India reveals cheapest car ever made

Tata Motors, the largest and oldest automotive manufacturer in India, revealed its much anticipated "people's car", the lowest priced four-wheeled car ever built.

The "People's Car", priced approximately at $2,500, will be available for sale next year.

Although the car has the potential to open up new markets in India and to bring affordable travel to millions in the emerging middle classes of India and other developing countries, the vehicle most likely would fail emission and safety standards in any developed country.

After a financial slump in the late 1990s Tata Motors undertook actions to minimize its production costs and increase revenues.

After thousands of improvements in worker efficiency and productivity, by March 2006 annual revenues for the company had grown to $5.2 billion.

During that time, Tata began developing the "people's car", a project spearheaded by Company Chairman, Ratan Tata, one of India's most visionary business leaders.

The vehicle, shaped like a jelly-bean, is cheap because it has no radio, power steering, power windows, air-conditioning and only one windshield wiper instead of two.

The car lacks a tachometer, and uses an analog rather than digital speedometer. For India, where there are only 7 cars for every 1000 people, Tata Motors reasoned it does not matter what the vehicle lacks.

What matters more it is what the vehicle can offer to those who previously could not afford a four-wheeled vehicle.In a country of 1.3 billion people relatively few people could afford any kind of motor-driven vehicles, typically in the form of two-wheel scooters.

But India's auto industry has been growing at an average rate of 12% for the past decade and a vehicle as cheap as $2,500 - with cargo space and 5 passenger seating - is competitive with the more popular two and three-wheeled scooters found throughout the country.

About 7 million scooters and motorcycles were sold in India last year, typically for prices between $675 to $1,600.

Tata is targeting a market price of 100,000 rupees or about $2,500 at current exchange rates, for its small car.Tata will not limit the new vehicle to the India market alone.

The company plans to sell the car in Africa, Southeast Asia, Eastern Europe and Latin America where it has the potential to bring affordable four-wheel transportation to many low-income developing nations.

As part of India's economic boom, many low-cost car producers have also set up shop in India, and industry experts believe India could become the global hub for small-car production.

Hyundai and Suzuki build small cars in India, and Toyota is considering an India hub.

Passenger vehicle exports grew by 13% last year to 192,000, according to J.D. Power and Associates, with Hyundai exporting more than 110,000.

Prior to the "people's car" the British-built Mini, released in 1961 was the cheapest car ever built at with a price tag of $11,000.Only time will tell how successful the "people's car" will be and what the potential implications are for the environment and oil supplies when use of the high emission vehicles become more widespread in the world's second most populace country.

This article is reproduced with kind permission of The GLOBE Foundation of Canada.

It was originally published in GLOBE-Net, the On-line Guide to the Business of the Environment published by the GLOBE Foundation.

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