The Nano: Big news about a tiny car

One small step for Tata, one giant leap for autokind?

So what's the car of a million dreams across India?

If Tata Motors has it right, it will be the Nano: a cut-rate engineering marvel with a rear engine and front trunk space. Oh, and a price tag of about $2,000.

The tiny Nano will lack many of the standard accoutrements of cars in the West.

It won't have airbags or back-seat safety belts. There won't be power steering or an anti-lock brake system. But with a base price of 100,000 rupees, middle-class India may just stampede its way to car-dealerships when orders for the Nano begin in mid-April.

“The euphoria over the Nano is unmatched,” said Premanand Shenoy, chief executive of the Prerna Motors, a Tata dealer in Bangalore. “We have already held staff meetings on how to handle the thousands of people expected to walk in that day.”

The Nano project took off after Ratan Tata — the famed chairman of the Indian conglomerate that spans salt, steel and software — promised to build a “people’s car" for the masses now driving two-wheelers.

In India’s traffic-clogged city roads, millions ride on scooters and motorcycles — with sometimes as many as four or five people hanging precariously to the same vehicle.

The Nano aims to fulfill middle-class India’s desire to own a car, helping the not-so-rich claw their way up another rung of prosperity. Analysts estimate that latent demand for a low-priced car could boost the Indian car market's size by 65 percent, even in the face of a slowing economy.

Nirupa Venkatesh, a Bangalore-based dentist, is eager to order the Nano as the family’s second car. She and her husband, a gynecologist, already own a Toyota SUV.

“I want the Nano because it is cheap and (the) best,” said Venkatesh, who like many price-conscious Indians wants a no-frills product. She will use the car to shop, run errands and drop her 9-year old daughter off at school.

Merc mulls engine, gearbox unit in India

German auto giant Mercedes-Benz is contemplating setting up a plant to manufacture engines, gearboxes and other components in India at a whopping investment of Rs 2,500 to Rs 3,000 crore. While plans are yet to be finalised, the lower cost of manufacturing in India has compelled the company to give a serious thought to the proposition, Harald Landmann, the bus business head for Mercedes-Benz said at the launch of the company’s intercity luxury bus in Pune.

Assembled at Sutlej Motors in Jalandhar, the Rs 80-lakh bus will compete with its Swiss counterpart Volvo in the fast growing Indian luxury bus segment.

“We are yet to figure out when the entire bus building operation, including the development of engine and gearboxes, will happen in India. However, we are looking at a possibility to set up a manufacturing unit over the next three to five years,” Landmann said, speaking to reporters after the launch.

While Landmann did not disclose the location to set up this unit, officials close to the development hinted at Pune or Chennai.

Mercedes Benz is setting up its new facility at Chakan to manufacture cars as well as buses, which will begin operations in January. The company is expected to move all its operations from its present plant in Chikhali to Chakan. Considering this, the company might set up the engines and gearboxes unit in the vicinity of the Chakan plant.

“As our new manufacturing unit is coming up at Chakan, the engine and gearbox manufacturing should ideally happen in the same region. Since Pune has a strong automobile component industry, the unit has to come up nearby,” an official stated.

Once the company draws a concrete plan for the Rs 2,500-crore project, it will approach the Maharashtra government for approvals. “We might explore other states to set up the engine-gearbox facility if things do not work out in Maharashtra,” he added. Apart from Pune, Chennai could be the other option for this project.

Elaborating the business plan for the newly launched bus, Landmann said, “Mercedes-Benz enjoys a 17 per cent market share in the global luxury bus market. We have built the new bus on our versatile O500 R/RF chassis, which is being developed at the Pune plant. While most of the components are being imported from a Brazil-based unit, the chassis-building acitivity will happen in Jalandhar through an agreement with Sutlej Motors.”

“The luxury bus market is growing in India. Volvo, so far the only significant player in India, sold some 350 buses last year. Our plan is to earn a significant market share within the first year,” Mercedes-Benz India Managing Director Dr Wilfried Aulbur said.

Audi weighing options for luxury small car launch in India

German luxury car maker Audi is weighing options for the introduction of its best selling small car A3 and upcoming A1 in India.

Although, according to the Audi’s preliminary assessment the Indian automotive market is still not ready for the luxury small cars, the company is waiting for the appropriate time to go ahead with the launch of such cars, possibly in 2010, according to a top company executive.

“Market dynamics in countries like China and India are fast changing. In the emerging markets, it would take just half the time it took to develop a market for such cars in Europe,” Mr Martin Birkner, Vice-President (Marketing), Audi India, told Business Line, hinting that the company’s current plans could be reviewed.

“We have no plans to sell compact cars at least until 2010 as we first want to establish ourselves as a luxury brand. But things can change according to the market situation,” he said.

Audi’s entry level luxury car A3, which is credited with creating an entirely new market segment of premium compact car in Europe, and the upcoming super mini car A1, claimed to be highly economic with its hybrid powertrain, are considered to be best fit for its strategy to expand its presence in developing markets. A1 is likely to be launched in 2009 or early 2010.

China
Faced with the stiff challenge from BMW and Mercedes-Benz in China, Audi which dominates the luxury segment in that country is mulling the launch of A3 in China this year. Audi sold more than one lakh cars in China in 2007.

Indian market
In US market, A3 price starts at US $25,930 (Rs 11.25 lakh) while the price of A4, the least expensive Audi car available in Indian market, starts at Rs 29 lakh. Audi, part of group, seems to be following its top-down strategy. Volkswagen came to India with Passat in the luxury segment, launched Jetta in the D segment and is working on an India-specific premium compact car on Polo platform.

Another group company Skoda has made significant inroads with premium hatchback Fabia, which sells around 600 units a month. “As a group, we have presence in almost every segment. We are in no hurry to launch Audi’s compact cars. Our focus is currently on establishing our luxury brand image,” he said.

“In India there is no market for small expensive cars. We know that it will be growing. But now, it is a little early to launch such products,” said a source in Audi India.

However, in its long-term India strategy, Audi cannot do without A3. Out of 9.64 lakh cars the company sold globally in 2007, A3 contributed 2.31 lakh. Audi sold 350 cars in India in 2007. In the current year, up to July, the company sold 595 cars.