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 Page 2

The Making of Nano

Ratan Tata interviewed by Christabelle Noronha


CN; What are the innovations that have made the Tata Nano possible, from design to product finalisation?

Initially I had conceived a car made by engineering plastics and new materials, and using new technology like aerospace adhesives instead of welding. However, plastics didn't lend themselves to the volumes we wanted because of the curing time required. Volumes mean the world in this context: if we produce this car and if it is for the wider base of the pyramid, we can't settle for small numbers because then the purpose is defeated.

When we were planning facilities for the car and working out a business plan, the business plan shown to me was looking at a figure of 200,000. I said a 200,000 car is crazy. If we can do this we should be looking at a million cars a year, and if we can't do a million then we shouldn't be doing this kind of car at all.

But such a figure (a million cars) has never been achieved in the country before. If it had to be done the conventional way, it would have meant investing many billions of dollars. So we looked at a new kind of distributed manufacturing, creating a low-cost, low break-even point manufacturing unit that we design and give to entrepreneurs who might like to establish a manufacturing facility. We looked at different ways of servicing the product, at the customer's location, and through a concept adopted from the insurance industry, wherein self-employed people are trained and certified by us. And we went back to innovation in design and scrupulously took, as much as we could, cost out of the product.

We did things like make similar handles and mechanisms for the left- and right-side doors; we developed our own small engine which could sit under the rear seat, enabling us to craft a smaller overall package; we looked at a new type of seats; and we worked at cutting costs everywhere. We have put our instrument cluster in the middle, not in front of the driver. This means the same dashboard will work for a left-hand-drive vehicle. There are a lot of such innovations that are low-cost and future-oriented.

Equally important to the cost structure was the incentive we could get from having our manufacturing facility at a particular place. The benefits on this count will be passed on to the customer.

Our move to West Bengal was a leap of faith and a sign of our confidence in the leadership in the state. We were breaking new ground, not only on the product front but also in helping industrialise a previously ignored part of India. But we did not start out getting the incentives that other states were offering. I remember telling the chief minister [Buddhadeb Bhattacharjee], "Sir, much as we have tried, it makes no sense for us to come to West Bengal. We cannot meet the cost requirements we have without incentives." It was then that we negotiated a set of incentives that, long-term, work out to be the same as we may have had if we set up in some other place.

CN: Other than emission norms and safety standards, what are some of the other challenges, physical and psychological, that Tata Motors had to overcome to make this car happen?

RT: There was the usual dilemma of what is basic and what is nice to have. A basic car may not have all the niceties its fancier cousins sport, and when you're looking at saving money on every single bit of the car — even parts that cost as little as Rs20 — you keep facing these dilemmas. Hundreds of such dilemmas have risen.

However, we were always conscious that there should be no quality stigma attached to the buying of this product. One thing we were clear about: this was never going to be a half-car. Nobody wants a car that is less than everybody else's car. Our car may have a small engine and certain limitations in terms of being basic, but that does not make it inferior. Also, we have a higher version of the car — with air conditioning, leather seats, etc — that we will be displaying at the auto show in Delhi. We hope people will look at that, too. Down the line, as we widen our range, we will have dressed-up versions with higher-powered engines, diesel engines, automatics and the like. We have a whole bunch of innovations coming along on this platform.

What we now have is a car that is truly low-cost which has, approximately, the same performance as a Maruti 800 in terms of acceleration, top speed, etc.

CN: When future versions of this car hit the market, will they not be in direct competition to the Indica?

RT: No. The way I see it, this vehicle will cannibalise some of the lower-end car market and some of the higher-end motorcycle and scooter market. It will eat into both of those markets but it will also create a market of its own. It will expand the market by creating a niche that did not previously exist. It may well cannibalise some of the higher-end car market, but to a small extent, and probably only when people look to buy a second or third car.

CN: About the criticism that the car will add to India's pollution problems… what is generating so much criticism?

RT: Our car will cause less pollution than a two-wheeler. I'm trying to think of a parallel where someone has introduced a product at a disruptively low price and changed the market. A good example would be the Swatch watch, low-cost, trendy and with a wide range. Did Swatch finish off the Swiss watch industry? No (in fact, it was a Swiss company that created Swatch, the same company that produced Omega). Did it finish off Citizen and Seiko and other Japanese competitors? No. Did Swatch cause the Japanese and others to produce something like the Swatch? Yes, it did, but Swatch continued to dominate its niche.

What did this do to the global watch industry? It enabled somebody to look at a wrist watch almost like cufflinks: you could buy 10 Swatch watches, you could wear different ones for different occasions. Swatch sold multiple watches for a single wrist. I think something similar could also happen with the Nano.

I think it [criticism] comes from vested interests. Let's ask ourselves why the car is attracting so much attention and why it is being attacked so much. My view is that if the car were not attracting all this attention, it wouldn't be attacked. This car has provoked serious apprehensions in some manufacturers. There are people in our company even who fear what it will do to the Indica. Do you think there's a concern among three-wheel manufacturers that it might replace their vehicles? Yes, there is because some three-wheelers cost more than what the Nano will cost. All in all, I think people are attacking us because they are apprehensive.

CN: Has the Indica experience helped in the creation of the Nano?
RT: Oh yes, enormously. The Indica experience and the Ace experience have helped; Ace especially because it was another tight, cost-based exercise.

From the Rs1-lakh car to products costing many millions, if the Jaguar deal comes through: What next for the Tatas on the automotive front?
I won't comment on the Jaguar deal, but to answer your question, we are not in an acquisitive mode. That's not our strategy for growth.


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