According to management experts, the car has created a new paradigm of "frugal engineering" and will trigger breathtaking innovations in manufacturing technology in the global automobile industry based on severe cost-cutting.
Yet, despite stripping the Nano down to its most rudimentary dimensions to produce what a United States media presenter termed as "a golf cart crossed with a jelly bean," Tata Motors is unlikely to be able to fulfill its $2,500 price promise for long.
"In fact, the figure is an introductory offer excluding taxes and local duties -- on the road, the car will actually cost between $3,310 and $3,819," said Dinesh Mohan, a transportation expert and professor of biomedical engineering at the Indian Institute of Technology in Delhi. "And that's the initial cost of the bare-bones model. Other versions, including an air-conditioned model, will cost more."
Tata Motors chairman Ratan Tata has already hinted that the introductory price may not last long. "We may not be able to hold the price emotionally. We have to understand that steel and tire prices ... are rising," he said, while launching the car last week.
He recalled that in 1983, the Maruti 800 car made in India by Suzuki too was offered at $1,145, but the price almost doubled within a year.
The Nano's ultra-low price tag is in part a result of major subsidies offered by the Marxist government of West Bengal, where the car will be manufactured. According to former state finance minister Ashok Mitra, the $210 million in subsidies work out to one-fourth of the car project's initial capital cost.
The Left Front state government has leased 997 acres of land to Tata Motors virtually free, with no down payment. It's also advancing a $50 million loan at 1 percent interest and further granting an exemption from the value-added tax for 10 years, amounting to $125 million.
If the indirect subsidies given to private automobiles through the free use of roads and parking space are added, cars such as the Nano would no longer be ultra-cheap.
Hype about "the world's cheapest car" apart, the Nano is deeply flawed because of inadequate safety features and emission standards, according to environmentalists and experts.
"This car is likely to have low longevity and high maintenance costs," Mohan said. "It already fails the current Western emission and safety standards and will soon fail Indian standards too, as India adopts the ‘Euro-IV' emission norms applicable in many European Union countries."
The ruthless way that Tata Motors has pared down the Nano's costs has meant cutting many corners to stay focused on frugality and minimalism.
For instance, the Nano's designers reportedly used a hollow shaft instead of a solid beam to connect the steering-wheel to the axle, and plastics and adhesives in place of many studs and bolts. The car's low-performance wheel bearings may wear out rapidly beyond 70 kilometers per hour.
It has only one windshield wiper instead of two. It uses belt-driven continuous variable transmission, which slows down acceleration. To save merely $10, the suspension was redesigned to eliminate devices called actuators, which adjust the angle of the car's lights to the way it's loaded.
"Such measures are likely to have an impact on the car's safety, sturdiness and durability/longevity," Mohan said. "Some of it will only become apparent once the car has been on the road for a few years. It's premature today to certify that the Nano is safe and reliable."
Tata Motors' claim that the Nano has passed the crash test and meets the national Bharat II and III emission standards has not been verified by an independent and competent agency. Besides, Tata himself admits that the Nano, as of now, falls short of the Euro-IV standards.
"India should have adopted these norms long ago, but delayed doing so under the automobile lobby's pressure," said Anumita Roychowdhury of the Center for Science and Environment an internationally known green lobby in New Delhi.
Euro-IV norms will come into force in India's major cities in April 2010 and are considerably stricter than Bharat II or III, which are 10 to 5 years behind Europe. For instance, under Euro-IV, sulfur emissions must be reduced 35-fold in relation to Bharat II.
"Similarly, key safety standards are long overdue in India, which has unacceptably high road accident and casualty rates," Roychowdhury said. "They are on their way. These include full-body crash tests -- which determine how cars will crumple in collisions, minimizing the impact on passengers -- airbags and anti-lock braking systems. Implementing them will raise the Nano's claimed costs by 40 to 50 percent."
"It's not good enough to have safety systems; cars must be frequently and rigorously inspected after they have experienced actual roads conditions, which often affect the systems that control emissions. This rarely happens in India," Mohan said. Michael Walsh, a pollution consultant and former U.S. Environmental Protection Agency regulator, has been quoted as saying that a car as cheap as the Nano is likely to lack the complex technology needed to maintain its initial level of emissions, and it could soon produce four to five times its initial pollution levels. "It strikes me as impossible that such a vehicle will be a very clean vehicle" over its lifetime, he told The New York Times.
The car will set a trend under which industry will take advantage of India's existing poor emission standards and rush to produce new vehicles before better standards are in place.
Scooter manufacturer Bajaj Auto has already announced that it will make a $3,000 car in collaboration with Renault. Volkswagen, Nissan and General Motors are also considering plans to make stripped-down cars priced between the Nano and the Maruti 800.
The addition of these vehicles will further slow down traffic in Indian cities -- where road speeds have considerably decreased and in some case have been halved in recent years.
It will greatly add to pollution, which has reached critical levels in 57 percent of Indian cities and is generating a health crisis, with disorders ranging from respiratory illnesses and hypertension to obesity.
India and China are emerging as leaders in low-cost car manufacture and consumption. In India, forecasts a consultancy firm, an additional 30 million households will be ready to buy a small car by 2010.
By 2013, India's car market will be annually growing at 14.5 percent, and China's at just over 8 percent. By 2020, some forecasts say, more than 150 million Indians and 140 million Chinese will have cars.
If this really happens, it will become nearly impossible to achieve major reductions in global greenhouse gas emissions. China and India account for 70 percent of the global increase in energy demand over the past two years.
If the "Nano trend" continues, the small window of opportunity to control spiraling energy use and greenhouse emissions will slam shut.
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Albion Monitor January
15, 2008 (http://www.albionmonitor.com)
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