KEY POINTS:
Has Ratan Tata shifted the goalposts for every carmaker in the world?
Last week the 70-year-old chief of India's giant Tata Group dramatically proved the naysayers wrong when he pulled the covers off the Nano - the $3200 car that could change the shape of the global vehicle industry.
The 3m-long Tata Nano is a looker - and it will be the world's cheapest car when it hits the market around October. The Tatas have shaved costs in innumerable ways and in the process they've pulled off an engineering coup that has astounded the car industry.
"It's a full-fledged car and not just an excuse for one. Though it's the cheapest car in the world you wouldn't be embarrassed to be seen in it," says Hormazd Sorabjee, editor of Autocar India, adding the caveat he has yet to take a test spin in it.
The Tata Nano has raised the hackles of environmentalists around the world. But in India the reaction has been astonished pride. The idea that an Indian company could venture where no other carmaker has ever gone before is a novel one.
Indian newspapers and television channels instantly began drawing comparisons between Ratan Tata and Henry Ford. "We've had an overwhelming response," says a spokesman for Tata Motors.
The Tata Nano should hit the market for around 100,000 rupees (that's about $3200) which is nearly half the cost of any other car in the world. At that price the Tatas may have found a gap in the market for ultra-cheap cars that has never been filled, targeting buyers who could not have afforded a car before.
"This vehicle will fill a great niche that exists in the marketplace. Others will emulate the Nano and bring out similar products," says Dilip Chenoy, secretary-general, Society of Indian Automobile Manufacturers (Siam).
Sure enough, many other rivals are already racing to their computer-aided design PCs. Bajaj Auto, India's biggest maker of two-wheel vehicles, tried to upstage the Nano by announcing last week it will put an ultra-cheap vehicle on the road by 2010.
But Bajaj, which is partnering Renault-Nissan, has a long drive before it reaches Tata's level. It doesn't even have an engine for the prototype put on display last week.
Similarly, motorcycle giant Hero Honda is looking for ways to get into the small-car market. Hero Honda has been scouting for partners but hasn't found one yet.
Both Hero Honda and Bajaj are alarmed by the very real possibility that the Tata Nano will eat into two-wheeler sales. About 7 million two-wheelers are sold annually in India but sales have dipped sharply in the past year. Some analysts argue that rising affluence in an economic boom is already pushing potential two-wheeler buyers into the car market.
The Tata triumph reinforces that India's car industry has travelled a very long way in the past decade. Every car company in the world is now selling in the country and the biggest companies are pouring money into fast-track expansion programmes.
At last count about 60 new models are slated to hit the road this year. The scale of the car boom is evident at the 9th India Auto Expo on in Delhi - it's almost twice as big as the last show two years ago.
But the real goldmine and the big numbers are at the bottom end of the market. India is still a poor country and the spending power of middle-class buyers is limited compared with developed countries. About 1.5 million passenger vehicles are made annually in India and about 70 per cent of them are small cars.
As the market booms India is also turning into the small-car hub of the world.
Take a look at Hyundai, the Korean carmaker which is India's second biggest maker of passenger cars. The Korean company is making its newest small car, the i10, in India and exporting it around 45 countries.
Then, there's Maruti-Suzuki, India's biggest carmaker, which lifted the covers off two models - the A-Star and the Splash. Significantly, the A-Star is a small car that has been mostly designed in India for the global market. In fact, the A-Star is, in several ways, a truly 21st-century multinational car: it has been designed in India and Japan, and will be made at a new factory just outside Delhi. But the cars made in India will sell in Europe under the Nissan badge.
Nissan is also looking at big investments in India and has just launched its best selling Logan there.
Carlos Ghosn, the feisty Renault-Nissan chief, is a huge fan of Indian low-cost manufacturing. "There's something unique about the frugality in engineering and management here that we would like to learn from," he said on a visit to India last year.
The giants of the car world are also spending big to raise small-car production in India. GM is building new capacity at its plant in western India and Ford announced last week it will invest US$500 million ($636.7 million) to build a small car in India.
Even giants like Toyota are figuring how to grab a share of India's small-car market and there's speculation the Japanese carmaker will bring its bestselling Yaris to India. Volkswagen showed off its new small car the Up! at the Delhi car show and Skoda launched a new Fabia.
Is this a recipe for an environmental catastrophe? Will millions of ultra-small cars pouring out from new factories clog the country's notoriously potholed roads? The answer is that India does need to clean up its environmental act and it does have lousy roads.
Also, public transport is hopeless and isn't likely to improve for many years.
But Tata says it can't be blamed for the country's environmental woes.
If all goes well, the company reckons it can make about 250,000 cars in the first and second years.
"Even after four or five years, we will at best be able to make about 500,000 cars. That's about 2.5 per cent of India's vehicle population," says a Tata Motors spokesman.
"The green lobby should in fact love the Nano with its fuel efficiency," says Siam's Chenoy.
Autocar editor Sorabjee calls it the ultimate "politically correct vehicle" because it delivers 20km a litre.
If the Nano lives up to expectations the global auto industry will almost certainly be forced to look at new ways of making cars.
Says Chenoy: "If it can be done by one manufacturer it can be replicated by others - and not necessarily in the small-car segment."
Will cheaper cars be a good thing or an environmental nightmare? There aren't any clear answers to that poser. But one thing is clear - companies like Tata won't be stepping on the brakes.
