Inside the Tata Nano Factory

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The "Luxury" version of the car features fog lamps, power windows and A/C. Tata Motors

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The team spent a year developing 32 experimental variants to create the perfect driveshaft for the Nano. It roped in designers from the company's French and Italian operations and changed the design to make it lighter and easier to manufacture. For the Nano's rear-wheel drive system, GKN designed a smaller diameter of shaft, which made it lighter and saved on material costs. "We thought if we were successful in this, we could dictate terms to the market, and every other car manufacturer would want to work with us," says Rajendra Ojha, chief executive of GKN Driveline India.

Taking the Pulse of the Project

All the suppliers have similar stories. And although none would disclose specific cost savings, most stuck to Tata's mandate to cut costs. That was, as Kant acknowledges, the biggest hurdle for the company—"then, now, and in the future,"—particularly as the price of raw materials like steel have more than doubled in the past four years, and the company has to follow new, tighter industry regulations. Kant, who recently led negotiations to acquire luxury auto brand Jaguar Land Rover, has little time to get involved in day-to-day details of Tata's many projects. However, with the Nano, "every cost, every component price, has to be run by me," he says.

Coordinating the vendors with Tata Motors' team was a whole new exercise in logistics. Wagh quickly realized it was necessary to bring everyone on board, "else it leads to last-minute heartache and delays." Every morning, he would spend an hour or two on the floor of the Pune factory, insisting that everyone involved—designers, manufacturing teams, vendor development people—be there to accelerate decision-making and problem-solving. "We had to have the pulse of the project and know exactly where the hurdles were," Wagh remembers.

Over time, Wagh's team grew to comprise some 500 engineers, an impractically large group to gather on a daily basis. So instead, a core team of five engineers gathered every day at 3 p.m. to discuss the latest developments. Each engineer represented a different part of the car: engine and transmission, body, vehicle integration, safety and regulation, and industrial design.

Attention to Detail Pays Off

Fitting the parts of the car together required lots of little, head-breaking details, recalls Wagh. The engine, for instance, was designed three times. Initially, Wagh thought they'd buy an off-the-shelf engine and so studied all the small-capacity engines available. They were unsuitable, so in early 2005 he decided to build his own. The first was a 540 CC engine that, when fitted on the prototype, lacked the necessary power. So its capacity was increased by 9%, then by another 9%, before Wagh finally settled on a 623 CC engine. Then the foot pedal had to be realigned to create more legroom.

The body had to be changed because Ratan Tata, over six feet tall himself, wanted it to be easy for tall people to get in and out of the car. "Imagine the plight of the body designer—he went through hundreds of iterations, then at the last minute the car length was increased by 100 millimeters!" Wagh says. The attention to detail paid off: When the car rolled onto the dais at the Auto Show in New Delhi in January, and Ratan Tata stepped out of the driver's seat with ease, it made an immediate impact.

What shook the automobile world most was the fact that the designers seem to have done the impossible: The sleek, sophisticated Nano doesn't look flimsy or inexpensive. If it had been an upgraded scooter on four wheels, Tata still would have been applauded for making a family of four safer on Indian roads. The Nano, however, affords both safety and status. "The innovation wasn't in technology," Kant recalls. "It was in a mindset change." The Nano, he adds, has put an end to all discussions of having variants of scooters or quadricycles as passenger vehicles on India's roads.

Organizational Innovation

Still, the story of the Nano is not confined to its impact on the auto industry. It's a tale that illuminates the India of today—an eager, ambitious nation with a combination of engineering talent, a desire for low costs and value, and the hunger of young managers looking to break from a hidebound corporate environment. Indeed, the team that worked on the Nano—on average aged between 25 and 30—has helped to flatten Tata Motors' stodgy, multilayered management structure, which has resulted in an unexpected side-benefit Wagh calls "organizational innovation".

The factory in Singur, Bengal, is still being built, and machinery is being installed. Wagh now spends most of his time away from his Pune home, supervising the work at Singur leading up to the launch date in fall. Tata Motors is determined to succeed in its mission, Ravi Kant says. "We are hungry for growth—and innovation is a by-product of that."

Kripalani is BusinessWeek's India bureau chief.