World Cheapest Car From India

Tata set to launch world's cheapest car
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New Delhi - India's giant Tata Group plans to launch the world's cheapest car early in January while also looking set to drive off with two of the poshest marques - Ford's iconic Jaguar and Land Rover brands.

Ratan Tata, head of the tea-to-steel Tata conglomerate, will unveil the "People's Car" January 10 at a New Delhi auto show that will carry a sticker price of 100 000, or $2 500, which some analysts say could revolutionise automobile costs worldwide.

And Tata, which has been on an aggressive overseas expansion drive, is also expected to win its reported $2bn bid for the British Land Rover and Jaguar brands in January - putting it in the unusual position of making two prestige cars as well as the world's lowest-cost automobile.

The cheap car, a pet project of Cornell-trained architect Ratan Tata that he helped design, is aimed at getting India's masses off their motorbikes and into cars.

"I hope to make a contribution to making life safer for them (the masses)," said reclusive tycoon Ratan Tata, who has spearheaded the growth strategy of the company known for its philanthropic values and paternal management style.

"That's what drove me - a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads - a family in potential danger," Tata, who turned 70 on Friday, said on the company website.

But despite its low price and safety factors, analysts say the four-door, five-seater could be a tough sell for Tata's vehicle arm, Tata Motors, even with an economy growing by a scorching nine percent, creating new affluence.

If motorbike owners wanted to graduate to cars, there are a lot of good second-hand cars for 100 000 rupees or less, analysts say.

'Won't be profitable immediately' 

"You don't find large sections of two-wheeler owners buying second-hand cars simply because they don't find them as attractive a proposition," said Mahantesh Sabarad, analyst at Mumbai brokerage Prabhudas Lilladher.

"A two-wheeler, the most popular kind, would cost 35 000 to 40 000 rupees, so it's still a big jump up," Sabarad said, adding cars cost far more to maintain.

"It will not be an immediately profitable venture, it will take a longer time to break even - at least three years," said Angel Broking analyst Vaishali Jajoo.

Tata has said it's targeting the car at Indian and eventually other emerging markets. A Tata Motors board member recently revealed the car would get a significant 25 kilometres per litre.

"Acceleration wise, it's the same as a Maruti 800," board member RA Mashelkar said, referring to the most popular budget model made by Japanese-owned rival Maruti Suzuki that sells for $4 800.

A lot is riding on the cheap car with Tata Motors "betting large sums of money," said Sabarad.

"The projected expenditure of Tata Motors and suppliers on the project is 25 to 30 billion rupees. Half of that amount is what Tata Motors would spend."

Tata Motors is taking on the challenge at a time when its share price has slid some 20% this year due to a decline in its vehicle sales.

Analysts, meanwhile, are also wary of Tata's bid for Jaguar and Land Rover, saying a global economic slowdown would hit luxury car sales.

'New market' 

"I really doubt Tata Motors can do better than Ford did with these brands over the past decade," said Sabarad.

"They're definitely not looking at a near-term view in their strategy," added Jajoo.

If the cheap car is a winner, environmentalists fear it will further congest India's clogged roads and add to choking pollution.

But Tata says the car will create no more pollution than a motorbike and is confident of its success.

"We should be able to create a new market that does not exist," said Ratan Tata, forecasting an annual market of a million cars.

Total two-wheeler sales were nearly eight million last year while car sales were around one million, said Sachin Mathur, research head at leading Indian credit rating agency Crisil.

"The cost of motorcycle ownership is three to four times lower than that for a car. That's why you won't see car sale volumes going from one million to eight million overnight," he said.

But a cheaper car "will provide some acceleration to market growth" at the same time as forcing other automakers to cut prices as well as produce cheaper cars, Mathur said.

- AFP