Now it's official. To challenge the Tata Nano priced at Rs 1 lakh, Bajaj Auto Ltd and Renault-Nissan have formed a joint venture to produce an equally cheap car by 2011. At this price tag, both versions of a People’s Car would be the cheapest entry-level offerings in the global auto industry. This is certainly no mean achievement for the Indian auto industry, the credit for which must go to Tata Motors Chairman, Ratan Tata. He started the wheel rolling by redefining the production possibility frontier for turning out an extremely affordable car that can trigger another auto revolution in India. For this achievement, Mr Tata has been rightfully included in the list of ‘biggest brains in global business’ by the US business magazine Conde Nast Portfolio.
While the Tatas, no doubt, have a headstart in this race — the Nano will hit the roads later this year — Bajaj-Renault-Nissan’s code-named offering, ULC (Ultra Low Cost), will soon be nipping at its heels. And credit for this domino-effect must go to Renault-Nissan CEO, Carlos Ghosn, for his unwavering faith in India’s ‘frugal’ engineering capabilities. Although most global auto majors have set up shop in India, they are handicapped by the fact that they do not have small car models to join this race. Even the Maruti 800, the entry-level model of Suzuki Motors, whose subsidiary in India accounts for half of the passenger car market, comes with a price tag of Rs 2 lakh. Suzuki, for its part, has no plans to follow suit with a cheaper version.
Both the Tatas and the Bajaj-Renault-Nissan team are evidently convinced that there is a huge market for low-cost cars at the bottom of India’s income pyramid. For starters, the number of cars per 1,000 people is only a lowly 8.5 in India. This exemplifies the fact that car ownership in the country remains very much aspirational. Although sales of small cars in particular are booming (accounting for two-thirds of the passenger car market), these pioneering manufacturers believe that a vast upside potential can be tapped if they turn out even cheaper vehicles that can be purchased by more people in the country. Let the race begin.