Nano: The world’s cheapest car

With the $2,500 Nano, an Indian car company hopes to bring motoring to the masses of India, China, and the rest of the developing world. What would that mean for the environment?

Is a $2,500 car feasible?

Ratan Tata certainly thinks so. He’s the 71-year-old chairman of Tata Group, India’s biggest conglomerate and the parent company of Tata Motors. Tata is at the forefront of a crowd of carmakers eagerly eyeing the emerging middle class in India and China, the two largest

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markets in the world. Close to 1 billion people in these countries are now enjoying their first taste of prosperity, and Tata is racing against Renault, Nissan, GM, and other carmakers to tap this potentially enormous market. After a few false starts, the $2,500 Nano is now scheduled to go on sale in India in April, while the other companies are at least a year away from bringing their cheap cars to market in China and elsewhere. “Now a car is within the reach of people who never imagined they would own a car,” says Tata Motors Managing Director Ravi Kant.

How can Tata sell the Nano so cheaply?

By cutting costs to the bone. The Nano’s tiny, 0.6-liter engine has only 33 horsepower. Its front and rear bumpers are made of plastic, not steel, and many parts are glued together rather than welded. There’s only a single outside mirror, on the driver’s side, and a single, center-mounted windshield wiper. The spartan interior features hand-cranked windows and manual steering and transmission. There are no three-point seat belts in the back seat, and no air bags anywhere. Radios and air conditioning cost extra. With car sales cratering around the world, the international automobile industry sees the Nano—and similar cars—as one of the few areas of growth on an otherwise bleak horizon. Environmentalists, though, are wringing their hands.

Why are they so worried?

If India, China, and other Asian nations put hundreds of millions of additional cars on the road, it will have dire implications for the environment. Indian vehicles already spew 219 million tons a year of carbon dioxide, the greenhouse gas most responsible for global warming. By 2035, India’s CO2 emissions could soar to 1.5 billion tons, thanks largely to the Nano and its ilk, according to the Asian Development Bank. Emissions on that scale would negate any projected emissions cuts in the developed world, virtually guaranteeing that efforts to halt climate change would fail. With projections like that, “I am having nightmares” about the Nano, says U.N. chief climate scientist Rajendra Pachauri, who shared the 2007 Nobel Peace Prize with Al Gore.

How does Tata respond?

It’s not the company’s problem, said Ratan Tata. “We never promised to make the world’s most eco-friendly car,’’ he said. “We only set out to make the most economical car in the world.” Besides, he notes, the Nano is much cleaner than the aging scooters and three-wheeled motorized rickshaws they’re likely to replace. Tata claims the car will get about 50 miles to the gallon and conform to Europe’s emissions standards, which are stricter than India’s. Its catalytic converter will scrub away about 80 percent of exhaust-pipe pollutants—though not carbon dioxide, which converters don’t capture. But that’s assuming the catalytic converter works as promised. Car maintenance is a foreign concept to many Indians, and the country’s pitted roads are rough on even the sturdiest components. If the Nano’s converter gives out, its emissions could increase fivefold.

What about safety?

The Nano certainly offers a safer ride than the motor scooters that now function as the family vehicle for millions of rural Indians. Every day in India, road accidents kill nearly 300 people—the highest traffic-fatality rate in the world. It’s not unusual to see a father driving a scooter along a pockmarked road with a child sitting in front of him on the tank and his wife sitting behind him, holding a baby. At the same time, though, the Nano promises to add as many as 2 million inexperienced new drivers a year to India’s already crowded roads. That translates to more accidents, injuries, and deaths. But despite these concerns, the company is projecting sales of 250,000 in the first year alone.

Does that seem realistic?

It does. The buzz over the Nano has been building for months in India, and its release in April is expected to generate huge national fanfare. “The Nano proves that the world is now India-centric,” crowed The Economic Times of India in an editorial. As for the environmental concerns, the emerging middle classes of the developing world don’t see why they should be denied the personal transportation that the developed world takes for granted. Rich Westerners, says Tata Motors boss Ravi Kant, “ask about congestion and pollution and global warming. I ask them, ‘Sir, will you stop using your car and take the bus?’”

A history of ‘people’s cars’

The Nano is hardly the first car aimed at consumers who had previously been priced out of the market. Henry Ford revolutionized the industry in 1908 with the Model T. The first car to be built on an assembly line with standardized parts, the Model T was also the first car that an average working American could afford. Ford produced 15 million Model T’s from 1908 to 1927, in the process turning cars from a plaything of the rich to a middle-class necessity. Adolph Hitler adopted Ford’s idea of a car for the masses and made the development of a “volkswagen,” or “people’s car,” a priority when he took power in 1933. The VW’s distinctive beetle-like shape was not merely a designer’s whim. It was the first car to be designed using wind-tunnel testing. But the champion people’s car has to be the Toyota Corolla. The original Corolla, introduced in Japan in 1966, was priced at $1,700, within reach of the average Japanese worker. It was an immediate hit and set off a wave of private-car ownership in Japan. And the “just-in-time” manufacturing process that helped keep the Corolla’s cost low has been copied by industries from aircraft manufacturers like Boeing to retailers like Wal-Mart.