Little car draws global attention to Indian auto industry

April 1st, 2008 - 10:18 am ICT by admin  

By Arvind Padmanabhan
It is a nano car driving mega dreams, not just in India but the world over. The global auto industry and millions of aspiring car owners in India woke up one wintry January to one of the most exciting entrepreneurial developments in decades when Tata Motors unveiled their small car “Nano” and promised to sell it for all of $2,500 at factory gates. From the crowded buses in the nation’s capital to the malls of the tech city of Bangalore, and from the busy roads of Guwahati in the east to Gandhinagar in the west, the world’s cheapest car seemed to have powered its way into the nation’s heart - and the world.

The blogworld was abuzz, every newspaper across the globe covered the news, many describing it as the next best revolution in the auto industry after Alfred Ford’s century-old Model T, and news channels featured the car like a paid commercial.

With that price tag, the Tatas made the masses realise what was just a dream for them once could metamorphose into reality, even as the global auto industry just could not believe the “people’s car” had actually been delivered as promised.

Even in far away Detroit, also called the automobile capital of the world, little Nano was the talk of the auto show with the industry comparing it with the Volkswagen Beetel and Ford’s Model T for the potential it held in transforming the way people commute.

“It is a proud moment for India. The car demonstrates India’s technological and entrepreneurial ability,” India’s Commerce Minister Kamal Nath said at the Auto Expo in New Delhi. “It will help people move from two-wheeler to four-wheeler.”

And the man of the moment Ratan Tata, the 70-year-old chairperson of the Tata group who led his “people’s car” project and personally oversaw its development almost every day for the past four years, broke his silence.

“A promise is a promise,” said Tata as he sought to drive home the point that he was delivering the car at the same price he had promised four years ago, despite major escalations in input costs.

“I observed families riding on two-wheelers - the father driving, his young kid standing in front, his wife seated behind holding a baby. It led me to wonder if we could conceive of a safe, affordable transport for such families,” Tata said.

And the result, he said, was Nano, dumfounding some analysts, who at one point were not too certain if it could be delivered at that prime by the Tata group, which has 98 companies in its fold with a combined turnover of $29 billion.

“They are going to create a whole new market,” said John Parker, executive vice president for Asia Pacific and Africa with Ford, at the Detroit show. “They are going to break through the paradigms,” he added.

Tata was uncharacteristically laudatory, yet circumspect. “It’s a car most people said couldn’t be manufactured at that price,” he said. Environmentalists also need not worry, he added reassuringly, since the car has passed stringent pollution and safety standards.

He said Tata Motors would start deliveries later this year with work still on at the group’s factory at Singur in the eastern state of West Bengal. Seeing the response, Tatas said they were considering enhancing the plant’s capacity to 300,000 units from the planned 250,000.

The Indian automotive industry saw the arrival of Nano as transforming the very dynamics of the market - worth some $34 billion a year, producing 1.5 million vehicles and contributing about five percent to India’s gross domestic product.

“The new price-point translates into a 65-percent jump in the number of families that can afford a car,” said India’s leading credit rating Crisil, commenting on the market where a two-third share is accounted for by small cars.

“Nano brings down the cost of ownership of an entry level car in India by 30 percent, making a new car affordable to families with income level of Rs.200,000 ($5,000),” the agency said.

“Such launches will also attract a large section of existing two-wheeler owners, currently nearly 50 million, to upgrade to a car,” added the Associated Chambers of Commerce and Industry (Assocham), a leading lobby for trade and commerce.

Even policy makers said the government’s Automotive Mission Plan, which calls for automotive sales to more than quadruple to $145 billion by 2016 would need some tweaking.

“The industry is on the cusp of a major growth, on account of major urbanisation of the Indian mind and rising incomes - this is acknowledged internationally,” said Ravi Kant, managing director of Tata Motors and president of the Society of Indian Automobile Manufacturers, co-hosts of the Auto Show.

It was for that reason the ninth edition of the show, which the hosts claim is twice as big as the one held in Tokyo, saw virtually every automobile and auto component company from Europe to the US, and Japan to South Korea, mark its presence.

Some 1,900 auto-component companies and 51 auto manufacturers from 27 countries showcased their products in an area of 120,000 sq, ft at the sprawling Pragati Maidan exposition grounds.

The show also saw some 25 new car launches and the display of some latest models such as Suzuki’s concept A Star, Honda’s Jazz and hybrid Civic, Volkswagen’s Polo and Beetle, the Fiat Grande Punto and General Motors’ Captiva.

As India powers ahead with an impressive growth of over nine percent, policymakers envisage a major transformation in the Indian automobile industry that saw some 10 million vehicles being sold in the last fiscal.

Passenger cars alone vaulted over the one million mark, commercial vehicle sales grew by over 33 percent and exports maintained the momentum of 20 percent growth despite a rise in the value of the Indian currency.

“I believe auto component exports themselves are slated to double from close to $3 billion this year to $6 billion within the coming financial year,” Kamal Nath told the inaugural event at the Auto Expo.

“Deriving from sophisticated engineering skills, formidable cost advantage and end-to-end production capabilities, India is becoming a destination of choice for sourcing of auto parts.”

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