Tata’s Rs 1 lakh Car: Evolution and Impact

It was a summer of 1959. Five mechanical engineering students from IIT, Kharagpur were on vocational training in TELCO, Jamshedpur. TELCO was its abbreviated name and that is today Tata Motors. I was one of the five. Even at that time, the idea of a people car was very much popular in Indian auto sector and also with politicians. I has seen photograph of the people’s car in TELCO News, the house magazine of the company. But unfortunately TELCO at that time was not at all in passenger car business. It used to produce only perhaps one platform of heavy truck in collaboration with Mercedes Benz that was adapted to Indian road and load conditions in perhaps the best manner. Hindustan Motors’ collaborator Morris Motors had a small car that could very well get into the categories of the people’s car. Some were produced with imported components. But Maruti 800 with its Sanjay Gandhi connection was to become the first people car. Here it meant the cheapest entry car that started perhaps at Rs 10,000.

However, it is Rattan Tata who is credited with Rs 1 lakh car idea.

With the very announcement of Rs 1 lakh car Rattan Tata created a ruffle for passenger car manufacturers. O. Suzuki ruled out the possibility of such a low priced regular car. Media kept on guessing about the Rattan’s dream car. It has helped heightening the expectations about the car. But Rattan has a history of success with his dreams. I still remember his dream of the first real indigenous Indian car Indica: “a car with the Zen’s size, the Ambassador’s internal dimensions, and the price of a Maruti 800”. With Indica Tata Motors entered in passenger car market in big way.

Rs 1-lakh car will not be a toy car built as prototype by the students of engineering schools. It will be well designed, perhaps by Italian stylists, four-door, four-seater with high performance, perhaps turbocharged 700 cc, two-cylinder gasoline/ diesel engine meeting all the international safety and emission standards and fuel efficiency between 26-30 km/lire or better.

Many competitors who took the Tata’s car lightly at the beginning are now seriously trying to emulate his dream. And this goes to the credit of rattan Tata. It was not easy task, but now it is almost clear Tata Motors will be able to meet the price target. It must have meant a lot of innovations and managerial skills. It now is now few months and the car crazy world can see it at Auto Expo 2008. But more importantly this uniquely Indian concept of Rattan Tata has made many automakers change their ideas.

According a report appearing in Times of India on September 13, 2007 from Frankfurt, French car major Renault SA has firmed up plans to compete with Tata Motors’ Rs 1-lakh car in the Indian market. Renault CEO Carlos Ghosn, speaking on the sidelines of the Frankfurt Auto show, is reported to have said, “We are looking for ways to build a car that could sell for no more than $3,000 to tap mass markets in India, China and Brazil. It is certainly possible to profitably build a car at this price.”

However, Renault and its JV partner Nissan of Japan have not yet made up its mind about its local partner in the venture. It is in talks to rope in Bajaj Auto (BAL) to manufacture this car in India.

According legendary Carlos, it is not going to be a stripped-down version of the Renault’s low-cost car Logan that is priced at about $5,000 (that is already in India through another collaboration with M&M). Everything from the car’s basic design to the factories will have to be conceived from scratch. Bajaj Auto has also confirmed the ongoing joint study. Between Bajaj and M&M, Bajaj may have advantage to get into entry car because of its existing huge customer base.

However, Tatas will certainly get the first mover advantage when it launches the car in 2008. But ultimately it will be the product that will decide the win. The most for the value of money, the smarter product will win.

I don’t agree with Jagdish Khattar or Srinivasan. Tata’s Rs 1-lakh car project will certainly cut into the sales of the existing entry car models as well as some models of the two-wheeler.

Another European car manufacturer is seriously trying to enter Indian auto market that name itself means ‘People car’. And one day VW will certainly come out with a car that may be competing with Tata’s car. VW with its ‘Beatle’ has an established history of manufacturing the people car.

However, Andreas Prinz, managing director, VW Group India said, “We are not fighting in the Rs 1-lakh car segment. One has to compromise with the safety standards and quality and we are not doing that.”

However, Volkswagen is already working to launch a totally new small car platform for emerging markets like India, China and South Africa by late 2010 or earlier. It may not be able to match Tata Motors’ Rs 1 lakh car, but could challenge the Maruti’s Alto and Hyundai’s Santro. The new small family with several variations powered by two-cylinder petrol (turbo-charged) and three-cylinder diesel engines, with the displacement ranging from 500cc to 1000cc and power output varying from 70 bhp to 90 bhp will be a highly fuel-efficient car, delivering up to 30 km per litre (kpl) and beyond.

VW has exhibited the ‘UP! Concept’ in Frankfurt Auto show. As reported in media, “In a way, the chosen architecture mirrors what has been disclosed about the Tata 1-Lakh car – not an inconsequential validation of the domestic effort. VW’s Up is unlikely to be priced for less than about 6,000 Euros, considerably north of the Tata target, although at European levels of specification.”

Rattan Tata must get the due credit for the Rs 1 lakh car and if it succeeds commercially, the India’s manufacturing sector in general and passenger car sector in particular will get a big image boost. Is it not the right way of fighting the Chinese aggression of manufactured products?

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