a huge demand-supply mismatch in the months after the launch. But that never happened.

A similar story seems to be playing out in the telecom sector, where Reliance Jio has taken the country by storm. There are long queues at Reliance Digital stores to buy new connections. The waiting period is long because there are fewer SIM cards on sale than the demand from users. Those who cannot wait are buying SIMs in the black market for Rs 500-1,000. The pull, of course, is the world's cheapest data plans and free voice calling for lifetime.

Soon after its launch, Nano ran into a series of problems, including incidents of the car catching fire on more than one occasion. The experience with Jio is also far from seamless till now. People who are given connections are facing issues with activating them. Those who have got it activated are not able to make calls because of major connectivity issues. The only saving grace seems to be data, which is working fine in most locations. 

In his launch speech, Reliance Industries Chairman Mukesh Ambani had grudged the lack of support from incumbent telecom operators. He mentioned that Jio customers suffered from 5 crore call failures to other networks in just one week due to insufficient interconnectivity capacity. If this continues for long, it would lead to irreversible damage to the users' perception.

Over the years, Nano's sales have gone through several dips and surges. At its peak, the previous version of Nano - the current version is GenX Nano - hit sales of 10,475 units in March 2012. In recent years, sales have been going only southwards. For instance, the sales in July 2016 stood at a dismal 701 units compared to 2,120 units in July 2015 even though the base variant of the car still costs Rs 2.06 lakh, the lowest ex-showroom price for any car in the country. The slightly-higher priced Renault Kwid had sold 9,897 units in July this year.

Reliance Jio has set for itself a target of 100 million customers in the shortest possible time. Earlier, there were reports that it targets to reach 100 million subscribers in one year. Let's assume that the shortest possible time is one year. That translates into selling a whopping 273,000 connections every day, or about 8.22 million connections a month. That looks daunting because with their established retail and distribution network, the top six telcos - Bharti Airtel, Vodafone India, Idea Cellular, Aircel, Telenor and MTNL - could add just 2.1 million subscribers this July. Bharti Airtel alone could add just 1.07 million in July, which is roughly one-eighth of Jio's target.

In the case of Nano, only 100,000 cars were sold at Rs 1 lakh, the price at which the car was supposed to be sold, as was thought by its Tata Sons' chairman emeritus Ratan Tata. The later models were priced much higher. The consumers don't have to pay anything to use Jio's services for now. Its welcome offer gives unlimited access to its bouquet of services till December 31, 2016. Experts say that more clarity on tariffs is likely to emerge after this largesse ends. Like any other business, Jio's profitability will be keenly watched by market analysts. With its aggressive pricing, Jio's financial performance is expected to be under duress.
 

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