By thinking small Ratan Tata is actually thinking very big. The launch of the Nano this week at the promised Rs 100,000 factory price opens up India’s car market to an additional 14 million households, according to estimates by CRISIL Research. Huge in a country that has eight cars for every 1,000 people. Mr Tata wants to sell the ‘people’s car’ to 250,000 of those families every year from January 2010, when the Nano’s mother plant in Gujarat comes on stream. Eventually, half a million Nanos are expected to roll out a year, which is nearly twice as many as the 300,000 small cars the Indian automobile industry will sell in the year to March 2009. Mr Tata’s optimism over the success of his dream is reflected in the fact that he is charging nearly the entire cost of the car at the time of booking sales; if his initial two plants run to capacity, he will mop up a cool Rs 2,500 crore.
Achieving the immense scale needed to keep the project viable will not be easy. Chances are Tata Motors will not be able to hold on to a price that is a third lower than its closest rival and which brings the Nano within reach of India’s 58 million motorcycle owners. The competition, too, will be reviewing its small car pricing strategy after the Nano experience. Scenarios of Indian roads clogging up with millions of Nanos are wildly exaggerated; small cars by Bajaj-Nissan, Suzuki and Honda will merrily tootle along. The roads will choke though, because not more are being laid to accommodate India’s automobile boom. Take Delhi. The number of cars in the city doubled to 1.6 million in the decade to 2006-07, over which time the national capital added a mere 2,000 km to its 28,000 km road network. The traffic and pollution reality gets grimmer in the other cities.
The world watched with incredulity as Mr Tata unveiled his maximum vision of the minimum car last January. Now it will be looking closely at how one of its most price-conscious markets takes to the Nano. Especially, the half of the world’s population that owns just 13 per cent of its cars.