CNBC Business | The Next Small Thing?

The Next Small Thing?

Ben Oliver asks what carmakers worldwide can learn from India’s new, €1,700 micro car – the Nano

THE SHAPE OF THINGS
TO COME? Functional and
affordable, the Nano could
revolutionise the car industry If it lives up to its hype, the Nano could be an era-defining car; as important as the Model T, the Beetle or the Mini. When it goes on sale in India later this year it will be – by some margin – the cheapest car in the world. At a stroke, it will make car ownership a possibility for hundreds of millions of people who currently rely on motorcycles, bicycles, animals or shoe-leather for transportation. For an almost unbelievable €1,700 – less than half the cost of its nearest rival, an ancient Suzuki, long-obsolete elsewhere – Ratan Tata, whose eponymous conglomerate has built the car, claims it will provide a safe, modern and reliable means of transporting five people.

The Nano started as a “social mission”, says Tata, who is also poised to buy Jaguar and Land Rover, but some say the project has ended up embarrassing Western carmakers with its engineers’ imagination. It promises to revolutionise an industry in which Tata is, for now at least, only a bit player. Impressively, the company delivered the vehicle exactly when it said it would, at the Delhi motor show, and on budget. €1,700 is 100,000 rupees, or one lakh; until its launch the Nano was referred to as the one-lakh car, and the name seems to be sticking.

Unsurprisingly, the Nano’s launch did not result in universal rapture; apart from inevitable howls from environmentalists, horrified at the prospect of car ownership exploding, some observers questioned Tata’s business model. “My scepticism about the car is not about Tata’s ability to put it together but to put it together at one lakh,” says Rajiv Bajaj, managing director of Tata’s local rival Bajaj Auto. “I still haven’t heard them say it will be profitable.”

CLEAR VISION Ratan
Tata aims to offer reliable,
safe cars to the public at half
the cost of his competitors The Indian government predicts that car sales – driven by the Nano – will treble to three million a year by 2015, even though domestic sales will be slightly hampered by poor roads and gridlocked cities. However, the Nano’s real impact will be felt when its sales spread to the other emerging economies – China mainly, but also Russia, South America and Africa, where car ownership is currently even lower. Globally, it might open car ownership to billions of people. Privately, Tata’s people say they plan eventually to bring better-specified versions (with luxuries such as a radio) to Europe.

So how did the 150-year-old, family-controlled €32bn conglomerate, best-known in Europe for its purchase of UK steelmaker Corus for €8.8bn, build a car for less than half what the established carmakers thought was possible?

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