October 9, 2005
Then: Building a car for Rs 1 lakh, or even about, is much harder than it is romantic. For, everything about the car must be worked backwards from the self-set price target. To spell out the challenge that Tata engineers face, they must build a small car that's almost half the price of the world's cheapest car (Maruti 800) but be at least as good if not better, and yet meet all the safety and emission norms. In fact, if there's any manufacturer in the world who could have built a car for Rs 1 lakh, it is the Suzuki-owned Maruti Udyog. Its small car already sells for Rs 2 lakh, which, minus the effective tax component of 40 per cent and profit margins (say, of five per cent), costs Rs 1.30 lakh or so to build. But according to K. Kumar, Advisor (Engineering), Maruti Udyog, and the man who helped build the company's vendor base from scratch, "the 800 and the Alto have already been pared to the bone." Therefore, no amount of value engineering can shave another 25 per cent off the production cost.
The company refused to share details of the project, but BT has been able to piece together at least the broad strokes of Tata's small car strategy by speaking with several vendors, rival carmakers, automotive designers and engineers, and industry watchers. And the picture that emerges is of one company braving peer ridicule, cynicism and, perhaps, subterfuge to push the limits of automotive engineering. The guiding mantra: think out-of-the-box, and question some or all of the industry's long-held beliefs.
Now: Tata Motors was able to launch the Rs 1-lakh car last year, which of late has been in the news for its technical flaws. Some Nano models have caught fire raising safety concerns, but the company has downplayed the incidents.