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Game Changer: The TATA Nano Story

The story of the world’s cheapest car begins on a rainy day in Bangalore.

Ratan Tata was in the south Indian city on business and on his way to the airport. The head of India’s most famous business empire told his driver to be careful on the slick roadway.

Article by MARCUS GEE for The Globe and Mail

As usual in India’s crazy traffic, the streets were full of dodging scooters, many of them carrying whole families: father at the controls, mother holding on behind, children riding on their laps. Typically, none of them were wearing helmets.

Suddenly, a scooter turned in front of the Tata car and lost control, sending a family of four spilling onto the pavement.

“No one was hurt, but we could have run over the whole family; we were just behind them,” remembers Mr. Tata. He had seen before how vulnerable scooter riders were in the traffic, “but that was the first instance that scared me.”

He began to think: How could he make driving safer for Indian families?

His first notion was to build a safer scooter. Trained as an architect, he made notepad doodles of new designs – a scooter with two wheels at the back, a scooter with a protective cage – none of them very practical.

Then he played with the idea of an open-sided “rural vehicle” with safety bars in place of car doors. He decided “no one wanted a half a car.”

Finally, he hit upon the simplest and most audacious idea of all. Why not simply build a tiny car – just big enough to carry a family like the one that crashed in front of him that day in Bangalore, but cheap enough for a scooter-driving family to afford.

Thus was born the one-lakh car.

In India, one lakh means 100,000, so the car would cost 100,000 rupees, or about $2,500 (U.S.). No one had ever built a car for less than twice that much. Critics, including some within his own company, said he could never do it.

So it was with obvious pride that Mr. Tata drove the one-lakh car, rechristened the Nano, into the television lights at the New Delhi Auto Expo on Jan. 10. “A promise is a promise,” the Tata Group chairman said as he announced the price of the car: 100,000 rupees for the base model (tax not included).

The announcement made headlines around the world, supplying new evidence of India’s dramatic rise from impoverished economic laggard to industrial and technological dynamo. It also drew attention to the quiet tycoon who conceived and nurtured the phenomenal car.

Mr. Tata was born into one of India’s oldest and wealthiest business dynasties. The group was founded in the 1870s by Mr. Tata’s great-grandfather, Jamsetji Tata, son of a Parsee merchant and banker. He made his fortune in cotton, an industry then dominated by imported textiles from Britain, then India’s colonial master. Travelling to England to study the mills of Lancashire, he set out to beat the English at their own game, then rigged in England’s favour. He later moved into iron and steel, laying the ground for what today is India’s largest private business house, with 98 companies in everything from cellphones and hotels to tea and trucks.

Mr. Tata was raised by his grandmother after his parents, Naval and Soonoo Tata, divorced. Lady Ratan Tata, who had adopted Naval, presided over a stately Mumbai mansion, Tata House, where Mr. Tata grew up surrounded by British nannies, chauffeurs and footmen. He left India at the age of 15 to study in the United States, eventually completing a degree in architecture and structural engineering at Cornell University in Ithaca, N.Y.

“It was a great thing to be a in a place where you were just another person,” he recalled in a recent interview at Bombay House, the colonial-era sandstone pile where Tata has its headquarters. “For 10 years of your formative life you were just another guy and you’d be punched in the nose as easily as someone else if you did something wrong.”

Today, his style and mode of living are modest in a country where the rich aren’t usually shy about flaunting their wealth. He carries his own bags into airports and insists on paying the bill when he visits one of the company’s grand Taj hotels. A lanky, athletic-looking 70-year-old, he lives in a simple, three-bedroom apartment in old Mumbai, occasionally escaping with his dogs to a weekend beach house near the city that he designed to his own plan.

Called back to India from the United States by his ailing grandmother, Mr. Tata worked his way up the ranks of the firm, starting with “drudgery” on the shop floor at Tata Steel and Tata Motors. He got his first interesting job when the firm put him in charge of a failing electronics company. “You didn’t know where the month’s payroll was coming from,” he says. “You were fighting for your life and I think that’s a great learning experience.”

When he was called to take the reins of the whole company from his uncle J.R.D. Tata in 1991, he wondered: “How do I fill his shoes?” The senior Tata was an outgoing, larger-than-life figure who bombed around Mumbai in Italian sports cars. He had ruled the company for more than half a century. “Do I mimic him and be his clone or do I just be myself?” Mr. Tata asked himself. “I chose the latter.”

Adopting a leadership style more “inspirational than dictatorial,” he got rid of extraneous businesses such as cement, paints and cosmetics. He halved the bloated work force at Tata Steel. He built Tata Consultancy Services into Asia’s biggest software firm. In 1998, he took a gamble by launching the first Indian-made “people’s car,” the low-cost Indica.

Looking abroad to hedge the company’s risk in a volatile home market, he launched a go-global strategy that saw the company snap up Britain’s Tetley Tea, Anglo-Dutch steel giant Corus and, finally, last month, two of the world’s most famous luxury car brands, Jaguar and Land Rover.

When he told fellow executives the company should strive to get at least 30 per cent of its revenue from abroad, “one was told that it wasn’t possible.” Today the figure is 60 per cent.

Mr. Tata does not like being told that something is not possible. Associates and rivals alike say that behind his gentlemanly demeanour lies a ferocious competitor. Nothing underscores that like the launch of the Nano, his most daring move yet.

When he first announced the venture, no less a figure than Suzuki Motors chief Osaka Suzuki said flatly that “Tata will not be able to make a one-lakh car.” That quotation flashed on the screen behind Mr. Tata as he unveiled the car in January – sweet revenge.

“A lot of personal success or failure revolved around what happened on a project that, rightly or wrongly, was connected with me,” Mr. Tata admits. “There would have been a great deal of attention if we’d fallen on our face.”

To make sure they didn’t, he took intense personal interest in the project, travelling at least once a month to the design centre in Pune near Mumbai to huddle with the 500-member Nano team.

Project leader Girish Wagh says Mr. Tata often grabbed a pencil and a notebook to sketch out ideas, encouraging everyone to speak up. “Even a junior engineer could talk to him,” Mr. Wagh says. He wanted to be sure the car came in at 100,000 rupees, but “when we tried to compromise on customer requirements, he would say no.”

He drove a prototype of the car and thought it was underpowered, so the team added horsepower. The team had almost signed off on the styling of the car when Mr. Tata decided it wasn’t bold enough and ordered another try, resulting in the rounded, futurist look of the Nano.

To save on costs, the team gave the car a windshield wiper with one arm instead of the usual two and one side-view rear mirror, too. They even attached the wheels with three bolts instead of four.

Along with the engineering, Mt. Tata hopes to change the manufacturing process. The company will produce a ready-to-build version of the car that can be distributed in kits. With help and training from Tata, groups of entrepreneurs could buy the kits and assemble the cars themselves, creating new businesses across India – “my idea of dispersing wealth,” he told a British newspaper.

The little, 33-horsepower, twin-cylinder engine is mounted in the rear, like the original Volkswagen Beetle. The base model has no air bags, air-conditioning, radio or power steering (later, upgraded export models may get them). Its top speed is 105 kilometres an hour. But, then, for the price of one Rolls-Royce Phantom, you can buy 240 Nanos. The first cars are expected to roll off the assembly line in October and the company plans to produce 250,000 a year to start.

Whether the company can make money on the car at the one-lakh price remains to be seen. Even on the Nano team, “people right up to the day of the launch said that we were giving it away,” Mr. Tata concedes.

But the car may already have achieved greater things. It has made the dream of car ownership a possibility for hundreds of millions of striving families in India and around the world. It has showed companies the value of pitching products to the lower end of the market – illustrated in C.K. Prahalad’s book, The Fortune at the Bottom of the Pyramid. Perhaps most important, it showed that bold, innovative thinking – not just cheap goods from cheap labour – can come out of emerging economies like India’s.

Auto maker Anand Mahindra, who competed against Tata for Land Rover and Jaguar, calls the Nano “a shot that was heard around the world.”

“Maybe it won’t have great margins, or replace as many motorcycles as it would like to, but it was a game-changing move,” he said in a recent speech.

Billionaire Baba Kalyani, head of auto parts maker Bharat Forge, says that before the Nano, if you wanted to make a car, “you set up a big factory, you cut a lot of metal and off you went,” charging customers enough to cover your cost and make a profit. Mr. Tata turned things around, setting the price and adapting the product accordingly. “They started with a clean piece of paper.”

In Mr. Tata’s case, that is quite literally true – a doodled superscooter on his notepad, then a doodled minicar, then the Nano itself.

Next time Ratan Tata has an idea, don’t tell him it can’t be done.