Tata's Nano: Dream or nightmare for India?

Ravi Velloor, Straits Times 24 Jan 08;

NEW DELHI - MR BIRBAL Yadav makes a modest living renting out tenements to domestic workers in New Delhi's lower middle class area of Saidul-ajaib. His sons, Sonu and Monu, are in secondary school, and he hopes they will further their studies.

Mr Yadav, 47, has thus far hesitated to give the lads motorbikes, but now he plans to hand them an incentive that not only adds prestige, but also reduces his fears for their safety.

'I intend to book two Nanos that the Tata company announced this month,' he says.

Nano is the 'people's car' unveiled this month by the Tata Group, probably India's best-regarded business group, which also owns Singapore's NatSteel.

Called the one-lakh car - a lakh is the equivalent of 100,000 rupees (S$3,600) - the bug-shaped vehicle that comes with a 624cc engine is only 3.1m long and 1.6m high.

At its current price, car industry figures show, the Nano could do for Indian motoring what Henry Ford did a century ago with the Model T, which fired the American passion for wheels.

Traffic planners and environmentalists are nervous. Dr Rajendra Pachauri, chairman of the Nobel Prize-winning climate change panel of the United Nations, has said the prospect of a million Nanos entering Indian roads every year gives him 'nightmares'.

If media coverage is any indication, however, the rest of India is applauding. 'Small wonder', gushed the headline of the lead story in New Delhi's Hindustan Times the day after group chairman Ratan Tata drove the vehicle into the Delhi Auto Fair to the popping of a thousand flashbulbs.

India's rising middle class, fattened by an economy clocking average growth of close to 9 per cent, is snapping up consumer durables. Those on bicycles are trading up to 100cc and 125cc motorcycles, which cost about 55,000 rupees apiece. The two-wheeler segment is eyeing four-wheelers, starting with Suzuki Motor's 210,000 rupee offering of the Maruti 800, the original Indian mass-market car.

Nano, which will go on sale in the latter half of the year, is arriving at a time when Suzuki Motor, which controls 55 per cent of the car market through its local unit Maruti, is eyeing the market for larger cars.

Mr Tata said he was inspired to build the low-cost car after spotting a family of four on a scooter getting drenched by monsoon rains. Four years later, the group said it has kept its promise.

Even so, the one-lakh tag is a misnomer. After taxes and transportation from factory to showroom, the minimum price for the base model, which has no air-conditioning, will be about 135,000 rupees.

Even so, to keep prices at this level, Tata engineers, who have filed for 34 patents on the car, have needed to find new ways to do things. For instance, the steering column is a metal tube, where most cars use rods. In some places, modern adhesives do a job traditionally left to nuts and bolts.

Tata claims the car, which can comfortably seat four people, will run 20km to the litre and is as environmentally friendly as any other car made in India. Its engine generates about 33bhp, enough to propel four people up steep gradients. Despite the thin body sheets, the group said the Nano passes frontal crash tests.

Mr Tata is not letting on how many pieces of the base model he intends to manufacture and how many will have the trimmings that yield the real profit.

The car has attracted attention worldwide.

Fortune magazine correspondent John Elliott said his blog entry on the Nano chalked up more than 21,000 hits in less than two days. In contrast, his entry on the hugely successful Reliance Power IPO, the largest offered by an Asian company, got less than 2,000 hits over a week.

At the annual Detroit car show, the Nano was a frequent topic of debate, although the car was not even shown there. Indeed, even Ford executives had fulsome praise for Tata.

'It is a ground-breaking product that will cause people to think differently about the car,' Ford executive vice-president John Parker told reporters. 'I have a lot of respect for Tata.'

The car, which optimists said could herald a manufacturing revival for India, came to life on a day when the government reported that industrial growth was slowing. Production growth in November, the latest available data, was at a 13-month low.

That said, India's choked roadways are set to be further clogged once road warriors seize upon the Nano. Cities such as Delhi and Bangalore each add a thousand cars and motorcycles to the road every day.

Since 1951, while India's urban population has increased 4.6 times, vehicle numbers have increased 158 times, according to New Delhi's Centre for Science & Environment (CSE). Cities are also struggling to keep pace with infrastructure demands.

Gridlock is causing Delhi annual estimated losses of as much as 40 billion rupees.

Said CSE chairman Sunita Narain: 'Cars do meet our aspirations, but they cannot meet our needs. Our needs must be met by public transport.'

With a maximum tested road speed of 104kmh and billed to take 14 seconds to hit 70kmh, Nano may not break the sound barrier. But class and other distinctions seem set to crumble in its wake.

Indeed, Indians may have to get used to seeing their domestic help driving to work.

Mr Mange Ram, a driver for a construction contractor, said he will probably book a Nano, sharing the cost with his brother, who drives for a retired banker. They currently show up at work on a 125cc Bajaj motorbike.

'As long as we can leave home together, it should work out fine,' said Mr Ram, who was wearing a skull cap under his helmet to guard against the winter chill. 'Both of us may need to make some extra bucks by cleaning other cars, but so what?

'We are young.'