The launch of Nano, the world's cheapest car from Tata Motors, enhances India's position as a small car manufacturing hub and can potentially expand the domestic car market, according to integrated research house Crisil Research.
According to Crisil Research head Sachin Mathur, Nano - with an on-road price estimated at Rs 120,000 ($2,400) - has 'further highlighted the capabilities of a low cost automotive manufacturing ecosystem in India'.
Alternative low cost car models launched worldwide in the past two years have been priced at least 50 per cent higher than Nano.
"The new price point reduces the cost of ownership of an entry level car in India by 30 percent, and to below three times the cost of owning a motorcycle. This will make the car affordable to an additional 14 million families, including a section of the 58 million two-wheeler owners," Crisil said.
India has been gaining significance as a small car manufacturing hub with small car exports of 0.3 million in 2008-09. Small car exports have grown at a compounded annual growth rate of 21 percent during the last five years and are expected to more than double by 2013-14.
The Nano initiative, entailing significant product design innovation and cost optimisation, further adds to the competitive edge of automotive manufacturing in India.
Lower middle-income countries including India account for around 53 per cent of world population, but only 13 per cent of global car sales; ultra-low cost cars are expected to be a key driver for increasing the car ownership in these countries.
The Indian market would become the first testing ground for the manufacturing as well as marketing success for an ultra-low cost car, Crisil said.