Ratan’s revolution
India Today — January 11, 2008

It was an unlikely venue for the launch of a revolution. The gleaming lights, the massive stage, the smell of freshly minted cars, leggy lasses, popping flashbulbs, video cameras, cables feeding television channels across the world… the stage seemed set for a rock concert.

As Ratan Tata stepped onscreen via a 3-D hologram in a virtual cameo to narrate the journey of man’s romance with mobility, he looked every bit the rock star, even if in formals. A minute later, when Tata, in real flesh and blood, drove on to the stage to a standing ovation, it was clear that Indian innovation had shifted to a higher orbit on January 10. The 624cc four-seater Tata Nano promises to herald a revolution that will change the way India moves.

Priced at $2,500 or Rs 1 lakh at the dealer end, the car is the cheapest fourwheeler in the world. The next cheapest car would be the Chinese QQ3, which costs $5,000 (Rs 2 lakh). Indexed for consumer price inflation, the Nano is less than half the price of the 1983 Maruti 800, which was Rs 48,000.

A quick, back-of-the-envelope indexation for inflation shows that if the Maruti 800 had been launched today, it would have been priced at Rs 2,67,000. Consider the arithmetic of the proposition. At a rate of interest of around 12 per cent, the EMI or equated monthly instalment for the Nano could range between Rs 2,200 per month for a five-year loan and a little over Rs 3,200 for a three-year loan.

At over 20 km per litre of petrol, the car would have an operating cost of Rs 2.5 per km, which is well worth the safety of travelling on four wheels and the pride of personal mobility.

And you don’t have to be a rocket scientist to figure out the potential. Growing at 9 per cent, India’s GDP is over a trillion dollars (Rs 40 lakh crore), delivering an average per capita income of $1,000 (Rs 40,000). The launch of the Nano is timed to perfection. Consider the synchronisation with the emergence of India as a manufacturing centre that helped them cut costs, along with a highgrowth market with a scaleable potential.

One doesn’t have to rely solely on the market share occupied by Maruti. Currently, 80 lakh two-wheelers, 13 lakh cars and 6 lakh three-wheelers are sold in India every year. Add 5 lakh used car sales. Hypothetically, each of these buyers is a potential customer. At the price the Nano is being offered, there could be a new set of users—for instance, fuel-guzzling old taxis or unstable three-wheel rickshaws.

This proposition that prompted Tata to think about a people’s car: Typically, the trigger was a social concern. On a wet August night in 2003 Mumbai, when Tata was driving back home from his office Bombay House in Flora Fountain, he saw a young couple travelling with their two children on a two-wheeler and was struck by the enormous risks of riding on a wet road.

The thought of a small car germinated in his mind and a week later, on a visit to the Tata Motors plant in Pune, he shared his thoughts with MD Ravi Kant. Instinctively, his first query was whether the two-wheeled scooter could be made safe. “The first doodles,” in Tata’s words, “were sketches of a two-wheeler with a bar around it and some weather-proofing.”

Thereafter, a core team of 500 (including those in charge of setting up the plant) worked on the concept for four years. Indeed the first thoughts centered on a door-less four-seater that was more a quadricycle than a car.

The design envisaged the use of plastic weather-proofing of the kind seen in rickshaws and contemplated using new materials. But somewhere down the line, the ideas ran into a conflict with Tata’s brief. It was simple: it would seat four, have a low operating cost and meet all safety and emission standards. The team dumped the nascent design and focused on the process of building what would be a car differently.

As they worked on Project X, affectionately referred to as “chhota baba”, the market environment changed considerably. Product design and innovation cannot happen in a vacuum. It is not just the risk of competitors breaking the queue, there is also the changing cost structure.

For instance, in the last five years, crude prices have shot up—from $20 (Rs 800) per barrel to $100 (Rs 4,000)—and so has the cost of steel. With rising fuel and material costs, the need for a light, fuel-efficient car couldn’t be over emphasised. Being green was no longer just fashionable cultural liberalism, but made sound economic sense too.

All along, the competition, including Japanese and Korean giants, ostensibly masters of efficient design and innovative pricing, scoffed at the very proposition of a car that cost a lakh of rupees. Can’t be done, they said. Osama Suzuki, president, Suzuki Motors, jokingly speculated that “it would be a three-wheeler or a stepney”.

Tata, who wears his Indian identity as proudly and prominently as the Titan watch on his wrist, was confident that his team could make it possible. “Barriers to innovation,” he said, “were usually in the mind.”

He believed that there was room at the base price and with the skills of Indians, known for engineering cost-effective solutions, it could be done.

Maruti, which has 210 vendors and over 1,000 sub-vendors, is said to build the 800 at around Rs 1,10,000. So on the face of it, a smaller engine, a lighter build and reengineering could deliver a cheaper car for the Tatas.

When Tata invited his core team led by Kant and Girish Wagh on stage at the launch, it was as much a salute to Indian skills as it was a riposte to those who had said it couldn’t be done.

The Nano could not just change the way India will move, but also move the world to change the way it views Indian capabilities.

The car is not revolutionary in its looks or in the materials used. As far as the looks are concerned, it leans towards the Benz’s Smart, but the similarity ends there. The Nano is very, very Indian. What is revolutionary is the thinking, the philosophy behind the design. It has all been done before, but the elegance of the packaging makes it such a big draw.

The architecture—for instance, the placement of the engine below the rear seat—delivers cost and operational efficiency. As Tata points out, “The rear passenger seat is on the engine, so you save space; the engine is driving the wheels directly so you save engineering for the drive; you save the space in the bonnet and construction helps keep the costs down but yet meets safety standards.”

The result is dramatic in terms of utility and costs. The location of the engine also enabled the designers to give the car a rakish face that is bound to attract the youth as much as the running cost will.

Along the way, the vendors, which include Bosch for powering the car, Lumax for lights, Sona for steering, Shriram and Ricoh, were coaxed, corralled and challenged by Kant to cut costs.

As he told a vendor at a meeting at the company’s technical centre, “If this car clicks, it will be as much your success as ours.”

The vendors took up the challenge and reengineered their own products and thereby brought down costs by 15 per cent—and in some cases, even more. Indeed, Tata quipped that now when he asks his team if a certain element could be altered, “they say that would be so many rupees more and silence me”.

Indeed the Nano—which means small in Parsi-Gujarati—turns out to be a font of innovation, generating as many as 40 new patents for Tata Motors.

It wasn’t all smooth-sailing; there were hiccups. For instance, they had originally planned to launch a continuously variable transmission system on the lines of gearless scooters, but Tata was not satisfied and they opted for a conventional gear kit drawn from the home grown Ace.