Tata Nano – A Look at the World’s Cheapest Car

Advertised as “the world’s cheapest car“, the Nano is a no-frills automobile designed by Tata to be affordable to millions who commute on 2-wheelers carrying a family of 4-6!! The impact is huge, and everyone is excited at the prospect of owning a car that is only 1 lakh rupees ($2500).

The US economy might not be in its best times, but the growth and revolutions in emerging markets like India are breaking all barriers! The latest to hit the ever-growing Asian and European markets is the sensational Tata Nano – the no-fuss, fuel-efficient energy car that has fueled every Indian’s dream to own a car. Anywhere else, a new car may have received some acclaim for what it’s worth, but in india, things are different. This tiny-tot has created quite a havoc, but whether it stands the tests of time, and whether it creates more problems than solutions is yet to be seen.

Termed as a “People’s Car”, it is a cute (or maybe not!!), compact car designed to appeal to first-time car buyers in one of the world’s fastest growing car markets. The car is the culmination of about five years of research and input from designers across the world. But it is definitely a step ahead in innovation, right from using aerospace adhesives instead of welding, a clean and efficient fuel-burning technology to the concept, distribution strategy and marketing, and has succeeded in catching the attention of the world.

Designed to look sleek and compact, about the size of a BMW Mini Cooper, and styled to enable aerodynamics, this concept car is not for those seeking class. The four-door Nano is a little over 10 feet long and nearly 5 feet wide. It is powered by a 623cc two-cylinder engine at the back of the car. With 33 horsepower, the Nano is capable of 65 miles an hour. There’s a single wind-shield wiper, and no A/C (though a high-end version will also be out sooon) Its four small wheels are at the absolute corners of the car to improve handling. There is a small trunk, big enough for a duffel bag, but on the whole, it does give tough competition to the current favorite Maruti-800.

A look at the side effects of this revolution is in order here. As everyone knows, India is densely-populated, and the current road conditions, narrow lanes, and lack of traffic control, and the dearth of parking structures may be on a rise if the streets get flooded with these cars!! On the other hand, neccessity is the mother of invention, so this might give rise to more infrastructure opportunities and new businesses! It will surely be a safer bet for those families of 6 who risk their lives travelling long distances on a motor-bike!!

Tata Nano for Europe in 4 years

India’s top car maker Tata Motors will create a European version of the world’s cheapest car within the next four years, a company executive said in an interview to be published on Monday.

“In four years, we’re going to develop a successor (to Tata’s bargain-rate Nano car) that will respect Euro-5 rules on exhaust emissions and European requirements in terms of safety standards,” Girish Wagh, head of Tata’s small vehicles department, told the German weekly Focus magazine.

In January, Tata unveiled a $2500-car billed as the world’s cheapest to mixed reviews. While experts say the car could revolutionise how millions travel, others worry about pollution.

Wagh did not say how much the European spin-off might cost.

Hyundai working on cheaper than Santro model for India

Tata Nano might not have launched but it is already showing its affect on the rival automobile manufacturers in India.

Hyundai is one company which is taking the challenge seriously. The company now plans to launch a new model in the market which would be priced cheaper then their current cheapest model Santro.

This new car would take at least three years to appear in the market. It would be designed for the developing markets and is unlikely to be sold in their home market of South Korea.

Hyundai has also started operating their second manufacturing plant in India making it their second largest production facility in the world.

Canadians hot for Tata Nano; $2,500 car from India would be big seller

It may not be available in Canada for years, if ever, but Canadians have already fallen in love with the idea of the Tata Nano, the world cheapest car.

With a top speed of 105 kilometres an hour, a 33-horsepower engine and the looks of a snub-nosed beagle, the Tata Nano from India is hardly a vehicle that could be described as a “babe magnet.”

But the expected $2,500 price tag is drawing plenty of attention – including from young women – a poll of Canadians suggests. By comparison, inexpensive sub-compacts in Canada can cost upwards of $12,000. The Canadian Press Harris/Decima survey of 1,004 adults conducted in late January suggests the Nano would be a hit in Canada if Tata Motors, which expects to start production this fall, decides to export the car.

Tata has said the Nano would be manufactured strictly for the India market for the next two years.

More than one in three respondents (36 per cent) said that someone in their household was either certain or likely to buy one if they could, although 41 per cent said that was unlikely.

As well, 21 per cent said they believe the five-seater will be a big winner around the world over the next 10 years, and 54 per cent said they believed it would be at least a moderate success. The poll has a 95 per cent accuracy probability within a sampling error of plus or minus 3.1 percentage points.

“I think this tells us that as much as we’re seeing growth in the luxury car segment, there’s still burgeoning demand in the lower end segment, particularly among younger Canadians and those who are not as well off,” said Bob Murphy, senior vice-president with the polling firm.

Hyundai’s Tata Nano challenger might arrive by 2011

Hyundai Motor has recently stated that they were planning to develop a new low cost public car for the Indian market.

This could be their challenger for the recently showcased Tata Nano.

The latest reports in the market states that they might launch this vehicle in India by 2011. Tata Nano would be available in the market before the end of the current year.

A company representative said that this new car is likely to be priced at around USD 3,700. This would make it a lot more expensive than the Tata Nano which would sell for somewhat above USD 2500.

This new car from the company is unlikely to be sold in their home market of South Korea.

Nano: Ratan Tata grows beyond business

What is the impact of a leader’s values on his business decisions? As leaders move up on the value hierarchy, do they start thinking more about society and about making a difference ? This seems to be true going by some of the important decisions made by various leaders.

Everything that we do is to fulfill a need and by doing that, we get satisfaction . Psychologist Abraham Maslow proposed that humans operate as if they have a hierarchy of needs. His research focused on the motivations of people who were successful in their lives. According to Maslow, the primary human need is survival.

When we are able to master survival, we shift the focus of our consciousness to the establishment of relationships , so that we can feel safe and protected. When we are able to master the art of relationship building , we shift the focus of our consciousness to satisfying our self-esteem needs. Once we are able to feel a sense of self-worth , we shift the focus of our consciousness to self-actualisation .

We continuously grow towards a higher stage, and in that highest state, we become a better human being and this process of growth is termed by him as ‘self-actualisation’ . A self-actualised person is set to develop deep social interest and compassion.

I do agree that a Rs 1 lakh car would sell more than a Rs 2 lakh car and the large number of potential customers would add to Tata’s profits. At the same time, I would like to look at the possibility of Ratan Tata operating from a higher level of self-actualisation when it comes to the Nano project.

According to Ratan Tata, “What drove me—a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads—was a family in potential danger.” If we connect this to the fact that Ratan Tata declared himself as chief personnel officer, acting as a change agent to facilitate best HR practices in his organisation, possibly we are looking at a shift in focus and values.

“I think that in everybody’s life there are certain moments of satisfaction. You feel that after that has been achieved, it is a nice time to step away or change gears and that’s why I said that in an ideal world this would be a good time to step away.” Do these words reflect his self-actualisation stage according to Maslow’s hierarchy of needs?

Are we saying the decisions of leaders would be influenced by the hierarchy of values that he operates from? Yes, and this seems to be the truth. “I will be thrilled and privileged if the board asks me to continue as non-executive chairman while the role of chief mentor would be going to a smart person,” said Infosys’ Naryana Murthy.

This shows the characteristic values one demonstrates while operating from the self-actualisation layer of the Maslow hierarchy. We also know that Bill Gates said about his intention to handover his responsibility for software strategy immediately and reduce his involvement in the company progressively . Bill Gates also said he would switch his attention to philanthropy—working on global health and education.

Interestingly, the Airtel campaigns over the last three years show a movement towards a higher level of hierarchy. It started with ‘Express yourself’ and then moved on to ‘Connect to your loved ones’ and now has reached a state where the campaign talks about ‘Dissolution of barriers’ .

This need is about giving back, enriching others and championing a greater cause. This relates to the Body Shop website that reminds visitors, “Never doubt that a group of thoughtful, committed citizens can change the world; indeed, that’s the only thing that ever does.”

So, if we can map, understand and predict the values and hierarchy of the leader, we may be able to predict what would influence his/her critical decisions .

Loans for Tata Nano may be riskier for banks

The people’s car from Tata, called Nano has created a new opportunity, which the banks definitely don’t want to miss. However, the customer profile that is expected to go for Nano is mostly middle class and lower middle class, and banks are worried that these segments have a higher risk profile as compared to other car loan borrowers.

Tata Nano is expected to create a huge dent in the two-wheeler segment and many two-wheeler owners have already expressed interest in owning a Nano. They are even willing to defer their decision to buy another or a new vehicle till the car is available in the market. The two-wheeler loan segment has one of the highest default rates among various retail loans and hence carry a higher rate of interest.

At present the car loans in India are available from lenders at interest rates ranging betwen 12-16 percent, while the two-wheeler loan segment have higher interest rates ranging between 18 -22 percent. In addition to the high interest rates, two-wheeler loans have low tenures generally around two years, while car loans are available for around 7 years.

This loan tenure and interest rate scenario of two-wheeler loan segment can come into picture since the entry level model of Nano is expected to cost around 1.25 lakhs. Keeping in mind the income profiles of this segment of borrowers, banks are contemplating on adding a ‘running cost’ component to the loan for Tata Nano. This could effectively increase the loan amount and hence enable banks to offer loans of longer tenure with lower EMI’s, which could be easily afforded by borrowers of this segment.

The resale value of Tata Nano and design defects, which have been a regular feature of Tata’s popular cars like Indica, are also making the banks take a cautious stand on financing Nano. P. Sridhar, Senior VP,IndusInd Bank said, “If there are design defects it will affect the resale value of the car which could drop to just Rs 50,000-60,000.”

Tiny Tata Nano Car, Big Threat

There’s a good reason why chief U.N. climate scientist Rajendra Pachauri, who shared last year’s Nobel Peace Prize with Al Gore, says he’s “having nightmares” about India’s newest automotive innovation. It’s not because the Nano from Tata Motors, which was introduced last week, makes the boxiest hatchbacks from the ’70s look sexy. It’s not because the car lacks air conditioning in a country where the heat can be paralyzing, nor because its 2-cylinder engine can barely manage 60 mph. It’s because the vehicle’s tiny price tag — about $2,500 — will make car ownership possible for millions of Indians, which could well render the rest of the world’s efforts to combat global warming moot.

Currently, only about 12 in 1,000 Indians have a car, according to the United Nations. In the United States, the ratio is 765 cars for every 1,000 people. What happens if, through a combination of its incredibly rapid economic growth and innovations like the Nano, India’s car-ownership ratio hits that of the U.S.? That would put 864 million cars on India’s roads, more than 3 1/2 times the number in the U.S. It wouldn’t happen for several decades, if ever, but the same phenomenon is occurring in China, which has an even bigger population. The International Energy Agency estimates that the number of cars in China will increase sevenfold, to 270 million, by 2030.That’s a scary prospect. Light-duty vehicles account for about 10% of global carbon emissions, and that number is going to rise quickly as more Indians and Chinese get behind the wheel.

Indians, of course, have every right to enjoy the newfound freedom and status that comes with owning a car. There is nothing the world’s environmental community can or should do to interfere with the rollout of the Nano. Yet it does point up the urgency of developing technological alternatives to the internal combustion engine and the burning of fossil fuels.

If there’s a silver lining in the Nano cloud, it’s that the free market could help solve the emissions problem. Prices for gasoline will probably keep rising as millions of cheap cars hit Asian roads. That will spur research into alternatives and discourage people worldwide from buying low-mileage cars. It’s even possible that gas prices in India might rise to the point that those who could afford a Nano wouldn’t be able to afford the gas to fuel it.

American automakers should take heed. Judging from the models being unveiled at this week’s Detroit Auto Show, consumers can expect more of the same gas-guzzling vehicles in showrooms this year and next. Detroit isn’t entirely to blame because it takes years to produce new models, and soaring gas prices are a relatively recent phenomenon. But carmakers considering their future lineups would do well to phase out the Navigators for something more Nano-sized.

Nano as taxi? Mumbai drivers all geared up

Think Mumbai, think black and yellow Fiat taxis. For decades now, the trusted Fiat has helped Mumbai get around be it day or night, with the friendly taximan always just a wave away.

But the cabbies now want a change for the better. With the Premier Padminis no longer being manufactured, they are looking forward to the Tata Nano hitting the roads.

“Majority of them (drivers) are anxious and have enquired about this vehicle because there’s no other viable option,” says President, Mumbai Taximen Union, A L Quadrose.

The drivers are more than happy. “It’s cheap, it looks good. Who wouldn’t want it?” says a driver N P Singh

But the Nano may not be viable just as it is. The taximen want few changes for it to become their ideal run-about.

“Petrol is not viable for us. We have to be able to convert it to CNG. We’re trying to work it out,” says Quadrose.

Drivers too have their set of demands. Says a taxi driver Rajendra Kumar Tiwari, “We need a carrier and more space. Then it will be great.”

But even with those modifications, there are doubts being raised.

“It (Nano) can only work for very short distances. if I want to go from city to suburbs and back it will not work. They need a sturdy car,” says Chairman, Western India Automobile Association, Nitin Dossa.

The Taximen Union says it’s meeting Tata later this month to figure how the Nano can be a viable alternative for the Premier Padmini.

Is the two wheeler segment dreading the Nano effect?

Tata Motors has challenged global auto firms and kept Chairman Ratan Tata’s pledge to introduce the Nano at the emotional price of Rs 1 lakh.

For the first time in history of automobile, the need for smaller cars would soon overtake the need for horsepower or speed as oil hovers around $100 a barrel. Major auto firms and even bike-maker Bajaj had a small car on display at the Auto Expo that is underway in Delhi. Most of them were concepts to counter Tata’s Nano. But the underlying theme was obvious, ’small’.

The question is will Nano spark a car revolution on the streets that would have an impact on the two-wheeler segment. Nano is far safer than two-wheelers where the fatality rate is double that of cars. Analysts say that even if Nano manages to convert 10% of the two wheeler market of nine million, it will have almost 50% share of the car market.

Nano is expected to be launched around Diwali and may lead to a 20 per cent reduction in prices of two-wheelers and a 35 per cent decline in prices of second-hand cars, according to industry chamber Assocham.

“Nano is expected to change the automobile market in India. It would cater to a typical middle income Indian family of four who wants to avoid rain, wind and dust. Its freedom for four,” says Dilip Chenoy of the Society of India Automobile Manufacturers (SIAM).

The 100-125 cc two-wheeler range, which comprises 90% of the two-wheeler market in terms of sales, could be severely affected with the launch of Nano. Bike makers Hero Honda and Bajaj have realised this and have jumped into the bandwagon of ultra small cars.

Rajesh an IT professional working with an MNC in Gurgaon who, travels every day in a Bajaj Pulsar says, “I would definitely consider buying the Nano as the cost of the car fits my pocket and above all it gives good mileage.”

Industry research organisation CRISIL, in a report, stated that the Nano may bring 65 per cent more families into the range of those who can now afford a car. “The on-road price for a Nano is expected to be in the region of Rs 1.3 lakh. This brings down the cost of ownership of an entry level car in India by 30 per cent, making a new car affordable to families with income level of Rs 2 lakh,” the Crisil research added.

However, Aman Verma a manager working with a Hero Honda showroom in East Delhi had a different opinion, “Nano may give a lot of people a chance to own a car, but more than fixed price, it’s the variable cost of maintenance, fuel and spare parts, where the two wheeler sector has an edge.”

“A car is much more suitable, safer and a comfortable option than a two wheeler, in a cost conscious nation like India, but there will always be a place for a two-wheeler. There will not be a large scale migration to the Nano. Both the bike and the entry level car segment would have its own niche customers in future. In the next five years the two wheeler segment would constitute 25% sales of the auto industry,” adds Chenoy.

Mahesh Kumar working as a Sales Manager for a Tata Motors showroom in Delhi said, “We are getting 50-60 telephone calls daily from people enquiring when exactly the Nano will be available in the market.”

A nation with economic growth touching 9% consecutively for the third year and a population of more than a billion, there is no scepticism that demand will be strong for Tata’s Nano, whose basic model does not include air conditioning and lacks a radio. This is a win-win situation for the company as it would play the volumes game to make profits from its dream project.

The Nano would cost roughly less than half its nearest competitor the Maruti 800 and just about double than that of a 150 cc bike. Two-wheeler manufacturers would now be forced to work on new technologies to make better motorbikes and scooters. This would also in turn influence the price tag of the two-wheelers. It also proves that for frugal engineering, at least Indian manufacturers can outdo anyone else in the world.

“A promise is a promise,” said Ratan Tata after displaying his dream project at the Auto Expo. One American journalist wrote that the Nano is Wal-Mart on wheels. Well, will this prod the two wheeler industry in India to focus on an entry level bike that would cost Rs 10,000?