Ratan Tata has achieved his dream. This morning the chairman of Tata Sons, one of India’s two largest companies, unveiled his “Peoples’ Car” at a pop star-style media circus staged at the Delhi auto show. He fixed the price of a basic 623cc model at the much vaunted level of one lakh (a hundred thousand) rupees or about $2,500.
That makes it the world’s cheapest car, though it may not be very profitable.
And he named it Nano – to conjure up high tech and small size images.
“A promise is a promise” he said, announcing the price. When I asked him whether the figure would otherwise have been higher, he said the promise had been a response to what had appeared in the media.
This had become “a challenge” that he felt he had to meet. He’s proud that he has launched “a means of transport that does not exist”, enabling families to move up-market faster from motor cycles that frequently carry three young children as well as parents.
The basic model of this handsome elongated bubble of a car will have the dealer price of $2,500 but will cost the consumer about $3,000 with tax and delivery costs when it is launched toward the end of this year.
That is about three times the price of an average motorcycle and half that of the Maruti Suzuki 800cc saloon, currently India’s lowest priced car. More luxurious versions, with air conditioning and other features, will be priced higher.
The car is unlikely to be exported for three years or more but, when it is, extras such as air conditioning and power brakes and steering would be added.
Rajiv Bajaj, managing director of Bajaj Auto, claimed this week when he launched a concept $3,000-plus car to be developed with Renault and Nissan (NSANY), that Tata (TTM) had never said his one-lakh car would be profitable. Today Tata dodged the question, saying the auto show was “not the platform to talk about breaking even.” Margins would be “spread over several models” and, with variants, the car would be “a profitable proposition for the company.”
Contrary to recent mocking jibes, Nano would meet all emission, pollution and safety norms, though its basic India version would not be sufficient for full European emission and side-crash requirements, nor have an air bag. Its maximum speed will be about 65 miles an hour with regular gas (diesel will follow later) consumption of 50 miles to the gallon.
Tata would not say much about how the low price has been achieved beyond that his Indian designers had “shrunk the package of the car” so that less steel and other materials are used, along with a smaller engine. But it is only 8% smaller than the Maruti 800, though it has, Tata claimed, 21% more inside space.
Some savings will come from locating suppliers on the same site as the main Tata Motors factory in West Bengal (which has been hit by rows over use of land). Further savings might be made later by using subcontractors to assemble cars nearer the point of sale.
Overall, Nano is undoubtedly a major achievement for Indian design and manufacturing. It is also a huge personal success for Tata, whose ideas have been met with widespread incredulity since he first broached the idea nearly ten years ago of moving families off dangerously overloaded motor bikes and into the relatively greater safety of a low cost car.
He has said recently that he would like to retire before too long and that it would be a good time to do so when the Nano is fully launched. He is now 70 and is due to go by the time he is 75. “I do not want to go out in a wheelchair,” he recently told Business World, an Indian business weekly.
But first he has to find a successor who can provide the widely diversified and growing Tata group (currently bidding for the Jaguar and Land-Rover car businesses) with the type of strong leadership that he has achieved – and that seems to be posing him with a more difficult challenge than designing and unveiling the Nano.