How Ratan Tata created the Nano like Henry Ford
The Economic Times — January 22, 2008

When Ratan Naval Tata stepped out of what looked like a giant white jelly bean on four wheels flaunting his version of the "people's car" not many present at the auto expo in Delhi and, headline writers at newsrooms around the world could resist using the epithet "India's Henry Ford".

Even if you discount much of the adrenaline induced hyperbole, Tata's Nano should be considered the true spiritual successor of the Tin Lizzie with which Henry Ford famously put "America on the wheels" exactly a hundred years ago.

What about the Volkswagen Beetle, or at least a dozen other attempts such as, Malaysia's Proton, French carmaker Citroen's 2CV and Yugoslavia's Zastava's '750' at a people's car, including our very own Maruti 800, you would perhaps ask. The answer is quite simple, and staggering. After Henry Ford, Ratan Tata is the only entrepreneur to think of an affordable, no-frills mobility solution for the man on the streets and actually be able to pull it off.

All other attempts in the past have been a brainchild of governments and not of individuals. The government's role here was to ostensibly fulfil what they perceived to be their social obligation. Ergo not surprisingly, all people's cars have rolled out of factories run by either authoritarian or socialist states. For instance, the Beetle had Adolf Hitler's backing, and the Maruti 800 too was imagined by the scion of a socialist leader with strong authoritarian tendencies. Suzuki, then a little known carmaker among Japanese giants such as Toyota was a willing ally.

But why has it taken entrepreneurs so long to realise that the fortune of mass transportation lies at the bottom of the pyramid? If you look at automobile history, North America influenced the evolution of automobiles from the very beginning. In the early 40s and 50s no one really thought of a small car in America. Cars were more icons of luxury than vehicles of mass transportation. Gas price was comfortable. And muscle cars were the aspiration of the common man.

The small car was more a concept of Asian companies such as Suzuki, which started producing compact cars after the Second World War. But most of these were sold in Japan," says Abdul Majeed, automobile consultant and partner at PriceWaterhouse as an answer. In short, Uncle Sam never needed a people's car. It was more the need of socialist countries, which tried to conceive of a car for the common man.

The Volkswagen Beetle was conceptualised by the Third Reich as a common man's car. In 1933 Hitler submitted sketches to Ferdinand Porsche of Volks-Wagen which itself meant "People's-car". The now famous brief was: "A basic vehicle that should be capable of transporting two adults and three children at a speed of 100 km/h." Some decades later, Zavodi Crvena Zastava a Yugoslavian government-owned carmaker rolled out the Zastava 750, a people's car intended for the mass-motorisation of Yugoslavia. Could the Soviets be too far behind in anything that's meant for the proletariat?

AvtoVAZ, a Soviet carmaker made the cheap Lada, a rip-off of the lightweight Italian Fiat 124. The only exception here seems to be China. Given Mao Zhe Dong and the Communist Party's concern for the common man, the country never seems to have attempted a people's car. Then in 1960 in Egypt, El Nasr Automotive Manufacturing Company, a state owned carmaker made the Nasr, which was meant to be an affordable car for masses. The creation of Nasr was a part of the general industrialisation process initiated after the Egyptian Revolution. But with the exception of Beetle and 2CV none of the others could live up to their promise of affordable mobility.

Clearly, populism and massive state subsidy can't match a well thought out business strategy that has profit as the motive. And as CK Prahalad, the management guru who's inspired many of the Tata Group's low cost, affordability-based products and services, would readily point out that looking for fortune at the bottom of the pyramid is not an altruistic mission but a way to sustainable profitability.

The trick of making a people's car lies in mass commercialisation and not showcasing a prototype," quips a top former executive of one of India's largest carmakers. "People who will buy such cars have greater expectations than buyers of a luxury vehicle. Pricing is important and selling these cars profitably is the key. If the Tatas can meet the demand for the '1-lakh' car, and not just push the high-end versions of the same, then we have a real 'people's car'," he warns.

Churning out numbers is the key. Diljeet Titus, one of India's leading vintage car collectors says that Ford and VW rolling out the Model -T and Beetle in huge numbers was the clincher. "Over the years R&D, technology and resources have changed. This is prompting other private players to jump into the fray."

And now Mr Tata is not alone. The country's second largest two-wheeler manufacturer, Bajaj Auto has promised to come out with its 'people's car' in the next couple of years. Ford India has earmarked around Rs 2000 crore to set up a small car manufacturing facility in the country. And there are other biggies such as, Renault, Nissan, Volkswagen, Skoda and Fiat in the race to build low cost cars.

According to industry estimates, small car sales, which make up more than two-thirds of India's domestic market, are expected to nearly double to 2 million units a year by 2010, helped by rising middle-class incomes.

"With the Nano, Tata has created a market where none existed. It has brought the stepping-stone between bike users and first car buyers a notch lower. And all other big players have realised that to stay alive, they have to depend on the people. And the easiest way to do that is to build a car for the people. A car that you can safely call, the 'people's car," adds Majeed.