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The cheapest car in the world

Why the lowest price can lose, and how to raise yours fairly · 13 min

Ratan Tata built a real car for one lakh rupees, for families squeezed onto scooters. Years later he said one word had hurt it: "cheapest". A dress that sold better at a higher price ending in nine, and a classic study of when people call a price rise fair, show why a price is a message as well as a number, and how to raise yours without losing the people who pay it.

Takeaways

  • Tata's Nano launched in 2009 at one lakh rupees, about $2,500, with plans for 250,000 cars a year; its best year was just under 75,000, and Ratan Tata later called the "cheapest car" label unfortunate. Land protests, delays and early fires also hurt it.
  • A price is a message as well as a number: in a test by a US women's clothing catalogue, moving a dress from $34 to $39 raised demand by about a third.
  • In telephone surveys in Toronto and Vancouver, 79% judged a grocer passing on a higher wholesale lettuce price acceptable, while 82% called raising snow-shovel prices after a storm unfair. This week: one price, one reason, one door for tight budgets.

Chapters

  1. One lakh rupees0:17
  2. The lowest price myth2:03
  3. What a price says4:03
  4. Two sellers, one rise6:33
  5. Hear it done8:07
  6. Build yours9:17
  7. The answer11:06

References

  1. Kahneman, D., Knetsch, J. L., & Thaler, R. — Fairness as a constraint on profit seeking: Entitlements in the market(1986)
  2. Anderson, E. T., & Simester, D. I. — Effects of $9 price endings on retail sales: Evidence from field experiments(2003)
  3. Anderson, E. T., & Simester, D. I. — Mind your pricing cues(2003)
  4. Malay Mail / AFP-Relaxnews — India's Ratan Tata sees brighter future for upmarket Nano(2013)
  5. Business Today — 'Not the car I envisioned': When Ratan Tata opened up about Nano's marketing misfire(2024)
  6. Wikipedia — Tata Nano(2026)
  7. de Mel, S., McKenzie, D., & Woodruff, C. — Are women more credit constrained? Experimental evidence on gender and microenterprise returns(2009)