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How Cheap Is Too Cheap For A Car? Indian Automakers Test The Water

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Tata Nano

Tata Nano

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How do you solve a problem like getting a nation of low income people onto the roads?

That's the question that Indian carmakers Tata and Bajaj, among others, are trying to answer. Indian automotive mogul and man at the helm of Jaguar Land Rover, Ratan Tata, tried to revolutionize Indian transport with the Tata Nano. Bajaj has just launched a competitor, the RE60.

But as Ratan Tata struggles to erase the "poor man's car" stigma from the world's cheapest car, it poses an intriguing question: How cheap is too cheap?

Tata received huge publicity when it launched the Nano. Billed as a one-lakh rupee car - just under $1,900 at current exchange rates - the final price has risen to nearer $2,400. That still makes it the world's cheapest car, but the Nano has been dogged by recalls and a series of high-profile fires.

Those have made the Nano appear under-engineered, even considering the price and its fitness for purpose, and sales have been lower than expected.

Ratan Tata still believes there is a market for cars at such a low price-point, however. Speaking to The Times of India, he said "The launches of similar small cars by others vindicate our belief that this segment was missing in the product line."

Referring to cars like the newly-announced, $2,800 Bajaj RE60, Tata says that he isn't competing on price, and is more concerned about improving the Nano's image. "Whatever stigma is there in the market, we will undo it."

Recent revisions to the Nano have improved its styling, with detail changes to the bodywork, a range of new colors and some engine modifications that liberated an extra 3 horsepower - now at 38 bhp - and better economy.

The Indian carmakers' worry is that with an increasing middle class in India, cars like the Nano and RE60 simply don't have the image to compete with international brands such as Suzuki and Honda, who also sell cars in India. Meanwhile, the nation's poorer inhabitants are either too poor to afford motorized transport, or can only stretch to scooters and motorcycles.

Have cars like the Nano and RE60 arrived too late to seize a gap in the market? Time will tell, but Tata's struggle suggests that consumers in India are as image-conscious as their counterparts in America. It also casts doubts on whether the Tata Nano Europa, due to be launched into the European and U.S. markets, will offer enough for consumers to choose it over a used car from established brands.

You can make a car affordable, but people will always aspire to something better...

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Comments (3)
  1. Hi I am from India and ground realities are quite complex here. Well Indian buyers really think about their image. You will be amazed to know that in India sell of SUVs and Sedans is increasing, and with almost every brand in the world launched theis best vehicles in India, Indians have great choice to choose. And many Indians afford SUVs and other hot cars.

    As far as Tata Nano is concerned, it is sure a cheap car..but there is competation to Nano from Maruti Suzuki Alto and Hundai Eon and other small cars which are more powerful, have upmarket looks and price difference is quite less in between Nano and those Cars. So many Buyers prefer other small cars, by puting some extra money.
     
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  2. Also runing cost of a Petrol(Gasolene) cars is more in India than Diesel car. As Petrol costs approx 72Rsr/Liter and Diesel costs 45 Rs/Liter, many people tends to buy Diesel cars. Also Diesel cars have more mileage than petrol cars. So diesel car like Suzuki Swift or Fiat Punto has more demand and they are cheap to operate tha Nano.
     
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  3. Hi Jay, thanks for your input - great to hear how the market works from someone actually living there. As I understand it the Maruti Suzuki Alto was previously India's highest-selling car (may still be, given the Nano's slow sales) but it's exactly the sort of car that Indians still want because of the badge, right?

    That's quite a financial difference in fuel costs as well. In America the difference is much smaller, and in the U.K, where I'm from, diesel is actually more expensive than petrol.
     
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