Global car makers have been enthused by the Nano to announce the launch of their own versions of Ratan Tata's dream car.
Nano, the Rs1-lakh wonder car from the house of Tatas may have to deal with a strong competitor on the roads two years later if Carl Ghosn, chief executive officer, of French carmaker Renault SA and its Japanese affiliate Nissan has his way.
Apart from Bajaj Auto, which has also unveiled the concept for its small car at the start of the Ninth Auto Expo in Delhi, costing $3,000, automakers like Hyundai are also planning small car offerings.
Significantly Ghosn said at the World Economic Forum in Davos, Switzerland, that Renault and Nissan would launch a new car at the same price range as the Nano in India and that the model would go on sale within ''a year and a half'' of the scheduled launch of the Nanao in late 2008.
Renault SA and Nissan were earlier planning to roll out a $3,000 car but have now scaled down the targeted price and Ghosn said that the expected cost might be around $2,550 dollars or Rs1.2 lakh.
The target date for the launch of the cheap car from Renault Nissan can thus be expected to be around early 2010.
Renault and Mahindra manufacture and market the C segment Logan in India. The car, branded as Dacia Logan in Europe, is sold on the value-for-money platform in India priced between Rs4.5 lakh and Rs6.5 lakh for the top-end version.
Car sales in the developed markets like the US, Japan and Europe, are either falling or growing at less than 5 per cent per annum according to statistics from the Organisation Internationale des Constructeurs d'Automobiles, an international grouping of auto makers. Further the US market has started showing recessionary trends.
Against this the passenger car market in India has grown at an average of 14 per cent a year over the past three years.
For Renault SA to scale down the price of the new, low-cost, made-in-India car by $450 is almost compulsory since the future potential in small cars is enormous given the size of the two-wheeler market. About 7 million motorcycles are sold in India annually against one million cars and ten per cent of the motorcycles sell for more than Rs55,000.
That the Nano is likely to sell at no more than Rs1.15 lakh – Rs1.20 lakh, at least initially, and will give Tata Motors a huge prime-mover advantage in capturing the mindspace of a large number of consumers. Thus any carmaker wanting to occupy the small car slot had better not try breaching the Nano's price barrier to begin with.
By Ratan Tata's own admission Carlos Ghosn has been the only head of a global carmaker who has believed and backed Tata's efforts to build a Rs1-lakh car while others were publicly sceptical. Ghosn's confidence in being able to come out with a low-priced car to rival the Nano is not misplaced especially since the Renault Nissan car is likely to be made in India and is likely to employ the same methods used by Tata Motors to scale down the price of the Nano.
The low-cost manufacturing methods employed in India have already impressed the French carmaker enough to sign separate deals with Mahindra and Mahindra Ltd, Ashok Leyland Ltd and Bajaj Auto for making small trucks and smaller cars.
Even Europe's fourth largest automaker, Germany's Volkswagen that owns brands like the Audi, Bentley, Buggati, Lamborghini, SEAT, Skoda and the Volkswagen range of commercial vehicles, and entered the Indian market late last year, is planning to launch a small car in India though not at a price to rival the Nano, would be technologically superior and priced attractively enough to attract a number of buyers.
According to Andreas Prinz, Volkswagen India's managing director for passenger cars, safety and quality are of prime concern at Volkswagen and hence the company does not intend to compete at the lower-end of this segment and is not looking to introduce a Rs 1-lakh car in India.
Volkswagen, which is targeting to attract a 10-per cent share of the Indian passenger car market by 2018, plans to expand the Indian auto market on the back of its proposed small car, the first of which will be rolled out in 2010, says Prinz.
Volkswagen's small car in India will be based on its mini-hatchback Polo. The company is developing a whole new range of engines for this car and is actively considering a 1-litre diesel / 1.2-litre petrol engine, and a sub-1.3 litre diesel engine for the new car.
Volkswagen is also in the process of setting up a dedicated small car manufacturing facility at Chakan Industrial Park near Pune at an investment of Rs2,400 crore, the largest German investment in India.
Carmakers like Japan's Toyota Motors and Korea's Hyundai are also planning small cars for emerging markets.
According to report from rating agency CRISIL, Nano's launch would end up expanding the Indian car market by 65 per cent as it will prompt other players to enter the mini car category over the next few years and entice a section of two-wheeler owners to upgrade to cars.
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