People of India: Forget the 1 Lakh car, buy a QQ instead.
Business Week have written an excellent article on the 1 Lakh car from TATA. It sounds as barebones as they come, it doesn’t even have proper suspension on the back wheels, and lacks reclinable seats! From the below article, the above TATA 1 Lakh sounds like a motorbike with a shell on it.
Forget about sleek styling, a powerful engine, or electronic gadgets in the dashboard. Gurdeep Randhawa is lusting after a bare-bones car that’ll soon be available in India. The 39-year-old mill manager in a Mumbai suburb buzzes to work on a $1,350 scooter and piles his wife and two kids on it for weekend outings. But he may soon replace that hazardous family hauler with a $2,500 car Tata Motors (TTM) expects to offer this fall. “It’s affordable,” Randhawa says, patting his wallet.It’s not just Indian scooter drivers who are eager to see what Tata comes up with. Virtually every automaker on earth will keep a close eye on the Indian Auto Show in New Delhi, where Tata plans to introduce what it’s calling the People’s Car on Jan. 10. The industry is looking to emerging markets for growth, and many companies are gearing up to build cars that can be sold at rock-bottom prices—in both developing countries and more established markets. Toyota (TM) and Volkswagen’s (VLKAY) Skoda subsidiary are planning small cars for India. Suzuki says it will soon cut the price of its cheapest model in India. And Renault-Nissan has teamed up with Indian motorcycle maker Bajaj Auto to launch a $3,000 car next year. “If Tata can do it, we can do it,” says Renault-Nissan Chairman Carlos Ghosn.
Can they really? Many auto executives say it’s almost impossible to build a car at the price Tata is talking about. Established players’ engineering and labor costs are far higher, and few are interested in a car that generates the slim margins Tata is likely to earn. Furthermore, regulators in developed markets wouldn’t let such a stripped-down car on the road, and consumers probably wouldn’t want to buy it. To succeed, “it has to be more attractive than a used car that sells for the same price,” says Nick Reilly, General Motors’ (GM) chief for Asia.
Tata won’t release the details of the People’s Car until the New Delhi show. But the company and industry sources say Tata has kept costs down with such spartan appointments as a dashboard that features little more than a speedometer, fuel gauge, and oil light. The car will lack basics such as reclining seats, a radio, and power steering, and will have a 650cc engine that puts out at most 70 horsepower—about what the Yugo had when it was introduced in 1986—but gets 50 to 60 miles per gallon. The ride, meanwhile, could be a tad rough. Tata will use basic shock absorbers up front, but the rear suspension design dates back decades.
Tata’s real advantage may be in development costs. India has top-notch engineers, but they’re paid about a third what their counterparts in Detroit earn, according to GM, which has a technical center in Bangalore. Engineering a top-selling model costs about $350 million in the West, but could be about 20% of that in India, estimates Detroit consulting firm AlixPartners. That could mean savings of $300 to $1,000 per car. And factory hands in Mumbai earn just $1.20 an hour, less even than auto workers in China. Tata “will set a benchmark” for the industry, says Stefano Aversa, co-president of Alix.
Tata will also save with an innovative distribution strategy. The company plans to supply kits to dealers who will do the final assembly. While other carmakers use kits in emerging markets, assembly is done at big centralized factories that churn out thousands of cars a month. Tata, by contrast, expects the cars to be built in small workshops. That will save Tata money, since distribution and retail account for roughly 20% of a car’s sticker price in the U.S. While it’s a strategy that bigger carmakers with less extensive operations in India would have trouble matching, it could also lead to serious quality issues since there will be far less oversight of manufacturing.
CUTTING CORNERS
The biggest hurdles to selling such a car in the West would be its technology. Tata will save about $900 per car by skipping equipment that the U.S., Europe, and Japan require for emissions control, says James N. Hall, principal of 2953 Analytics, a consulting firm near Detroit. And Tata will forgo features such as antilock brakes, air bags, and support beams that protect passengers in a crash. “It’s safer than putting four people on a scooter, but that’s it,” says Sandy Munro, president of Troy (Mich.) consulting firm Munro & Associates, which has advised Tata on manufacturing the car.
Even if Tata’s offering wouldn’t cut it in the U.S., the company will put pressure on the world’s biggest carmakers. Tata intends to focus initially on India and then other developing markets, where it could cut into the expansion plans of the industry’s leaders. Later, Alix Partners estimates, Tata could build a car that would meet U.S. or European specifications and sell for about $6,000—still a bargain in either market. Tata has no immediate plans to do so, but with its ambitious chairman, Ratan Tata, close to buying Jaguar (F) and Land Rover (F) and pushing his own brand elsewhere, don’t be surprised to see something inspired by the People’s Car on a highway near you soon.
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$2500 delivered in a box to a shady mechanic down the back alley between the fresh food market and local loan shark.
I wonder if the engine is assembled or if that is a DIY job as well.
This businessweek report pretty much answers my question of how they plan to make profits from this car. Thanks Ash.
I think BYD F1 is better, the one in the pics had double airbag, but it will be interesting, but i have a question: ¿Will this TATA come to Latin America?, becouse the TATA model here in Venezuela are very expensive for their equipment, and they are very unsafe, i think the this car is gona be a lot worse!
the point is that Tata spent the money to develop a new product, custom made for its domestic market.
BYD, for what it appears from the pictures, spent much less money to copy a product developed for the European market (C1, 107, Aygo). Probably the copied product will look better, and probably will be more safe- if they managed to copy well all the structures, using the same material, and building with the same quality standards used by Toyota/PSA, and their supplier of safety equipment managed to copy as well…
Tata is learning how to make cars, BYD apparently is squeezing money from other’s work. I think that in the long term the strategy of Tata will be the winning one.
>the point is that Tata spent the money to develop a new product, custom made for its domestic market.
They spent R&D money on that?
The article says factory hands are on a $1.20 an hour, shall we say it cost a maximum of $10 for a days work?
The article says “Engineering a top-selling model costs about $350 million in the West, but could be about 20% of that in India”. That is 70 million US$.
This estimate of the article (350 million US$)cost most probably covers styling, engineering, prototype building and testing.
If you copy the structure/chassis of an existing car, you can save at least 70% of that cost (you do not need to engineer the structure, you can skip lots of testing…).
It means that copying you can have the same result spending little more than 20 million US$…
“Tata is learning how to make cars”
I am sorry, I don’t mean to offend anyone here but it is just mind boggling to think this.
Isn’t Tata group alredy 100 years old or more ? Tata motors is already 48 years old. Don’t you think this car is an insult to such an old company ?
Ash, let’s just be fair, otherwise people will think you’re Chinese and you’re pro-China
lol
Tata already has some good motors!
The City Rover?!?
http://www.tata.com/tata_motors/releases/20030916.htm
That new 4×4??
Tata already has some good motors!
The City Rover?!?
http://www.tata.com/tata_motors/releases/20030916.htm
That new 4×4??
Ash, you realise that this article was written in 2003 ?
Yes, but TATA actually managed to engineer a car years ago that was able to be sold in the UK.
yes and brought about the demise of Rover along the way for lack of styling! =D
Rover was dead before that went out onto the market!
Then it was regarded as overpriced, and under publicised.
The city rover was never a good car. It was crude and badly made and also overly expensive.
I am aware of the original City Rovers problems, but wasnt there a ‘sequel’ to the City Rover that was much improved?
Official pictures here:
http://www.tatapeoplescar.com/tatamotors/index.php?option=com_content&task=view&id=83&Itemid=98
Interior pic:
http://www.tatapeoplescar.com/tatamotors/images/stories/gallery/parrotgreen/interior1.jpg
Think ill pass on the 1 lakh car.
Found a bit more here… http://economictimes.indiatimes.com/Tatas_Peoples_Car/Secret_Unveiled_Tatas_1-lakh_car_a_reality/articleshow/2689471.cms
This BBC article tells the readers who is the target audience of this car etc… and make it so cheap (at the bottom page)
http://news.bbc.co.uk/2/hi/business/7181432.stm
according to bbc, this is a plastic car ? what happen to a plastic car when it runs into a deformable concrete block ?
The Smart fortwo is made up of a lot of plastic panels, I think it’s dependant on how it’s engineered underneath. the fortwo scored 4 stars in the recent Euroncap, so a small plastic car can be strong!!
What is the (F) doing behind the names Jaguar and LandRover? If it means France, Jag and LR are UK brands.
eBay is actually a very good place to buy car parts. I use http://www.equidation.com to do my research before buying. Here is a sample list.
nice cars
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