World's cheapest car headed for North America

Tata's Nano to debut in India this summer

THE ASSOCIATED PRESS

Mar 23, 2009

MUMBAI – The world's cheapest car will retail for just over $2,500 and can be yours – if you live in India and are very lucky – by July, Tata Motors said Monday.

The Nano, a pint-sized vehicle designed to make car ownership accessible to millions of the world's poor, finally goes on sale in India next month. Whether it will revolutionize the global auto industry – or turn around its manufacturer's fortunes – has yet to be seen, and other automakers will be watching closely to see how consumers respond to the car. So will environmentalists.

"We can do what most countries felt could not be done," Ratan Tata, chairman of the sprawling Tata group of companies, said at a launch ceremony Monday, as the swelling strains of the theme song to "2001: A Space Odyssey" died away in the warm night.

"Nothing is really impossible if you set your mind to it," he said. "What we have done is given the country an affordable car.''

And, he pledged to go to Europe and America soon, with safer, cleaner but still ultra-cheap Nanos for the developed world.

The Nano was initially targeted at impoverished first-time car buyers in Asia and Africa, but the global economic meltdown has amplified Ratan Tata's export ambitions.

Tata Motors unveiled the Nano Europa, a slightly more robust version of the Indian model, at the Geneva Motor Show this month, with a planned launch of 2011.

The company is now designing a version of the Nano that meets U.S. safety and emissions standards and should be ready for launch in about three years, Tata said.

"A year ago, I would have said the United States is not on our radar screen," Tata said at a lunch with reporters Monday. Now, he added, "We see an opportunity for a low-cost car. In this economic situation we can see perhaps there is a place for it.''

The Nano, with a starting retail price of 112,735 rupees (the equivalent of about $2,700 Canadian) is a stripped-down car for stripped-down times: It is 10.2 feet (3.1 metres) long, has one windshield wiper, and a 623 cc rear engine.

The four-seater can travel up to 65 miles an hour (105 kilometers an hour) and gets 55.5 miles to the U.S. gallon (4.2 L/100 km). The Nano does not have air bags or antilock brakes – neither of which is required in India – and if you want air conditioning or power windows, you'll have to pay extra.

Tata said the car emits less carbon dioxide than most motorbikes.

Priced like a gadget or a piece of jewelry, the Nano will be sold not just at Tata car dealerships across India, but also online and at electronics and clothing shops owned by the Tata group of companies.

People flocked to the Nanos on display Monday night like moths to light, thwacking the doors shut, testing the seats, tooting the horns, and tugging on the flexible plastic bumpers.

"It is a proper car," said Hormazd Sorabjee, editor of Autocar India, a trade magazine. He said the designers made clever compromises to keep costs down, scrimping on the plushness of the seats, but offering a comfy suspension and ample interior space.

The Nano should make global automakers stop loading their cars with costly gadgets people don't really want, he added.

"Finally, it's going to make people realize they should be building cars that people need," he said. "This is where multinationals have failed.''

Some automakers have already started following suit. Bajaj Auto, Renault and Nissan teamed up last year to make a car that wholesales for close to $3,000 in India by 2011.

Production of the Nano has been scaled back from initial targets – and the rollout has been delayed six months – because Tata Motors had to move its Nano factory from West Bengal to the business-friendly state of Gujarat. Violent protests by farmers and opposition political party leaders over land at the initial site forced the company to change plans.

The new factory, which will be able to produce up to 500,000 cars a year, will open by year's end, officials said. Until then, Tata Motors can only produce 50,000 cars a year from an existing plant in Pantnagar, in the northern Indian state of Uttaranchal.

The prices are only guaranteed for the first 100,000 cars, and given the production constraints, consumers may well have to wait until 2010 to get cars they book in April, company officials said.

Until then, eager Nano customers will have to console themselves with the spiffy array of Nano T-shirts and Nano key chains the company has spun out – all designed to make the Nano seem not just cheap but cool.

Though Ratan Tata said he expects to eventually sell 1 million Nanos a year in India alone, few analysts predict the tiny car will be able to quickly turn around Tata Motors, which has been beset by flagging sales and high debt.

Commercial vehicle sales, its core business, have been decimated as India's growth slows, and consumers have had trouble getting affordable car loans.

Tata Motors declared a loss of 2.63 billion rupees ($54 million (U.S.)) for the October to December quarter, and it has struggled to refinance the remaining $2 billion of a $3 billion loan it took to buy the Jaguar and Land Rover brands from Ford Motor Co. in June.

Vaishali Jajoo, auto analyst at Mumbai's Angel Broking, said even if Tata Motors manages to sell 250,000 Nanos a year, it will only add 3 per cent to the company's total revenues.

"That doesn't make a significant difference to the top line. And for the bottom line, it will take five to six years to break even," Jajoo said.

Tata officials said they've spent 20 billion rupees ($396 million) developing the Nano so far.

Ratan Tata won't speculate whether this is a Henry Ford moment for India. Ford famously paid his factory workers enough so that if they saved carefully, they'd be able to buy their own Model T.

The average salary at the Pantnagar factory is 150,000 rupees ($3,000) a year, company officials said. Ratan Tata said most workers there don't even own motorbikes.

"We bus them to work everyday," he said.