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From Edmunds Inside line:
This car has spawned similar project from the global auto makers. Whether this particular one lakh car from TATA Motors succeeds or not, Ratan Tata's dream of an affordable car will be fulfilled by one of the global automakers for sure. Quote: India's Tata Motors and the Next People's Car
By Paul Lienert, Contributor Email
Date posted: 10-10-2007
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Ratan Tata may be remembered as the Henry Ford of India — or perhaps the Preston Tucker. But already his influence is being felt by such global auto titans as Carlos Ghosn and Ferdinand Piech, despite the fact that tiny Tata Motors doesn't even seem to have surfaced on Detroit's murky radar screens.
That could be yet another strategic blunder in myopic Motown. Because, in an industry that measures progress in infinitesimal increments, Tata's audacious blueprint for an affordable "people's car" — a 21st-century Model T for emerging global markets — has the potential to be a game-changer, much like the original Volks-Wagen ("People's Car") designed by Piech's grandfather, Ferdinand Porsche.
Details are sketchy, but Tata envisions a compact four-seater with a rear-mounted engine, built on the cheap in India and shipped to first-time buyers in markets from Afghanistan to Zanzibar. How cheap? Tata wants to sell his car for 100,000 rupees — one lakh, in Indian parlance, thus the vehicle's unofficial designation as the "one-lakh car."
At current exchange rates, that translates to about $2,500, or roughly half the price of India's least expensive car, the aging Maruti 800, and about one-quarter of the going rate for Renault's ballyhooed "affordable car," the Romanian-built Logan. The Neo-Beetle
Ghosn has been quick to seize the gauntlet, launching assembly of the Logan in India earlier this year in partnership with local manufacturer Mahindra & Mahindra, one of Tata's fiercest competitors.
But the Renault chairman has been even more aggressive in sizing up the potential for a really cheap car, recruiting another Indian firm, Bajaj Auto, a maker of two- and three-wheeled vehicles, to partner on development of a $3,000 no-frills hatchback that would dance toe to toe with Tata's one-lakh car. As Ghosn told reporters this summer, such a product "could have a big potential — bigger than India."
Piech hasn't exactly been sitting on the sidelines. VW's supreme commander has his engineers and designers whipping up a new Third World design, along the lines of the rear-engine Up! concept that was unveiled at the 2007 Frankfurt Auto Show.
Piech's minions have tried and failed at least once before at this mission, having proposed, then scrapped a similar scheme about five years ago to build a cheap, sub-Polo minicar in China. Now VW, like Renault, is looking to India as an even lower-cost source of production for its neo-Beetle, even though the price target is a much less ambitious $7,000. Where Are the Japanese?
From a cost standpoint, even Japanese auto giant Toyota considers India to be the smartest location to base its upcoming global subcompact — a $7,000 hatchback that will use the iQ concept from Frankfurt as its jumping-off point. Like VW and Renault, Toyota plans eventually to build and sell its cheap small car in such emerging markets as China, Russia and Brazil.
The new stripped-down models from Renault and Tata are intended primarily as step-up starter vehicles for owners of scooters and motorcycles. With little or no safety gear, emissions hardware or even basic amenities that American buyers take for granted, like a radio and a heater, they won't be seen any time soon on the streets of Santa Monica.
Still, the Detroit-based automakers' overseas operations appear to have nothing like them on the books. The closest competitor would be General Motors' China-built Chevrolet Spark, a sibling to the Korean-designed Daewoo Matiz that sells in China for around $6,000. Automotive Manhattan Project
While Detroit so far is paying little heed to India's automotive equivalent of the Manhattan Project, Beijing and Seoul have taken notice. Hyundai is said to be pondering its own low-cost strategy, using its sprawling manufacturing complex in Southern India as a potential small-car export hub for the rest of the Asia-Pacific rim, despite the fact that it is in the process of installing enough production capacity in China to build a million cars a year.
Taking on the Chinese and Koreans in the global small-car arena might seem daunting enough — so much so that Chrysler threw in the towel earlier this year and hired Chery to build most of its future compacts in China. And yet even a low-cost expert like Chery, which makes a cheap $4,000 knockoff of the Spark called the QQ, is about to set up shop in India, to take advantage of labor rates that are less than half of those in China. Ironically, GM also has begun assembling a version of the Spark in India (where the local model starts at $7,800).
So how can a small Indian manufacturer possibly upstage such a formidable array of competitors, from feisty Chery to mighty GM? Family Business
Like Ford, Toyota and VW, Tata Motors is a publicly held company that's still family-controlled, in this case by Ratan Tata, an American-educated fifth-generation scion who's held the reins at the 130-year-old firm since 1991.
A subsidiary of the Tata Group, which owns everything from steel companies to luxury hotels (it even owns Tetley Tea), Tata Motors is India's largest indigenous automaker, as well as the country's largest manufacturer of trucks, buses and commercial vehicles. Once known as TELCO (for Tata Engineering and Locomotive Company), the firm introduced the Tata Indica, the first modern small car designed in India, less than 10 years ago. Before that, Tata had made only a half-hearted attempt to enter the passenger-vehicle market, with a boxy station wagon called the Tatamobile and clunky SUVs with such unromantic names as Sumo and Safari.
Following the 1998 launch of the highly regarded Indica and subsequent rollout of sister models Indigo and Marina, the one-lakh car began bubbling up as a dream project for the 69-year-old Tata, who holds a Cornell engineering degree and is a graduate of Harvard's Advanced Management Program. They'll Get What They Pay for
How realistic is Tata's vision for a new "people's car"?
Says Hormazd Sorabjee, editor of Autocar India: "Obviously, the quality will only be what you get in this (price) bracket. The car may lack refinement, but there will be no compromise on fuel efficiency and running costs."
Adds Gautam Sen, editor of Auto India magazine: "It will be good enough to serve the basic transportation needs of a typical Indian commuter [as well as] for developing markets around the world. There will be more expensive versions with options that will be priced much higher. And a more sophisticated derivative could very well find its way to Europe."
If Ratan Tata can successfully bring his dream car to market as promised in late 2008 — even if the price tag balloons to one-and-a-half lakhs — he will have earned his popular sobriquet: the people's tycoon.
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