Friday, May 27, 2005


Ratan Tata's Rs 1-Lakh Car:
Excerpts from Ratan Tata's interview with Business World India (Full text available here; login is required, available for free.)
Q. The Rs 1-lakh car - how far has it progressed?
RATAN TATA: We are just finalizing the concept of structure, material and powertrain - which are the building blocks. Each of those has an assigned price to meet that objective. We are just coming to closing choices on all of those.
Now we'll go after developing the car. This is the broad framework in place. But if these building blocks are not decided upfront, then there is no car. So we have taken a long time to get at that. We have a couple of new drawings showing us the size of the car, but these building blocks have to be in place.
Should we go monocoque? Do we do plastics or do we go sheet metal? Those decisions had to be taken. We're almost at the point where we have evaluated this. It will be a five-seat, rear-engine vehicle.

Q. Will it be bigger than the Maruti 800?
RATAN TATA: It will be slightly bigger than the 800.

Q. Even in terms of the engine?
RATAN TATA: Maybe not, because it will be a lighter car than the 800. The intention is that the car will be positioned between the 800 and the two-wheeler on price.
I would imagine it would attract a two-wheeler customer to a primary car, which is all-weather-proof, is safe, has four wheels and, in fact, has the capabilities of a car that will come in two or three trim levels. There will be a rudimentary level and there will be a higher model which he can buy when he wants to upgrade. It will take some market away from lower-end cars and a bigger market away from two-wheelers.

Q. The rudimentary model - what will it not have?
RATAN TATA: There are a couple of views on what it may not have. For example, it may have a door, but the door may be a frame with a vacuum-coated plastic sheet on the front, with fixed windows that are sliding. And the higher version will have regular wind-down windows and regular doors. There is also a concept where there are no doors but just a safety bar, somewhat like the old jeeps.When I said that the building blocks have to be in place, we needed to look at how each of those things can be done elegantly. And what we hope is that the customer can define the car he wants when he buys it. And the car can be built in that particular form. He can also upgrade the same car after he buys it.

Q. Will it meet the safety standards?
RATAN TATA: It will meet all the safety standards that we require here. And until we really get involved in that, it will be difficult to say that it will meet the full safety requirements abroad, but our aim would be to try and meet most of those. It will meet the emission requirements that are there, which is a must. And we want it to be a safe car. We want to move people from a two-wheeler, with a wife holding a kid, to a safer form of transportation.
I can't agree more with Mr.Tata's vision that India has huge market for cheap cars; cheaper even than Maruti Alto and Maruti 800. Since 1991, when Ratan Tata became the chairman of the Tata group, Tata group has seen tremendous growth, especially in the automotive market. Today Sumo, Safari, Indica & Indigo enjoy big share in Indian car market. Tata motors has been focusing towards the cheap car segment from the start, which makes more sense keeping in mind that many foreign firms are now introducing their models from their stable abroad, specifically for higher end customers.

Still, I'm skeptic about his move to introduce Rs.1-Lakh car in Indian market. Maruti has declared vehemently that with such low budget it will be very difficult. I'm concerned about the compromises Tata Motors may have to do. Safety could be one. Although he has maintained that safety will be given all due importance, at least the rudimentary model doesn't sound very safe. Robustness will matter in smaller towns. Small city-cars can be successful in urban centers, but in smaller towns and rural areas the vehicles suffer a lot due to bad roads & usage conditions. If it's going to be a fragile thing like Reva, I can't see it cutting deep into smaller towns. If robustness counts in rural areas, style matter in urban areas. One prime example would be Maruti WagonR. It was supposed to be technically the most superior car from Maruti, still it didn't pick up well. The reasons are speculated to be related to it's looks. Same is the case with Indigo or Omni. With sliding windows & safety bars for doors, Rs.1-Lakh car looks more like an auto to me. Of course we've another important issues like maintenance,performance, mileage, comfort, etc.

Can this bring another revolution in Indian car market after Maruti in 1981? Only time will tell, but I've some doubts. The markets have opened up a lot since the introduction of Maruti (through an act of parliament in February '81). Today a lot many more choices are available to the customers. Loans are readily available. Consumerism is on the rise & prices are seen in the context of EMIs. Maruti Alto & Maruti 800 are respected well among buyers for their comfort & performance. Maruti must be planning to phase out 800 and replace it by Alto. Unless Tata's car impresses the potential buyers immensely, it will be damn tough for it to steal Maruti's share. Now let's consider the two wheelers' segment. It can be roughly divided between lower end models (Victor, CT 100, etc; Rs.25-35000) and higher end models (Pulsar, Eliminator, Thunderbird, etc. Rs.45-90000). The higher end motorcycles are bought mainly for their style and they're more popular among young people. Their buyers belong mainly to the category who feel that it's too early for them to buy a car and/or car is not necessary and/or maintaining a car is a liability. Mind you, these fellows can afford a car but they choose not to. They generally switch to cars after 2-3 years of bike usage. It won't be easy to woo them into buying cheap low-end car instead of high end mobikes. Some buyers from this section, who have enough money for bikes but not enough for a car, might be interested in Tata's proposition. Tata must be expecting to lure the low-end bike buyers. This class buys a vehicle mainly on need basis. Style matter less to them than comfort and usability. If their budget for motorcycle is around 25-40,000 today, it can be stretched upto 1-1.2 Lakhs for the comforts of a car. Car loans can encourage this class further into buying Tata's car. But, a major portion of this population belongs to smaller towns & I'm doubtful about performance of Tata's car in smaller stations.

I'll be very glad if Tata can manufacture a cheap yet well designed car suitable for Indian conditions. It's high time India increases it's car penetration. Good Luck Mr. Tata.


Jeet said...

hey why are you 9uc? I thought you were 9us.. nahin kya?

Jabberwock said...

Nice analysis dude, but personally speaking I can only think of the whole issue from the perspective of a harried Delhi driver who is horrified at the prospect of thousands of more 4-wheelers on the roads.

Jerry Seinfeld said it best during a standup comedy routine, with reference to the parking crunch in NYC: "ANOTHER new car?" he went, "What I'd really like to see on display in auto showrooms are parking spaces. Instead of 'The new Ford, ladies and gentlemen', it should be 'here, ladies and gentlemen, is...TA empty space for you to take home'."

Varun Singh said...

@Jeet: The era of 7uc & 8uc etc had passed when I entered IIT. Hence I wasn't clear about it, I chose 9uc because I thought 'c' stands for computer science. :)