Tata Unveils the World's Cheapest Car

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A Diesel Nano Will Come Next Year

Tata has filed 34 new patents on the Nano, says Girish Wagh, chief engineer and leader of the 500-man engineer and design team that created and developed the car. Most are in the engine; the Nano will have a two-cylinder, 30-hp engine with a four-speed manual transmission. Analysts say the true engine innovation will come next year, when Tata introduces the diesel version of the Nano.

Finally, the distribution of the car will also be an innovation. Just like a bicycle, it will be sold in kits that are distributed and serviced by the entrepreneurs who will assemble it for the consumer. Tata won't elaborate, and will only say "the distribution system will be a variant from the norm. It will remove some of the layers in distribution and service."

The Nano basic will sell for $2,500, but there will be many versions of it, including an air-conditioned one, and prices could go up to $4,000, still less than the Maruti 800, until now the world's cheapest car at $4,810. And it will be customized for overseas markets and exported. Ratan Tata intends to export the car to emerging markets in Africa, Latin America, and Asia, where it'll be a natural fit, says Paul Blokland, director of Segment Y who has been following the auto sector in emerging markets, particularly China, for a decade. The Chinese, he adds, have been only making copies of cars all these years, and have a lot to learn from Tata Motors' innovative vehicle.

Dealers' Phones Ringing Off the Hook

The Nano, having created a new market segment, has already begun to spawn an industry around it. India's Apollo Tyres has said it will start to make tires for small cars like the Nano, and the industry could clearly grow if the Nano proves to be popular.

Will Ratan Tata shift to a lower gear now that his dream has been fulfilled? He'd like nothing better, he says, but it's unlikely. "We have to now deliver a reliable product, and the Indian consumer has still to ratify it," he said. "We have only just put a stake in the ground." Does he worry about rivals? "We were driven by a desire to achieve what we set out to do, and it can be achieved by anyone who tries to achieve their dream. Someone else may be able to do it better than us," he said.

Certainly there's interest from consumers. At Bafna Motors in Mumbai, the phones were ringing all day, according to S.M. Bafna, managing director of the auto dealer. He had to keep his phone off the hook to ward off prospective buyers. Bafna wouldn't hazard a guess of how many Nanos he might sell, for "I might underestimate the demand," he said. "People are desperately waiting for the car."

Kripalani is BusinessWeek's India bureau chief

With Nandini Lakshman in Mumbai