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India's Tata Leads Car Innovation--But Is It The Right Innovation?

Posted by: Bruce Nussbaum on January 8, 2008

Tata Motors of India will soon unveil a $2,500 car that is a not only a marvel of low-cost manufacture but a novel business model innovation. The “People’s Car” (this nickname sounds like the original Beetle, right?) is the latest incarnation of India’s ability to change the way business is organized and managed to produce low-priced products services for people at the Bottom of the Pyramid. India is pioneering in low-cost eye surgeries, low-cost telecom services and low-cost retailing (with tiny sachets of shampoo and other products).

There is a challenging attitude toward the norm among Indian business people that generating business model innovation on a widening scale there and atracting the attention of US, European, Korean and even Chinese CEOs. This Indian innovative mindset combines irreverance for existing business models with a goal of creating through frugality. The end result is very, very low-cost products and services. This emerging model is as important as the US quality movement and the Japanese just in time movement.

Tata rethought not only the parts going into a car but the process of getting them. It is using the auction system on the internet to supply 30% to 40% of the parts for its cheap automobile. Most car makers use the web to supply 10% - 15% of their parts.

As for the car, Indian engineers rethought virtually every component with an eye toward cutting costs. Tata’s goal was to provide a four-wheeled vehicle for families now using two-wheeled motorcycles. Everything is minimalist.

My own concerns about the $2,500 car is that Tata didn’t go far enough. Putting millions of additional cars on India’s terrible roads will cause a nightmare of even more pollution and crowding. If India and China follow the Western model in lifting their people out of poverty into the middle class, global warming can only become much worse. This may not be fair to Indians and Chinese but it is, alas, probably true.

Families of four riding a motorcycle that gets 70-80 miles per gallon will now get around in a small car that gets maybe 40-50 miles per gallon. This is a problem. I saw small cars with electric engines while I was in Bangalore. Tata would do well to offer up a plug-in electric model in selling the People’s Car. And Tata might think of innovating the electric car motor to bring down the price for autos all over the world. That would be disruptive innovation and give Tata a huge global advantage.

For now, I can’t wait to see an image of this $2,500 auto.

Reader Comments


January 8, 2008 5:07 PM



January 8, 2008 9:00 PM

Mr Nussbaum,

The Western world did not consider the opinion of India and China while they were industrializing, in fact some of them forcibly robbed the wealth of India and China setting the economies there back by several centuries.

So you and like-minded patronizing elitists can keep your advice to yourself. If you really are concerned about the environment, search deep within your soul for traces of a conscience and campaign against the huge and wasteful SUVs on western highways rather than an ultra-efficient small car that even by your admission gives 50 MPG, around double the mileage of the affordable fuel-efficient cars in the west.

Thanks for your concern about congestion on our roads, it was so touching. But if it bothers you feel free to keep out of India, I don't think you will be missed.


January 8, 2008 9:33 PM

Mr. Nussbaum, if you truly care about the environment then get the US federal and state governments and the auto companies to replicate this type of car in their inventory. Rather than the gas-guzzling Hummers and Sequoias. Smaller cars will also force Americans to rethink their own weight when four of them will be unable to get into one such car.

Killing two birds with one stone.


January 8, 2008 9:36 PM

For too long now (about 150 years or so) India has been in a quagmire of poverty, coming out of thousands of years of relative wealth and a history of innovation in mathematics, civic planning and a constructive approach to public life. The European interregnum is now once again been challenged. Old European (literally/demographics!) mindsets are slow to change and accept new realities, a sign of civilizational decay.
Per capita carbon emissions are one of the lowest in the world in India. Per capita carbon emissions are about 40 times higher in that most narrowly nationally self-interested of European diaspora, the US of A. Your article fails to grasp that innovation at its best is only have to look at the history of wasteful innovation in "western" societies. Enough preaching -- I wish that we spend most of the carbon-based energy left in the world because I want India and China to get their fair share and more.


January 8, 2008 9:37 PM

I can't understand how we can make such a comment. If there are 16 million cars annually sold in North North America and only about a million sold in India (with much better fuel efficiency), it is not appropriate to comment on Tata. I would expect the Western companies to come up with this innovation since they have the Technology and more $$'s to be able to do this and then lead the World.


January 8, 2008 10:03 PM

You have probably not heard of the tie up between Tata and MDI ( to introduce clean compressed air engines, and of course the electric version of the new car is also expected.


January 8, 2008 10:33 PM

"If India and China follow the Western model in lifting their people out of poverty into the middle class, global warming can only become much worse. This may not be fair to Indians and Chinese but it is, alas, probably true" - So what do you suggest we do? Live poor, so the people who contributed to the Global warming so far can continue to do so? You would like to see the governments of India and China invest in public transportation and discourage their citizens from using cars, but the only thing the world's richest country can do is pass a bill requiring a 40% increase in fuel efficiency in 13 years (thats just over 3% a year, which will probably be achieved by incremental innovation). Dont you think the west will look credible if it follows what it preaches?

I wonder what kind of vehicle your drive and what the fuel economy is? (15 / 20 mpg?) and how many cars do you have in your household. Do you know that US with a mere population of 300 Million (4.6% of world population) consumes more than 25% of world's oil? The energy (not just oil, but energy in all forms) consumed by an average American is a whopping 15 times than an average Indian and 7 times an average chinese (source:

Bruce, I'm surprised you are worried about families trading off their 70-80 mpg motorcycle to 40 - 50 mpg cars? Where is your concern for their safety? If the cars are going (and it will, no doubt) to create traffic nightmares, we will (and we are) build highways and expressways and improve the quality of the roads. Isnt that supposed to be a good thing? I dont have the numbers but I would say probably 80-90% of the country uses public transport.

I cant help but wonder, why most people in the west points out (rightly so) that this will create more pollution, but cant see that they are the problem in the first place (and have been so for more than a century)? If you want to reduce Global Warming please trade in your gas guzzling SUV / Pickup trucks (if you have one) to a smaller sedan / convertible. It will be interesting to see what kind of car you own and how energy concious you are. I will be (and so will the Tatas) more than willing to take your suggestions when you ride the bus / train.



January 8, 2008 10:38 PM

I agree with Andrew. India and China are finally recovering after the brutal colonialism and now now this? The West needs to leave the East alone. After all, its the colonialism that caused this.


January 8, 2008 10:56 PM

I was shocked to read this article .How come anybody write such matter without knowing innovation. I think you need to do your home work before writing get the fact and one more thing you’re article and column title is way away from your writing.

Narasimha Kikkeri

January 8, 2008 11:13 PM

I agree with Bruce Nussbaum 100%
All Bruce trying to say here is Tata can be an innovative automobile manufacturer and leader for the 21 century to the entire world by providing the right technology with emission controls. As he pointed Indians companies don't need to follow US wrong policies and models especially in auto industry

I think we all know Indians are proud of Tata and it will make all Indians more Prouder if Tata name spreads across the globe as an innovative leader

I also some time think when I visit Bangalore every six months are so about what happens if every one start driving the car. On the other side the core problem is not with Tata the problem is with local corrupt Govt’s not putting effort to make the cities safer with better infrastructure.

Anyway Business week article a worth reading and to the point and interesting

Narasimha Kikkeri

You Need Re-Wiring

January 9, 2008 2:01 AM

Your way out of line in your views. The TATAS are world class socio-corporate philantrophists. I gues you ahvent seen world class TATA products and innovation to call Indian business frugal at one stroke. India & the east's growth is way more noble and less selfish than the west.


January 9, 2008 2:35 AM

The article makes a pretty strong point actually. Low-cost with an alternative cleaner power source would be a great way to approach it. Forget global warming - I am sick and tired of wheezing my way through the pollution in Pune. Tata should go further. The Japanese succeeded by defying the old paradigm that speed-cost-quality couldn't all be improved at the same time (the "engineer's triad"). If you improve two, the third had to get worse. With Kanban and other innovations, they solved for all three and created an amazing set of industrial powerhouses. Imagine cracking power consumption, clean emissions and cost simultaneously. It would be huge!


January 9, 2008 3:14 AM

I agree with everyone here. Before we point our fingers at others, how about introducing some public transportation to reduce vehicle dependence in our cities and yes doing away with all the fuel-inefficient SUVS?
Oh and talking of wastage, why don't our stores and super markets turn of their lights at night just like our counterparts in Asia and Europe do?

Before writing such articles please remember "not to throw stones at others, when your house is made of glass"

Siddharth Sethi

January 9, 2008 3:33 AM

Mr. Nussbaum

I so strongly wish that you and the rest of America had a more broad horizon of thinking. The statement that you make regarding carbon emissions and its relation with India and China is preposterous.

California is the car capital of the world. Can you name just one efficient means of public transport that this area can talk of? If everyone in the SF Bay area can take a car (mostly an SUV) to work, why can't poor Indian people ride 5 in a so called fuel inefficient car?

Why are Americans so self consumed about everything?

For the love of your country, please innovate to help the USA come out of the rut of having to get Indians to do the math for them and stop blaming the Indians for eating up Western jobs and the oil because we are not doing that. It is the incompetency here that is resulting in all of this. Had the US earlier innovated and gotten more fuel efficent cars, maybe oil would not have been an issue at all and maybe the Tatas would have not developed this car for the Indians.

Stop these suggestions. As the other comments on this article can tell you, you might want to reconsider your stand on this innovation.

Best regards,


Kumar Anshuman

January 9, 2008 4:46 AM

India has always been a pioneer in providing a new business model to the world. As the author rightly said, right from shampoo, eye surgery to telecom services, the country is always stunning the world with its path breaking innovations. I would like to assure the author that let India become a saturated automotive market. Undoubtedly, the talent pool will come up with energy efficient and environment friendly products.

Chat Mohan

January 9, 2008 6:37 AM

I am amazed at the reaction of many posters here. Why assume that the author is not advocating that developed countries should also reduce their oil and energy usage and carbon foot-print? He is making valid points and all he is saying is that an innovative company such as Tata can also come up with energy and pollution efficient innovations and be leaders for the rest of the world. Why get oversensitive invoking colonialism and anti-west rhetoric?


January 9, 2008 9:26 AM

Hat's up to TATA


January 9, 2008 9:55 AM

Hi Bruce,

Must commend the brilliantly biased view of the developed/developing country divide. A frickin' lawnmower is as powerful, if not more, than the Tata Small car.

Just have two words for you - Sod Off.

You need Re-Wiring

January 9, 2008 10:26 AM

Everything takes time, I think they have it all figured out and will evolve into all the stuff that needs to be done- Step-By-Step.

TATAS has some serious "green" auto projects coming around the bend, including the AIR CAR - runs on compressed air, with Guy Negre.
They also have hybrid versions and hydrogen prototypes in various stages of development.


January 9, 2008 10:31 AM

Your article makes a subconscious assumption that all people in this world are not equal. You or at the least most of your friends must be owning a car. It is unfair at best and discriminatory at worst to expect common people not to have a chance to own something that most people in west take for granted. It is a crime to expect 1/6th of humanity to continue subsistence living while the other 1/6th enjoys SUVs, Saunas, 24x7 Heating/Cooling!


January 9, 2008 11:35 AM

Bruce, how worried you are about global warming? How come you have never said anything against Americans using fuel guzzling SUV's? Do you suggest that Indians and Chinese remain poor so that the American's can drive their SUV's?

An average American consumes 7 times the resources than a Chinese or Indian.Is this information good enough for you to know who needs to really start doing something about global warming? I would suggest that GM and FORD shut down all their factories in Detroit and start using the people's car - what do you say?

Ravi Chimakurthy

January 9, 2008 3:08 PM

Absolutely - This is the right innovation! Someone has to be insane to think otherwise! I am glad that some company on earth is thinking and doing something about the bottom of the pyramid! They are people too and want to drive a car - Hello !!

Its quasi racist when someone says that this is going to increase global warming while Western world which had been driving Hummer like vehicles and misusing resources and environment all along has no right to speak!

Answer is simple - just ban all the bigger vehicles/SUVs in the western world and we can just compensate for these new co2 emissions - this looks like an easy thing for me to do.

India and China will make global warming everyones problem at an unimaginable rate including those in the west so stop ranting and do something on your own western shores before preaching!


January 10, 2008 7:13 AM

Here's a quote from Ratan Tata that should put all emissions concerns to rest:

"The car will meet all current safety nroms and all emission criteria. The pollution it will cause will be lower than 2-wheelers."


January 10, 2008 7:58 AM

Looks like it is curtains for Suzuki in India. This one has passed frontal, side and offset crash tests, which is more than the Suzuki death traps sold in India can say.


January 10, 2008 8:44 AM

Yet another politely worded exercise in racist doublespeak.

Ahh - yes, an Indian company introduces an imaginatively designed car that is twice or thrice as fuel-efficient as the cars (nay, mini-war-tanks) that traverse huge distances in the American suburban sprawl - but alas, Business Week's precious author is "oh so concerned" about global warming - because - oops - the family of four that makes do with an ultra-fuel efficient 2-wheeler might now drive this car.

Well, how about a few Americans (who are single or divorced) try riding a two-wheeler for global warming?

India has several ultra-fuel efficient brands on offer. And yes, I imagine that some might even pass the US safety norms and emission standards.


January 10, 2008 9:43 AM

India Rocks! We will see more such innovation out of India: by Indians, for Indians.


January 10, 2008 12:46 PM

sounds great! where can I find one?


January 10, 2008 1:21 PM

Where can I buy one? Ive had a trabant,citroen 2cv, and even a sinclair C5.....Getting from A to B is the name of the game, and on my pay a new car for $2,500 sounds just right.About time car manufacturers made cars for real people.....well done tata

Bright idea

January 10, 2008 2:12 PM

How about everyone in America junking their gas-guzzling monsters and buy EuroIII/IV compliant Tata Nanos instead? That should reduce global pollution by enough to let India and China pollute just a little bit more without causing any problems for future generations.

Anil Kumar Chitithoti Ongole

January 10, 2008 2:25 PM

I support to the statement that, One lakh car- tata nano is a true innovation by tata in India. It has put into limelite the indigenous capability of the developing country(India).The car is meeting the euro standards as well and is competant to all the small car range and a major hindrance for the two wheeler sale in India

Daniel Khoo

January 10, 2008 4:06 PM

Imagine this. A passenger ship has sunk. There are 1000 people in the water, but only 20 life boats. Each boat can hold 15 people. They swim for it, and many manage to climb into the boats. But there are not enough boats. The 20 boats can hold a maximum of 300 people. Before the ship sunk, they called for help. The rescuers will arrive in 2 hours, but nobody can tread water for that long. 700 people are going to drown. Unless ...

If 50 people tried to climb into each boat, all the boats will sink, and everybody will drown. But if we could get the 15 people already in the boat to climb out, then 50 people could just sort of cling to the side of the boats, using it for support to keep their head out of the water, until help arrives. The trouble is, how do you convince the people already in the boat to climb out?

Many countries already have 300 to 700 vehicles per 1000 people. India and China has about 5 to 10 vehicles per 1000 people. If India and China were to add 1 billion petrol burning vehicles in the next 10 years, we will all go to hell pretty quick. So far so good. I agree with Nussbaum up to here. But this is where we part company.

The solution is not that India and China should not get their 1 billion vehicles, where if they wanted these vehicles, they should develop environmentally friendly electric ones. While those who already have their polluting petrol burning cars get to keep enjoying them. The solution is not to freeze the status quo. This will be clearly unfair.

If the world can only support 50 vehicles per 1000 people, then everybody should have that same target. Those countries that are below that target should be allowed to build up to that target, but no further. Those who are already above the target must reduce. Many of us who already have vehicles must give them up. I very much doubt that this could be done voluntarily.

Girish Joshi

January 10, 2008 4:47 PM

Ratan Tata is an entreprenuer who has been able to understand the need of the hour ahead of others & have taken risk to invest in this project to offer value for money to masses. Tata NANO has forced entire auto industry into introspection & think how they remain relavent. It is just not about India, any such initiative is going to have Global ramification & it would not only change Auto Industry but whole lot of others as well. Essentially what Japanese could do in 70-80s, Indian are going to repeat it now.

Hats off to Tata for making this happen & hope this project unleashes new wave of innovation worldwide

N K Sahai

January 10, 2008 8:43 PM

Well done Tata Let others be jealous.He has done what Sanjay Gandhi wanted to do. All middle class people will thank him for enabling them to own a car like one in USA

Ron Wagner

January 10, 2008 9:38 PM

Congratulations to Tata, and to India. May it help lead the way to a better, more affordable world! We, in the West, are too controlled by big business which only cares to maximize profits. They , mostly, don't care about the poor person. They just want to sell more powerful and expensive cars that will go 140 miles per hour. 200 horsepower minimum. Just examine how they advertise power and sex appeal. Not economy. We need new laws to permit Tata's and other such vehicles on the road. We allow motorcycles, and bicycles, even without helmets. I won't be holding my breath though.

Sachin Panemangalore

January 10, 2008 10:38 PM

The Argument is pretty valid , however some parameters appear to be wrong.
The TATAs should not be blamed for making cars affordable, Its the government's job is to create infrastructure.

The NANO is a fantastic piece of techonology and sensibility.

We need more freeways throughout the country and within all metros atleast.
Currently Delhi is the only place in India which has freeways within the city. rest all have only expressways with signals.

Lets be real, innovation is required in infrastructure as well as public transport. This is the are which requires privatisation.


January 10, 2008 10:49 PM

Its true that it would be ideal if TATA would come up with vehicle with 0 carbon emmission - sounds si-fi even for cutting edge American/Japnese technology. However, if TATA were to realize that dream atleast first let them build a light-automotive platform, get some experience in ultra-efficient vehilce domain and then slowly extend it to bio-fuel/hydrogen etc - and thats exactly what Nano will help TATA achieve. What West has not been able to do 100 years after first car, how can they expect TATAs to do in their first go! There is no other option for India but not use carbon based fuels simply bacuse India is not self-sufficient in oil and cant depend upon the Arab world for oil indefinitely. So, just give India some time.
And BTW, how about if all cars in the West were to become as fuel efficient as Nano - naah, corporation wont let that happen... oil companies, automobile sector, auto-part conglomirates, dealerships will all gang up and kill any innovation of this sort, like they have alredy done many times in the past (GMs Electic car). And why not, profit margin on cheapest BMW car is $3000, more than the cost for Nano itslf! Who would give up those kind of juicy margins by themselves. At the end its the American consumers and mother earth who suffer most when deprived of ultra fuel efficient ultra light vehicles which also tend to be the cheapest with lowest profit margins. American consumers should wakeup and demand truly efficient and smaller vehicles - not a 20mpg SUV with the word HYBRID below the logo.

Gerald K. Thoma

January 11, 2008 12:54 AM

I want someone to E-Mail me and let me know how I can order one.


January 11, 2008 1:28 AM

Can I get one with leather seats and a "mega-huge" stereo speakers?

D Durga Prakash

January 11, 2008 7:55 AM

This is really amazing. For most of us we only know China is cost effective Manufacturing for Automobiles. Now with the Invenstion of Tatanano it is very clear that India is also started focusiing on cost effective Manufactruing apart of global cost effective services in IT & ITES Space. For us in Nprth America and Europe we should start looking at how to use this opportunity and get bets out of the possible global cost effective high quality manufacturing services coming from India. This is a new success NOKIA AND DELL's stories.

-D Durga Prakash
Bootstrap Technologies P Ltd


January 11, 2008 10:02 AM

The rhetoric used by those responding to Bruce's post highlights some of the difficulties presented by real, hard-fought design thinking. Having lived in India for about six months, I have observed that many Indians feel entitled to the same products and myths that Americans and others create and distribute. However, most Indians are entirely happy and indeed prefer the structure and modes of their current way of life. The myth that car culture is necessary for economic growth is stifling for many. In Bangalore where I live, the move towards car culture is creating dangerous situations for non-car commuters, an oppressive noise and breathing environment, and killing the trees, character and climate that makes Bangalore attractive.

India has a long and outstanding tradition of leapfrogging technologies (mobile technologies come to mind). India has implemented outstanding options for those that are just barely on the threshold of the money economy (take the largely effective train and bus systems as an example). The U.S. couldn't implement a high-speed train system if its future depended on it (which it does), and yet India has the infrastructure and social systems to create truly transformative technology and services like a world-class rail system. Ignoring the example of western countries is the best thing India could do for itself rather than follow the flawed models of Modernism.

Thinking in terms of the "the bottom of the pyramid" is wrong, especially for India. This so-called bottom is in reality the middle-class in India. The distribution is much more of an inverted diamond shape, with the tail of that distribution being those not involved in the money economy, that live in conflict, or that depend on institutional support. These are people that depend on their social networks rather than products and services offered by global corporations. This part of the distribution may not be as interesting for corporations as the "core of the diamond" or the middle class might be, but it does cause us to ask other questions. How can such offerings such as TATA's Nano car can help these non-economically enfranchised marginal populations enter the median sections? How does the addition of automobiles and automobile infrastructure help someone riding an Ox-cart or bicycle? How will the concentration on these kind of infrastructure improvements help the security guard that travels from Andhra Pradesh to Bangalore everyday by train?

When we think in terms of the "tip of the diamond" or those that are being excluded by offerings that fail to take these users into account, we start to think in terms of true innovation. This is the kind of innovation that will tap the core of global growth and serve as effective technological and social disruptions to the status quo. The Emerging Economy Report brings these concerns and trends to the forefront, capturing transformative strategies and a bold new approach to global marketing.

william cormeny

January 11, 2008 3:06 PM

I just saw how the Smart Car would cost $11,200 in the US. It is four feet shorter than the Mini and is powered by a three cylinder engine.
First,why can't dealers make money on the Smart Car.
Second,why doesn't Tata buy a bank in the US to finance sales of their vehicle and undercut these overpriced and over powered US and European vehicles?
Third, can the TATA come in a safety and clean version for another $1000?


January 16, 2008 5:23 AM

for more views on this issue , visit


June 26, 2008 4:46 AM

The USA has been very selfish for the past 40 years- Americans were buying gas guzling Camaro's Firebirds, Mustangs, etc. that had V8 engines producing 200-400 horsepower and more in the early 60's and 70's. They never care much for the environment and never thought about too seriously about helping it.

Then the 80's, 90's, and today brought us more elegant cars costing us 20 to 30 thousand dollars and we became a self centered country with nothing mattering more than power and fame. We needed to have bigger and nicer looking cars because of our image to our co-workers and we became infactuated with materialistic things.

At the same time, Japan became the car capital of the world and being a mass producer of their fine lines of Toyotas, Nissans, and Hondas. Still their employees were working hard while Japan also concentrated on electronics. They didn't have to worry about losing money because everybody was buying their products.

Now China and India have been major contributors in the textile industries and they have there eyes on breaking records by solving the energy crisis- Let us build cars that are fuel efficient, cheap, and takes us where we need to go.

Unfortunately Americans cannot see themselves buying these cars because they would rather pay $120 of gas a week in their 20 to 30 thousand dollar cars/suvs/trucks than to look silly.

We will pay the price now and our time has come to suffer!


September 24, 2008 4:55 AM

The “People’s Car” is also the cheapest in the world at 100,000 rupees. It is 3 metres long, seats four comfortably or five at a squeeze, does 65mph and aims to revolutionise travel for millions. The Nano, from Tata, the Indian conglomerate bidding for Jaguar and Land Rover.
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