Ratan Tata has challenged conventional wisdom with the launch of the world’s cheapest car, Nano. This would induce a fresh dose of entrepreneurship while making a big social impact
When Tata Group Chairman Ratan Tata fulfilled his “promise” in January this year with the launch of Nano, the world’s cheapest car, it enthralled not only the common man but big and small businesses alike.
The world greeted the Rs 1-lakh car with accolades unmatched in recent history as the media from every nook and corner of the globe descended in New Delhi to take a first-hand look of the most anticipated automotive model ever.
The compact hatchback has set off a revolution not only in the automobile industry but the entire manufacturing ecosystem, dismantling the belief that ‘low-cost is always cheap’. The four-wheeler is not only a marvelous piece of inspiration and innovation but also a dream come true for the burgeoning middle class and the ambitious blue-collar community in the whole of Asia. How well has the Nano made a place for itself in the minds of the common people of this country is reflected in the statement made by an auto driver I spoke to on a recent winter morning. “I will replace my auto with the Nano. It would save me from Delhi’s unbearable summers, chilly winters, and inundating monsoon,” he said. “But when will it be launched?” was his question. These words reflect the hope that drove Tata to meet the promise of making the Rs 1-lakh car four years ago despite the disbelief expressed by experts across the globe. Tata visualized a family of four on a scooter while offering the Nano, which would provide comfort and safety to the common man.
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“The Nano is just not about the small car segment—that would be taking a myopic view. It is a question of social growth and well-being,” says Dilip Chenoy, Director General, Society of Indian Automobile Manufacturers (SIAM). Indeed Nano is not just a machine; it is the locomotive for social change, and meets the aspirations of the masses.
But as we talk of the Nano, we cannot help but think of Maruti 800, the original people’s car launched back in the 1980s. It too created a buzz with its price tag of Rs 50,000 at a time when there were no Internet and cable television. Even though history has repeated itself, this time around there are blogs and Websites splashed with the finer details about the making and the launch of the ‘small wonder’.
Innovation: Low-cost is no more cheap
No business can survive today without innovation. Nano has set a new benchmark for innovation. Products, services, processes, supply chain—each segment of business calls for fresh thinking in tune with the fast changing world. “About 70% of all cars are made by their component makers so the Nano is the product of huge joint innovations by them all. Bosch, for example, has created a totally new fuel injection system with one injector feeding the two cylinders turn by turn with precise electronic controls,” says auto analyst Murad Baig.
After low-cost airline and low-cost mobile telephony, here is the low-cost car. The Nano effect has made companies the world over ponder over how they can do a Nano with their products and services. The Nano has established India’s prowess as a low-cost manufacturing hub with supreme engineering skill on offer. It is time for entrepreneurs to stop and think of how to leverage this advantage and weigh a number of opportunities across sectors—housing, healthcare, public transport, and education, to name a few.
Doesn’t it make business sense to offer low-cost housing? According to estimates, there will be demand for more than 25 million homes in cities by 2012, and over 90% of the demand will come from those belonging to the middle and low income groups. While all developers are focusing on high-end customers, no one is talking of low-cost housing. Low-cost healthcare is another area that needs focus. Can high-quality healthcare marry low-cost facilities? Take the case of Devi Shetty, who is offering healthcare services to the poor at affordable cost through Narayana Hrudayalaya.
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Impact on the auto sector Auto Components
A car is a sum of its parts. Understandably then, the auto components sector is abuzz with activities. “It is an opportunity for incumbent component suppliers to use their experience and scale up to meet demands of increased volume and low price,” says K Kumar, Professor, N.S.Raghavan Center for Entrepreneurial Learning, IIM-Bangalore.
Ever since the work on Tata’s small-car plant began in Singur in West Bengal, more than 50 auto components manufacturers have either set up shop there or are in the process of doing so. These include Tata Toyo, Amtek Auto, Kinetic Engineers, Bosch Chassis Systems, Caparo Engineering, Rucha Engineers, Sona Koyo Steering and Sharda Motors. To facilitate space to parts suppliers, a vendor park is coming up right next to the Nano plant.
Caparo will provide the inner structural panels to Nano while Tata Ryerson, a 50:50 joint venture between Tata Steel and Ryerson, will supply the chassis for the car and 16 non-load bearing components. Similarly, Amtek Auto will provide engine and suspension components.
But Singur is not the only shining spot. Adityapur, near Jamshedpur in Jharkhand, is also seeing a lot of activity in the auto space. The state’s first automobile and auto components special economic zone (SEZ) is being set up in Adityapur. Tata Motors is planning to develop an auto park in the city.
In 2006-07, the auto components sector garnered sales worth $15 billion. This included exports worth $2.9 billion. There are several factors driving the growth momentum. These include flourishing domestic auto industry, sharply rising number of after-sales and service centers, and contract manufacturing. The Auto Show held in January saw participation of over 1,900 auto components and ancillary companies.
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