Low-Price Tata Nano Sparks Industry Innovations

MUMBAI – Tata Motors Ltd.’s long-awaited Nano “people’s car,” unveiled at the New Delhi auto show earlier this month, is a real car that is changing the way things are done in India.

Indeed, Tata says it has filed 34 global patents for the vehicle’s platform.

The Rs100,000 ($2,500) vehicle’s interior affords more cabin room than Maruti Udyog Ltd.’s segment-leading M-800, seating four passengers and providing limited storage space under the hood. Vehicle weight is reduced by the use of an aluminum engine and replacing steel with lighter metals and plastic parts.

The Nano’s 0.6L 2-cyl. rear-mounted gasoline mill features multipoint fuel injection and is capable of 50 mpg (4.7 L/100 km) fuel efficiency.

The car is equipped with a 4-speed manual transmission and can achieve speeds up to 65 mph (105 km), while meeting Euro 4 emissions standards, as well as safety regulations.

Tata also is offering an upgraded model with an automatic transmission, common-rail diesel engine and air conditioning, with, of course, a higher price tag to be announced later.

For both the gasoline and diesel models, customers will pay an additional Rs20,000-Rs30,000 ($510-$765) for value-added tax, registration, insurance and transportation.

Critics told Tata Nano couldn’t be built.

Dealers will get a margin of 2.5% on the basic price, which considering the car’s price means they will need to sell considerable volumes. Tata is designing dealer outlets and practices to make it worthwhile for them.

Tata also is changing India’s manufacturing practices. That’s because the auto maker is asking engineers and mechanics to join together to set up their own assembly operations to build the Nano.

Tata not only will supply complete-knocked-down kits but also provide the entire assembly plant, at what it says to be the most economical price. The auto maker will monitor the quality and reliability of the assembly operation, taking full responsibility for product liability.

Using this strategy, Tata expects to make and sell 250,000 cars in the first year and up to 1 million annually in the next three to four years.

The unusual manufacturing strategy will enable Tata to meet increasing demand. At present, its Singur production site is embroiled in local political fights over plans to expand the current facility.

But Tata is not worried. If Singur cannot catch up, the auto maker says it will use some of its other plants initially to build the Nano.

Unveiling what some are calling “the world’s cheapest car,” Chairman Ratan Tata tells journalists, “I was in a lonely phase of my life.” That’s because no one in the industry believed he could build the car. Even his colleagues said it couldn’t be done.

Parts suppliers were not willing to sign up until Tata started building its plant at Singur. But now Robert Bosch GmbH and other global, as well as domestic, suppliers are competing for the business.

Critics’ voices still can be heard. Among them, Osamu Suzuki, chairman of Suzuki Motor Corp., claims the Nano will not be able to survive more sophisticated competition.

Some test drivers say the small-base car is unstable at highway speeds, while potential buyers wait to make up their own minds.

Other auto makers in India, including Honda Siel Cars India Ltd., Ford India Ltd., Fiat India Ltd. and BMW India Ltd., are developing their own small cars for India and emerging markets.

But their vehicles are much bigger and far more expensive than the mini Nano, which reportedly is 23 ins. (58 cm) shorter than the Honda Jazz/Fit.

However, two serious Nano contenders – Bajaj Auto Ltd. (in a joint venture with the Renault Nissan Alliance) and Mahindra & Mahindra Ltd. – insist the greater the competition and wider the market, the better it will be for everyone to sell their cars.

Whether the Nano will promote an industry revolution equal to the Volkswagen Beetle and the Ford Model T is yet to be determined.