India’s Tata unveils world’s cheapest car

The 4-seater Nano, with an engine around 625cc, will have a dealer price of 100,000 rupees (US$2,500) — about half the cost of the cheapest car on today’s market, a 25-year-old model from rival Maruti Suzuki.

The Nano will go on sale later this year, the company said.

“Let me assure you and our critics the car we have designed will meet all safety norms and all foreign environmental criteria,” Chairman Ratan Tata said as he proudly unveiled what had been dubbed the “People’s Car” at the Auto Expo in New Delhi.

The compact but curvy Nano stands in sharp contrast to the luxury Jaguar and Land Rover brands that Tata is negotiating to acquire from Ford Motor Co.

Hundreds of people crowded into the pavilion to see the long-awaited launch, standing on chairs to get the best view as Tata introduced and then drove the car onto the stage in a media circus more worthy of a pop concert or an Oscar ceremony.

Tata planned the car years ago as a safer and affordable alternative for the millions who often ferry families of four, plus baggage, on motorbikes and scooters.

“It’s a dream come true,” Ashok Singh, a constable with the Delhi Police, said at the show. “I look forward to buying that car. My wife will be really happy.”

Environmentalists are not so enthusiastic. They worry millions of the cheap cars will flood on to India’s roads, many of which are already heavily congested, sending emissions levels sky high in Asia’s third biggest economy.

The car arrives at a time when oil has topped US$100 a barrel, the move to fuel-efficient “green” cars is gaining momentum, and a wave of nostalgia has spurred sales of brands such as BMW’s Mini and the Fiat 500 Cinquecento.

Tata said the car would have a rear-mounted engine and travel 20 km per liter. It would be offered in a basic model and two deluxe variants.

“The proof of the pudding will be in driving it, but visually it looks pretty good,” said London-based auto analyst Ashvin Chotai, who was present at Thursday’s unveiling. “The pricing was a bit of a surprise. I thought it would be a bit higher.”

Chotai believed deluxe variants of the Nano, which will include features like air-conditioning, would account for bulk of the sales.

“Margins are still going to be very, very thin,” he said.

Shares in Tata Motors, which has a market worth of US$7.5 billion, fell 2.8 percent to 749 rupees, after having risen more than four percent, in a Mumbai market that ended 1.4 percent lower.

Tata has said it will initially produce about 250,000 Nanos and expects eventual annual demand of 1 million units.

Global car makers — initially skeptical that Tata could produce such a low cost car — are now scurrying to make their own versions to meet the needs of cost-conscious consumers in emerging economies such as China, India and Russia.

Ford this week said it would build a small car in India within two years, while the alliance of Nissan Motor and Renault, which has made a big success of its no-frills Logan sedan, plans a US$3,000 car with India’s Bajaj Auto.

Volkswagen, Toyota, Honda and Fiat have also said they are looking at small cars for emerging markets where strong economic growth has made car ownership a reality for millions.

Tata said it would focus on the home market for 2-3 years before considering exporting the Nano to countries in Africa, Latin America and Southeast Asia.

With just 8 people in 1,000 owning a car in India, there is huge potential to upgrade bike and scooter owners, who bought about 7 million two-wheelers in 2006/07.

Tata Motors’ stock trades at nearly 17 times forecast earnings, compared to 20.2 times for top utility vehicle maker Mahindra & Mahindra, whose shares fell 0.6 percent to 803.15 rupees on Thursday.

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