Low-priced Nano taps into Indians’ aspirations

For $60 down, a shopowner in a heartland Indian city can – for the first time – own a set of wheels. That’s the promise of the new Nano, a pint-sized car with an even smaller price tag: 100,000 rupees, or about $2,000.

As he launched the much-hyped vehicle Monday, Indian auto mogul Ratan Tata said the toughest task was to ensure that, for the price, drivers didn’t get a “half-car.” Some might question his success: the jellybean-shaped Nano can’t break 65 m.p.h., and power brakes and even the front cup holder are premium features.

But Mr. Tata has broken a major threshold here, reaching out to an untapped middle class of modest income and no credit history that’s eager to acquire the trappings of their country’s rising prosperity. And he’s doing it at a time when the US automotive and banking sectors are diving for the bunkers.

“The guys who are the true candidates for the Nano are working for smaller outfits in tier-two townships; guys lower down on the economic strata,” says Vikas Sehgal, a principal at consulting firm Booz Allen in Chicago, noting that India’s middle class has been far more insulated from the economic crisis. “You ask these guys about the global slowdown, and they say ‘What slowdown?’ ”

Middle-class focus

Indeed, it’s the middle class in poor nations who will be the focus of innovation for years to come, much as the Internet has spawned new businesses over the past 15 years, says Vijay Govindarajan, professor at Dartmouth College’s Tuck School of Business.

“Innovating in these countries does require a fundamental shift in the price paradigm,” says Dr. Govindarajan. The shift isn’t foreign to America – think Henry Ford’s cheap car for the masses. “I wish Ford, which entered India in 1993, had brought that kind of thinking into India. They could have made this product then.”

Tata calls such talk “serendipitous” for his company.

“All we set out to do was find a safer way to move Indian families at an affordable price,” he said. “All of us have been overwhelmed by the reaction.”

Cheaper than a Yugo

So how did Tata Motors make a car that costs less than the Kelley Blue Book value of a used 1989 Yugo?

The tiny two-cylinder engine sits right behind the rear seat. With a light front end, the steering column can be little more than a thin pipe with no power steering. The car weighs in at 600 kilograms, or about 1,300 lbs., making it the cleanest car in India and a gas sipper to boot – it gets 23.6 km/liter, or 50-plus miles, per gallon.

Instead of being made from stamped sheets of metal, the Nano’s body is formed more efficiently in a mold. A second windshield wiper or the little door for the gas tank are frills (you have to pop the hood to fill ’er up.)

It helps, too, that Indian labor is cheap – workers at the manufacturing plant make some $3,000 a year, executives say.

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