Special Biofuels Digest Report on the new $2500 Tata car

From Biofuels Digest correspondent Joelle Brink

Every now and then a social revolution comes along disguised as a small car. Call it the Model T, the Volkswagen Beetle, the Citroen 2 CV, the Fiat 800, the Mini Minor or the Honda Civic, life is never the same afterwards. It may be that the automobile is inherently a disruptive technology, but inexpensive automobiles accessible to first time buyers are decidedly so.

The $2500 Tata Nano is such a car, not only because it is accessible to more first time buyers than any car before it, but because no other car since the Model T has necessitated such a significant reorganization of the automotive industry. Henry Ford centralized auto manufacturing in his factory on the Rouge River where unskilled workers built the cars on an assembly line. Ratan Tata plans to decentralize Nano manufacturing, enabling engineer-investors throughout the country to sell, build and service cars for local buyers. Tata Motors will supply them with training, basic kits and options, and encourage them to innovate. If the idea works in practice, Tata Motors will have outsourced much of its future Nano design development, along with sales, service and manufacturing.

Ratan Tata hopes his decentralized model will provide jobs for India’s many unemployed engineers and mechanics and enable them to control their own destinies. In India, as in the US, corporations now open and close plants with little regard for laid off workers and their skills. The network of Nano “dealerships” will be able to respond quickly to demand and adapt quickly to changing times and customer preferences. New variants like the Ethanol Nano and CNG Nano that, for cost reasons, had to be cut from the main program will have a second chance under this distributed development model.

The turbodiesel Nano remains in the main program. Its engine is being designed by German small diesel pioneer FEV and will be biodiesel compatible. A diesel-electric hybrid Nano may also be in the works. FEV is currently developing diesel-electric hybrid powertrains for Mahindra’s light truck and SUV models the Appalachian and the Scorpio, both of which will be sold in the US starting in 2010.

Initially the Nano will be built in a new factory in West Bengal, traditionally a communist state that has given a lot of trouble to industry, but which in this case has opened its heart to “the peoples’ car.” The factory is designed help rehabilitate flood-prone land along the Hooghly river and provide jobs for residents of its low-income neighborhood, much as Henry Ford did in his Rouge River plant a century ago.

But the Nano’s reception has not always been so enthusiastic. “If you look at the coverage that has happened”, says Tata, “you cannot fail to notice how the low-cost car has been turned into an issue of congestion, of pollution, of safety. Initially it was all about why a car at this cost was simply not possible; that talk is long gone, only to be replaced by these ‘new’ concerns. We are not really talking about how it will change the way people live or transport themselves, what their aspirations may be.”

Ratan Tata is a graduate of Cornell University and the Advanced Management Program at Harvard Business School. By choice, he began his career at Tata Group on the shop floor and worked his way up to his present position as Group Chairman and Chairman of each of the Group’s constituent companies. He is a member of The Global Business Council on HIV / AIDS and the program board of the Bill & Melinda Gates Foundation’s India AIDS initiative, and serves on the boards of many high level global policy and business organizations.

Read Part One of this special report

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