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Tata creates new car niche

autos Updated: Jan 10, 2008 22:50 IST
Highlight Story

It trumps the Maruti and challenges China's Cherry QQ, but look hard, and you will find a different truth. Ratan Tata's Nano, showcased on Thursday, is blazing a new category of car users across the world by dropping the price while keeping family-ride features intact. As a result, there is practically no head-on rival for the car that will sell to dealers at Rs one lakh.



Maruti Suzuki, which pioneered the small car in India with its 800 cc vehicle, is already saying that its market share could be dented but is not in a position to join a price war either, underlining how the Tata car is not just a matter of positioning, but one of ground-up engineering that blends cheaper materials, labour costs and logistics.



"Y2K (programming bug) made the world sit up and take notice of Indian IT capabilities – providing high quality solutions at affordable costs. Now Tata Motors' impressive Nano will have a similar beneficial effect on India's automotive industry," said Arun Firodia, chairman of the Kinetic group, one of Tata Motors' rivals in Pune. The plan is solid, but fulfilling the grand vision built on Tata Nano is not going to be easy for Ratan Tata. He is the first one to acknowledge the hard realities.



As if on cue, share of Tata Motors plunged 6 per cent on Thursday, though in line with an overall market mood but nevertheless sobering the effect that the charismatic Tata Group chairman was having on the international media, which was hanging on to every bit of the car plan built on the audacious gambit of selling a small car for $ 2,500.



Deven Choksey of KR Choksey Securities said Tatas need to pump up 3 lakh units a year to squeeze costs, while Maruti 800 sells only 80,000 a year. This means that Tata Motors must chip into those who now ride motorcycles, which now sell 8.5 lakh a year in India.



"The only logical explanation is a new segment where they can sell the car," Choksey said.