The Man Behind the $2,500 Car

Four years ago Tata Motors embarked on an ambitious project to bring millions of people in India and elsewhere into the car-owning class. Today Chairman Ratan Tata unveiled the result: the Nano, a stripped down car with a 624 cc four-stroke engine that can seat four passengers. The car is a feat of engineering-it's made from plastic parts held together with adhesives-and meets all India's environment standards. Partly because of the visibility of the project, the Nano has become a lightening rod for criticism on the environmental impact of cars. Tata talked with NEWSWEEK's Jason Overdorf at the Delhi Auto Expo on the eve of the announcement. Excerpts:

NEWSWEEK:  Some people have said this car is going to be a disaster for the environment. What impact will the introduction of these vehicles have on pollution levels in India?
Ratan Tata: Our car will meet all emissions requirements in India and in fact the emissions requirements overseas, present and future. Our engine today will meet Euro 3 [emissions standards] today and with small tweaking will meet Euro 4. It will therefore meet all the specifications of emissions that exist in India. We will emit less pollutants than the best two-wheelers in the country. I don't mean per passenger mile or anything. I mean per vehicle. So I am both amused and intrigued by why we are being panned as an environmental disaster before anyone even knows. And in fact the major NGO that's making much of the noise [the Center for Science and the Environment] already knows because I responded to them in great detail with what our numbers were. That appears to have been ignored.

One other point you made is that the sales numbers are not going to be so huge initially, right?
We're building a plant for 250,000 [cars]. It will be expandable to 300,000, and if you mirrored it that would be 500 or 600,000. It would be a challenge to get vendors and a whole infrastructure in place that would enable us to just endlessly build cars, apart from the resources that would be required. So if somebody thinks that we will be putting 2 million cars or 4 million cars into the market, I think that's a bit absurd. Today, with 4, 2 and 3-wheelers, every year [India adds] about 7 million [vehicles] in the market. [India] produced 1.4 million passenger cars last year, so it's kind of flat. What would this car do? Would it sit on top of that by adding 2 and 3 and 4 million? Would it wipe out everybody else? Would we produce and sell 7 million cars? No. It's reasonable to assume that we might be looking at in the next four to five years, maybe a half a million cars, which would be a very good number. No single platform would have that kind of number. What would half a million cars be as a part of an annual production that at that time, with 2-wheelers, 3-wheelers and 4-wheelers, might be 12 to 15 million vehicles? I don't see what the concern is, unless people are seeing ghosts.

I just want to raise one other thing. The noise is being raised by people who are doing nothing about pollution in a holistic manner. Nobody is doing anything about the total population and pollution from two-wheelers, from power stations, from generators. All of this has to be viewed together if one is truly worried about the environment. There are two scooter plants being established today-Honda and Suzuki-each one has about 250,000 unit capacity when they come online. They're not said to be polluting, they're not said to be congesting, they're not said to be unsafe. It's only us.

The other big question for everyone is how you brought down costs so dramatically. Is there a shortlist of two or three big innovations you made to cut costs?
When you start an exercise like this you dimension your product, and we dimensioned the size of our product. When you shrink the size of the product you obviously reduce the amount of material and material is the largest single element in [the cost of] a product. Then there are hundreds of innovative ideas that have brought the price down, or have in fact generated the kind of low costs that we have developed. And there are more on the anvil that will come from vendors, and not all of them will be based on volume.

Are there any that have the potential to change the way the traditional big guns in the auto industry are making cars?
The whole process of putting a car together perhaps needs to change by welding going to adhesives at some point in time. [Among] the most expensive parts of an assembly process are the paint shop and the press shop, so [global manufacturers will move to] materials that will lower the [capital investment] and operating costs [for] those types of units.