Tata to Sell Nano for $2,500; Targets Indian Families

Jan. 10– Tata Motors Ltd., India’s largest truckmaker, unveiled the country’s cheapest car today, pricing it at 100,000 rupees ($2,500), as it aims to convince the nation’s motorbike riders to trade up to four wheels.

Ratan Tata, 70, the company’s chairman, displayed the `Nano’ at the Delhi auto show. The company will start sales later this year, Tata said.

“A promise is a promise,” Tata said, reiterating the price the company set more than five years ago, when it started developing the model.

Tata, lagging behind Suzuki Motor Corp. in Indian sales, is targeting the nation’s 45 million motorcycle owners. The car could help sales surge in India, set to be the world’s fastest- growing major auto market until 2011, even as environmentalists raise concerns of pollution and traffic.

“It’s a big, big bet by Tata,” said Amit Kasat, a Mumbai- based analyst at Motilal Oswal Securities Ltd., who recommends investors buy Tata’s stock. “The automotive world will be keenly watching how it plays out so that car companies can make their own adaptations for similar-priced cars.”

Tata Motors shares rose as much as 4.1 percent to 802.3 rupees after the car was unveiled. Maruti Suzuki India Ltd., the nation’s largest carmaker, declined 0.4 percent 921.8 rupees.

The car will cost almost half as much as Suzuki Motor Corp.’s Maruti 800, the cheapest car currently on the market. Almost seven motorcycles are sold for every car in India. The World Bank estimates almost half of the nation of 1.1 billion people live on less than $2 a day.

Per capita income in India has doubled since 2000. India’s economy has grown at 9 percent a year since 2005, making it the world’s fastest-growing major economy after China.

`People’s Car’

Tata said the car will be powered by a 624-cc engine, with 33 horsepower and can seat four to five people. It will meet all safety requirements needed in India, he said.

With oil rising to $100 a barrel and pushing up fuel costs, automakers must improve fuel-efficiency and Tata’s car may only be a starting point, said A.S. Thiyaga Rajan, who manages $250 million as the managing director of Singapore-based Aquarius Investment Advisors Pte.

Global Race

“The global race to get a cheap, fuel-efficient car is on furiously,” said Rajan. “As long as the design looks good and the safety standards are met, then there will be thousands of hungry buyers.”

Renault, France’s second-largest carmaker, is in talks with Bajaj Auto Ltd. to build cars that may cost about $3,000 and Renault would eventually export such vehicles to the U.S. for $5,000, Carlos Ghosn, the company’s head said Oct. 26.

The four-door car will have an engine at the rear and be powered by a 30-horsepower engine, Tata wrote in the company’s annual report in June 2006. It will have four to five seats and “will be extremely attractive to the Indian consumer, particularly the younger families,” Tata wrote.

Tata’s car could “jam cities” and raise pollution, according to the Centre for Science and Environment, which has led a campaign for cleaner air in New Delhi. Average vehicle speed in India’s capital has dropped to 15 kilometers an hour in 2002 from as much as 27 in 1997, it said.

“As congestion builds up and vehicles slow down, emissions increase up to five times,” it said.

The car will be the first new design from the Mumbai-based company since it unveiled the Indica in January 1998 as India’s first locally designed car. The new car could exceed the Indica in popularity, said R.K. Gupta, who manages $150 million as managing director of Credit Capital Asset Management in New Delhi, and is planning to buy more shares of the automaker.

“The car could spur even an office clerk to dream of owning a car,” said Gupta. “A lot of people will now follow the same route.”