Wednesday, March 25, 2009

Brother, can you please spare a Nano?

Say what?

No, I did not mean to imply the cute little portable music machines the fruit company puts out. They are now very ubiquitous, and a fashion statement to boot. I was pointing to the equally cute, and soon to be ubiquitous mode of transportation for the masses - in the developing world.

You see, it appears that history is about to repeat itself. Back in the 1920's, Henry Ford, the great capitalist, thought it would be a great idea to use mass production techniques to build a car that even his employees could afford to buy. Back then, the assembly workers' wages weren't much to write home about, let alone buy a car with. Anyhow, the story goes that Ford designed and built the model T and mass produced it by the millions, and the rest, as they say, is history.

Well, fast forward to 2009, and a capitalist called Ratan Tata has done it again. This time, his objective is a little different. He wants to sell a car to some 50 million motorcycle riders in India. But Ratan Tata is a different breed of capitalist. His self proclaimed objective is to "go to bed every night knowing I have not harmed anyone". Refreshing? Considering most Harvard trained executives live to "maximize shareholder equity", or "optimize workflow", you bet his objective is quite refreshing. And if you look at the picture of this poor Indian chap with his whole family on a motorbike (no helmets or seatbelts, mind you), you see exactly why he feels that way. The miracle is, I think, he feels, while most others figure, calculate, strategize, optimize.......

Well, Mr. Tata put 500 of his best engineers and marketers to work on figuring out what will make a typical motorcycle owner to trade up to a car. The biggest barrier was price. A lot of motorcycle owners who shell out 50,000 to 75,000 Rupees (about $1000 to $1500) for a motorcycle, they found, would rather have something safer that would shield them and their families from the elements. But they could not afford the 200,000 rupees ($4000) for an entry level car. But they would seriously consider something that cost around 100,000 rupees (around $2000). So, the engineers went to work on designing a car that would be profitably sold for around that price. Mr. Tata made it clear that he wanted it to look visually appealing, while taking liberties on cost where it did not matter. Gone were all power accessories, fancy seats, and rear hatch. So were two engine cylinders. Even the tiny 12 inch tires are fastened with only three lug nuts instead of four or five. But it had to have four doors (anything less is not a car in India). Not only did it have to seat four in comfort, it should get around 50 mpg gas mileage. The result has been nothing short of impressive (see pic). On March 23, the Tata Nano was launched in India with much fanfare. Advanced bookings for the initial production lots were oversubscribed several times over, so Tata Motors, the manufacturer, had to resort to drawing lots to pick the first 100,000 lucky owners. Production is expected to ramp to around 250,000 next year, and a million a year thereafter, but given the instant success, this will be gone as well.

None of this has escaped the attention of the world press. Last year in the Detroit Auto Show, it was dubbed "the most popular car" and it was not even shown! This year, in Geneva, a new version was shown (see below), which will have a larger engine, all safety and power features expected in Europe, and still cost around 5000 Euros. Tata did not plan on marketing one in the US, but considering the economic situation we are in here, he has changed his mind. So, in spite of all the reengineering and redesign it is going to take to meet the US specifications, he is planning on bringing one here around 2012 or 2013. That will bring affordable transportation (again) to a lot of people who cannot afford it now. I bet a lot of them cannot wait till they get their hands on one.

My kids can't either.

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