March 23, 2009 - Tata Motors, Mumbai India

A Tiny Car Is the Stuff of 4-Wheel Dreams for Millions of Drivers in India

The Tata Nano, India’s cheap, compact car, was introduced to the public by Ratan Tata, the company’s chairman, in Mumbai

Trouble Above and Trouble Ahead - TaTa!

Six years after the idea was hatched, India’s much-hyped $2,500 Tata Nano was introduced on Monday.

The supercheap compact car, aimed at the developing world’s millions of motorcycle owners with four-wheel dreams, arrived as Tata Motors struggles with production problems and a huge debt load.

But as the global economy withers and automakers bleed cash and cut employees, global warming continues and oil prices creep back up, even rivals say that tiny, wallet-friendly, fuel-efficient cars like the Nano might be where demand grows around the world.

“We’re quite confident there is going to be huge market for that segment,” said Ashish Sinharoy, a vice president at Renault India. Renault and Nissan have partnered with Bajaj Auto, an Indian scooter maker, to introduce a small, cheap car of their own, due out in 2011.

Automakers and car enthusiasts will be following the Nano closely, looking for flaws and gauging consumer reaction. Projects like the Renault-Bajaj alliance, and other cheap small cars plans from manufacturers including Honda and Hyundai might be scrapped if the Nano fails. J. D. Power & Associates predicts that Tata will sell 35,000 Nanos this year, because of production constraints. The car is expected to go on sale next month.

Questions linger about Tata’s ability to keep costs down and get production up and about the safety and reliability of the Nano. Meanwhile, several auto analysts say that Tata, which had its first quarterly loss in seven years at the end of January, has been forced to delay payments to its vendors because of a cash squeeze.

Indian auto suppliers are not in straits as dire as their peers in America and Europe, but any supplier disruption could be devastating to the Nano, because its parts are custom-made.

In an e-mailed response to questions about payment delays, Tata Motors said it was “conducting its business properly, adequately and in full partnership with all its vendors.”

The company said most of its vendor relationships are covered by a “bill marketing” system, where Tata’s bank makes payments to the vendors, and Tata Motors pays the bank. “As sales begin to climb, vendor purchases will also improve, and a positive cycle will once again get created,” Tata said.

If the Nano is successful, it will open the market for others, Mr. Sinharoy predicts. He said a car from Renault-Bajaj would be priced at about 150,000 rupees ($3,000) and be even more fuel-efficient than the Nano.

The four-seater Nano’s fuel efficiency is 100 kilometers for 5 liters of fuel, or 47 miles per gallon, and it has lower emissions than most two-wheelers in India, Tata says.

With its 11.8-inch dinner-plate-size wheels, an engine the size of a small outboard motor generating 33 horsepower, and a single windshield wiper, the Nano has already drawn some unflattering comparisons to kitchen appliances and garden tools. When the design was unveiled last year, Jalopnik.com, a car lovers’ Web site, asked, “Yes, but will it blend?”

A limited number of people have driven the car so far, all of whom Tata asked not to speak publicly until Monday.

“It feels like a real car,” said one such driver, who spoke on condition of anonymity because of Tata’s request. “It does not feel like a golf cart.”

But, he added, it felt like a car that would be used only for city driving. “You’re not going to take this on an intercity highway,” he said.

The Nano’s fans far outweigh its critics so far. It already has a dedicated Facebook group. More important, it seems to have a number of eager would-be buyers. Despite a vicious land-rights battle that forced Tata to relocate the Nano factory from its West Bengal site, the car is viewed with great pride in India.

It is “absolutely critical” that the Nano goes well, said Hormazd Sorabjee, editor of Autocar India, a monthly magazine. “The success of this will change the rules of carmaking in the world,” he predicted.

Pawan Goyal, a 35-year-old accountant who lives in Noida, a growing town east of Delhi, said he had been planning to buy the Nano since it introduced an early version at the Delhi auto show in January 2008.

“By spending 50,000 rupees extra, I will move on to a four-wheeler,” Mr. Goyal, who drives a motorcycle, said. The Nano will allow him to take along his whole family, including two children, ages 10 and 12, and it will be “more comfortable and safe” than the motorbike.

The Nano may attract more than the “starter” market because of the economic slowdown. “In times of crisis, there is a lot of trading down that happens,” said Arindam K. Bhattacharya, a partner in the New Delhi office of the Boston Consulting Group.

The Nano is built to safety specifications in India but would not serve all markets. Any additional safety features will mean a increase in costs, and it’s unclear whether Tata’s plans to sell the Nano in the rest of South Asia and Europe will pan out.

But consumers in Europe and the United States may demand a Nano of their own. “Consumer behavior can be stimulated simply by the economic issues we’re facing today,” said Dan Oxyer, a partner with the consulting company A. T. Kearney.

Some car experts are skeptical about whether the Nano will succeed. “It goes without saying a good car at a low price will sell well in global markets,” said John Bonnell, head of Asia forecasting at J. D. Power & Associates.

The fact that the Nano is here at all, though, proves the Big Three American automakers wrong, Mr. Bhattacharya said. When he made presentations on the Nano to Western car manufacturers a few years ago, “they would all laugh and say that it couldn’t be done,” he recalled.

Original Story - New York Times