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The $2500 car?

December 29th, 2007 . by Matt

Indian automaker Tata Group is going to release a US$2500 car in 2008. I didn’t even know that India had a viable car industry.

India’s giant Tata Group plans to launch the world’s cheapest car early in January while also looking set to drive off with two of the poshest marques — Ford’s iconic Jaguar and Land Rover brands.

Ratan Tata, head of the tea-to-steel Tata conglomerate, will unveil the “People’s Car” January 10 at a New Delhi auto show that will carry a sticker price of 100,000 rupees, or 2,500 dollars, which some analysts say could revolutionise automobile costs worldwide.

And Tata, which has been on an aggressive overseas expansion drive, is also expected to win its reported two-billion-dollar bid for the British Land Rover and Jaguar brands in January — putting it in the unusual position of making two prestige cars as well as the world’s lowest-cost automobile.

The cheap car, a pet project of Cornell-trained architect Ratan Tata that he helped design, is aimed at getting India’s masses off their motorbikes and into cars.

“I hope to make a contribution to making life safer for them (the masses),” said reclusive tycoon Ratan Tata, who has spearheaded the growth strategy of the company known for its philanthropic values and paternal management style.

“That’s what drove me — a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads — a family in potential danger,” Tata, who turned 70 on Friday, said on the company website.

But despite its low price and safety factors, analysts say the four-door, five-seater could be a tough sell for Tata’s vehicle arm, Tata Motors, even with an economy growing by a scorching nine percent, creating new affluence.

If motorbike owners wanted to graduate to cars, there are a lot of good second-hand cars for 100,000 rupees or less, analysts say.

“You don’t find large sections of two-wheeler owners buying second-hand cars simply because they don’t find them as attractive a proposition,” said Mahantesh Sabarad, analyst at Mumbai brokerage Prabhudas Lilladher.

“A two-wheeler, the most popular kind, would cost 35,000 to 40,000 rupees, so it’s still a big jump up,” Sabarad said, adding cars cost far more to maintain.

“It will not be an immediately profitable venture, it will take a longer time to break even — at least three years,” said Angel Broking analyst Vaishali Jajoo.

Tata has said it’s targeting the car at Indian and eventually other emerging markets. A Tata Motors board member recently revealed the car would get a significant 25 kilometres (15.5 miles) per litre.

“Acceleration wise, it?s the same as a Maruti 800,” board member R.A. Mashelkar said, referring to the most popular budget model made by Japanese-owned rival Maruti Suzuki that sells for 4,800 dollars.

Obviously the idea of tens of millions more people driving cars and adding to pollution is scary, but according to the maker the environmental impact is no more than that of a motorbike.

If the cheap car is a winner, environmentalists fear it will further congest India’s clogged roads and add to choking pollution.

But Tata says the car will create no more pollution than a motorbike and is confident of its success.

“We should be able to create a new market that does not exist,” said Ratan Tata, forecasting an annual market of a million cars.

I had always thought that the next big automakers would appear from China, but perhaps India will be the country to shine in this field. With petrol prices going through the roof and people paying a heavy price for their car ownership, they should have no trouble finding buyers for it.

6 Responses to “The $2500 car?”

  1. comment number 1 by: GarlicBreath

    Its a smart move by Tata. Hyundie dominates the small crappy car market in India. This is just one more nail in the coffin of hyundie.

  2. comment number 2 by: ZenKimchi

    I’ll buy anything from the giant Tata group.

  3. comment number 3 by: BananaBoi

    Happy New Year to all Occidentalism readers!!!!

    How safe and reliable is this car? LOL!

  4. comment number 4 by: darthvader

    And moving onto the chinese car industry that is about to start merging as well

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    Merger to rev up Chinese car industry
    Email Print Normal font Large font AdvertisementAdvertisementDecember 31, 2007

    THE merger of two of China’s state-run car makers comes as its domestic market booms and as the country gears up to compete with top global brands, industry officials said.

    The merger announced last week between Shanghai Automotive Industry Corp, one of China’s biggest car groups, and its rival Nanjing Auto is one of the biggest ever tie-ups between mainland vehicle makers.

    The deal was aimed at building a “world-class” firm, SAIC’s chairman, Hu Maoyuan, said at the signing ceremony.

    The rest is here

  5. comment number 5 by: Errol

    Happy New Year Matt and Mr Bevers. Keep up the good work in the year of the Beijing Olympics.

  6. comment number 6 by: ponta.

    Happy New Year Matt and Mr Bevers and to all Occidentalism readers and posters!