World’s Cheapest Car Gets a New Home

It was supposed to have begun rolling off a West Bengali assembly line this month, but the Tata Nano’s release has been delayed due to political clashes in that volatile Indian state. Instead, the automaker has found a new home for the Tata Nano in Gujarat, which is an Indian state that is much more receptive to welcoming modern industry.

Leaving West Bengal For Gujarat

To be fair, Tata’s adventure into West Bengal met with stiff resistance because farmers were not being adequately compensated for land that was taken from them by the state government and sold to Tata Motors at a bargain rate. An opposition political party fueled the farmers’ discontent by organizing protests, including deadly battles that eventually forced CEO Ratan Tata to move his factory elsewhere.

The delay has caused some concern for automotive analysts who wondered whether Tata would still be able to develop the Nano and sell it for the US equivalent of $2500, a previously unheard of price level. The rising costs of raw materials, fuel, and land acquisition and labor costs have cast that price in doubt, but Tata hasn’t said yet whether the price point would have to be raised.

The $2500 Tata Nano

The Tata Nano, simple as it is, is considered to be a revolutionary car in that it will open up automotive ownership to many of India’s 1.1 billion people who otherwise could not afford a car. In India, families will often load up on a motorcycle to travel across the city or to outlining destinations, as an alternative means of transport to overcrowded bus and train travel. However, injuries and deaths from motorcycle accidents is quite high, leading to Tata Motors developing an alternative in the form of a bare bones passenger car that can seat as many as five passengers.

The Gujarat deal came at the backing of the state government which was quick to offer a package to Tata Motors that beat out packages prepared by neighboring states. Although the country is a democratic republic, Indian states weld significant power and have the authority to craft major initiatives apart from federal control. This can work both for and against a company, something Tata Motors discovered when the West Bengal deal fell through and the Gujarat deal quickly came to place.

As for the Nano, production will begin as soon as all of the land surrounding the factory location has been cleared and the factory built. What would take at least a year or longer in the US to complete, will be done in a matter of months, with the first Nanos expected to roll off a Gujarat assembly line in early 2009.

Source: Tata Motors