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India's Tata Motors unveils $2,500 car

NEW DELHI - For millions of people in the developing world, Tata Motors' new $2,500 four-door subcompact - the world's cheapest car - may yield a transportation revolution as big as Henry Ford's Model T.

The potential impact of Tata's Nano has given environmentalists nightmares, with visions of the tiny cars clogging India's already-choked roads and collectively spewing millions of tons of carbon dioxide into the air.

Industry analysts, however, say the car may soon deliver to India and the rest of the developing world unprecedented mobility.

'It is a potentially gigantic development if it delivers what has been promised,' said John Casesa, managing partner for the Casesa Shapiro Group, a New York-based auto industry financial advisory firm.

'I think there is immense unmet demand for a vehicle of this type, because it effectively eliminates the great leap currently required to go from a two-wheel to a four-wheel vehicle,' Casesa said. 'They are creating something that has never existed before, the utility of a car with the affordability of a motorcycle.'

The basic model, expected to roll off assembly lines later this year, will sell for 100,000 rupees, or about $2,500, but analysts estimate customers could pay 20 percent to 30 percent more to cover taxes, delivery and other charges.

Company chairman Ratan Tata, who introduced the new car at India's main auto show, has long promised a $2,500 'People's Car' for India - a country of some 1.1 billion where only seven of every 1,000 people own a car. That vow has been much-derided by the global industry which said it would be impossible without sacrificing safety and quality.

'A promise is a promise,' Tata told the crowd after driving onstage stage in a white, luxury edition Nano, his head nearly touching the roof. Four company executives emerged from another. Tata says the Nano can seat five.

The company will not say how the price was kept so low on the basic version and won't say how much the luxury Nano will cost until it hits showrooms toward the end of this year. The company also refused to let reporters sit in the car, let alone drive it.

But the basic version is austere: There's no radio, passenger-side mirror, central locking or power steering, and only one windshield wiper. Air conditioning that would spare motorists the brutal Indian summer is available only in deluxe models.

The little car, with its snub nose, sloping roof and slightly bulbous rear, makes it look like another Indian icon - the mango.

The Nano's appeal, though, is not its pedigree but its price - targeting people moving up from the lower ends of India's transportation spectrum, where two-wheeled scooters selling for as little as $900 are often crammed with entire families.

The Nano's closest competitor is the Maruti 800, a four-door selling for nearly twice as much.

In terms of performance, it doesn't offer much more than the Model T. The Nano has a two-cylinder 0.6-liter gasoline engine with 33 horsepower, giving it a top speed of about 60 mph, according to Tata. It gets 50 miles per gallon.

The Model T cost $850 when it debuted in 1908, comparable to about $19,000 in 2006, according to an aggregate of Consumer Price Index figures. And the Nano bests the Model T's 20-horsepower, four-cylinder engine, which topped out at 45 mph. Ford's car got between 13 and 21 miles per gallon, which is still better than a Hummer.

Analysts believe the Nano could transform the auto industry, forcing manufacturers to lower prices and perhaps find cheaper ways to sell cars than in sprawling showrooms. French auto maker Renault SA and its Japanese partner, Nissan Motor Co., are trying to find ways to sell a compact car for less than $3,000.

'Most of the other carmakers are watching this development very closely,' said S. Ramnath, an auto analyst at Mumbai-based brokerage firm SSK Securities Ltd.

For now, the car will be sold only in India, but Tata said it hopes to export it to developing nations across Asia, Latin America and Africa in two or three years.

Tata initially plans to manufacture some 250,000 Nanos per year. That would be about a quarter of all cars sold in India last year.

The emergence of the Nano has fueled a host of concerns.

With developing countries like India and China putting more and more cars on the roads, it has created a greater demand for fuel, contributing to sky-high global oil prices. India consumed nearly 120 million tons of petroleum products in 2006-2007, according to the Petroleum Ministry, up from 113 million tons the previous year.

And the idea of such a low-cost vehicle has environmentalists petrified, conjuring images of traffic jams at midnight, hours-long commutes and rolling clouds of pollution.

Chief United Nations climate scientist Rajendra Pachauri, who shared last year's Nobel Peace Prize, said last month 'I am having nightmares' about the car.

'Dr. Pachauri need not have nightmares,' Tata said at the unveiling, promising the Nano met all current Indian emission standards.

Girish Wagh, who headed the design team, said the car has an oxidation catalytic convertor that emits 120 grams of carbon dioxide per kilometer (about 7 ounces per mile).

Tata's promises have not reassured everybody.

'If you're talking about urban environment, it will cause serious problems,' said Jamie Leather, a transport specialist with the Asian Development Bank. 'The cheaper and cheaper vehicles become, the quicker those pollution levels will increase.'