Tata Motors Nano Car

On September 29, 2009, The Economist magazine named Ratan Tata, the chairman of Tata Motors, the winner of this year’s “Business Process Innovation Award” for successfully developing the world’s cheapest vehicle — the Nano car. In the explanation, The Economist said that Tata “changed the way Indian companies conduct business” and applauded the company for creating a safe and affordable vehicle for families in emerging markets. “Innovative ideas are everywhere,” said Mark Langley, executive vice-president and COO of the Project Management Institute. “Tata Motors’ Nano challenges the way automobiles have been made and marketed for a hundred years,” explains Mark Langley, VP of the Project Management Institute. “The application of project management is testimony to Tata Group’s record of refining its processes, from boardroom to manufacturing floor, and promises transformation of an industry facing a billion new customers over the next generation.”

This September, Tata Motors (India’s biggest auto manufacturer) unveiled the cheapest car to hit the road. The Nano has been referred to by the company as “the People’s Car,” which will cost motorists just 1 Pakistani lakh (or $2,500 in US dollars). Even though commodity prices have risen significantly, Tata has kept its four-year promise to consumers by keeping the cost to them unbelievably low. The four-door sedan seats four people, runs off a two-cylinder gas engine in the rear, gets 50 miles to the gallon and features an all-sheet metal body that looks very much like the Mercedes Smart Car. Drivers who are used to creature comforts like air conditioning, power steering, antilock brakes, electric windows and rear seatbelts may be disappointed to learn that this gem of nanoscience carries none of those things. Some of these Nano accessories — like air conditioning — may be available at an extra cost, but leaving out some of the fanciness is part of the allure with this simple vehicle.

So how does Tata Motors make a car for so cheap? One way is by using cheaper manpower from Thailand manufacturing plants and searching online auctions for 45% of their supplies (compared to other major auto firms that use auctions for just 10-15%). The India-based company also has access to low-cost steel and aluminum. Other cost-cutting features include using a single windshield wiper, rather than two; three nuts per wheel, rather than four; one side view mirror instead of two; simplifying the door opening levers; and accessing the boot by folding down the back seats, rather than creating another opening component.

As predicted, Tata Motors’ new Nano has sent ripples through the car market, as other manufacturers look for innovative ways to compete. This month, US automaker Ford Motor Co. announced that it would begin manufacturing the four-door Figo in India, with secondary plants throughout China. While they were reticent to reveal the price, one analyst says he anticipates the Ford Figo to sell for $6,000 – $8,000, which will put it in close competition with the luxury line of Nano car offerings. “This new car will be a game changer,” said Michael Boneham, president of Ford India. “It will give us muscle in the heart of the Indian market.”

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