Full car at half price
Financial Express — January 22, 2008

Ratan Tata didn't promise a Rs 1 lakh car, he promised a dream to millions worldwide. The price wasn't arrived at by calculating costs. The price was a result of a conversation Ratan Tata had with Financial Times at the Geneva Motor Show. In putting a figure to low cost he mentioned 1 lakh. It was an invitational price at which mass affordability can reach out for a dream luxury product. Mass luxury. An unconventional concept. Yes. An unconventional price. Certainly.

The key question competitors and critics will ask is if this price is sustainable. What they're really questioning is the feasibility of a mass luxury brand. Unconventional it certainly is, but then what Swatch did the same to watches, and quite successfully, we are now witnessing it in India in automobiles.

The Nano is a fine car. There is no apparent compromise in quality; in fact, it looks like a really classy car. It seems that Tata has approached an unconventional concept with an unconventional plan. To begin with, the best way to control costs is volumes. Tata is targeting the world masses. Nano has a global appeal and can promise huge volumes.

Tata is sighting the 10-lakh mark, something never achieved in India, but we are talking of many firsts here. To begin with, the biggest first that has always been a Tata strength - they also make steel, the single largest raw material for a car maker. While I'm not implying that they would subsidise the Nano, however the obvious advantages of efficiency cannot be ignored.

There are other significant firsts that the Nano dream has inspired. Distributed manufacturing with a low break-even point. Design that can be franchised to entrepreneurs across geographies, cutting down distribution logistics and expenses. An insurance inspired after-sales-service model-self-employed people trained and certified by Tata who will service at home - huge cost savings again. Design innovations that allow similar parts for the left and right side of the car - savings again. An indigenously developed engine to top it all.

The Nano is a reality because Tata has thought differently. It's not simply a cheap car; it is a different experience for an entire set of people who have only seen other people drive cars. Their evaluation of the experience will not be from a car owner but from that of a two-wheeler owner/pros- pect. The price may not remain at Rs 1 lakh. In fact, even now the on-road price will be around Rs 1.10 lakh to 1.30 lakh inclusive of all extras. But Rs 1 lakh was not the point; the point is that this will be a better car at half the price to it's nearest celebrated competitor. The concept design will ensure that it retains its price advantage, the figure notwithstanding.

Hemant Misra

The author is president & COO, Publicis India