Tata's Nano: High-end version to hit Europe

Just minutes after the unveiling of the Nano at the Geneva Motor Show, Prodrive boss and now CEO of Aston Martin David Richards pumped Tata Motors MD Ravi Kant’s hand warmly saying, "there are so many beautiful cars around but you guys have stolen the show." A visibly thrilled Kant replied, "Coming from you that’s a huge compliment."

The exchange continued, with some friendly asides about Jaguar Land Rover — "I understand we are soon to be neighbours," Mr Richards said so which Mr Kant replied, "We are trying very hard" — till the Tata official was pulled away by local media.

David Richards wasn’t the only global auto CEO to sit up and take notice of the Nano. Minutes before the unveiling, Fiat boss Luca de Montezemolo dropped into the Tata pavillion for some congratulatory words and a warm hug for Mr Tata. Of course, not all reactions were quite that cheer-leading.

Earlier in the morning, Honda Motor Company CEO Takeo Fukui answered questions on the Nano effect saying: "The Nano I don’t understand. The Jazz is the smallest car for Honda but we need smaller and cheaper vehicles for India in future. Of course ecology is important and safety is important too." Honda is already working on another small car to complement the Jazz in India in an effort to shore up its compact presence.

For the man of the moment though these bytes are just that...bytes. And he takes them with equanimity just like he did when the top names in the business dismissed the Nano project as a can’t be done. "It’s interesting that the auto majors are talking about better fuel efficiency," he said.

"A lot of these people said such a car could not be made in the first place."

The Nano’s Euro debut and the interest it has generated both in the industry and media will of course come in handy when the car actually goes to Europe.

At the unveiling, Mr Tata said that the top-end variant on display could find its way to Europe one day, though there’s nothing planned for now. "The Nano will address global markets in due course but when it will do so has not been decided."

And when it does, the Euro Nano will be a different animal even though design wise it would remain the same. "We will upgrade the car when we do decide to sell it in Europe or elsewhere—not the design but it will meet all the regulatory and legislative requirements," Mr Tata said. "The car for Europe and other developed markets will be an evolution of the current model. But that will happen only after we establish the product in India."

Mr Tata also indicated that if his capacity did not catch up with the demand for the Nano at home and abroad, he would be open to licencing arrangements with other auto companies. "If there’s demand we can’t meet, we will look at licenced production agreements but if we can meet that demand ourselves we will do so," Mr Tata said.

Apart from Europe, the Nano could also find a big market in Latin America. As for whether Fiat will be involved in marketing the car in Latin America where the Italian company has a large footprint, he said: "Everybody will wait for the car to come out first and then look at the business case."

Meanwhile, Tata Motors will use its satellite manufacturing concept to ramp up its distribution footprint for the Nano. "We intend to have satellite manufacturing units that would be low cost and these would be sold of entrepreneurs to them franchise manufacturers of the Nano," Mr Tata said. "This structure will not be in lieu of but in addition to our existing distribution system," he added.

The Nano’s Euro outing though will not position it very differently from what it is elsewhere. "We’ve made a commitment to develop products that can extended to markets beyond India and Nano too is part of that," Mr Tata said. "In Europe too the Nano will be a compliant vehicle at a never-made-available-before price point."

However the recent 4% cut in excise duty will not make the Nano sub-Rs 1 lakh. "We said we will give a Rs 1 lakh car and we will give a Rs 1 lakh car," Mr Tata said.

"To expect the Nano price to go down even further would be unfair. We didn’t raise prices when steel prices went up. Steel prices have started to firm up again and will pinch us further this year." The excise cut, he said, will "perhaps" help hold the Nano price to Rs 1 lakh.

Indeed the excise lolly was the only silver lining in an industry that’s readying for some really tough times, he said. That included lack of capital, high interest rates and creeping prices of inputs. "I was watching the news on the US auto market and it was so depressing I could barely drink my coffee," Mr Tata said. Any relief, whether on input costs or excise, will be a "contribution for a project whose costs have been pared down to the bone," he said.

For Tata though the headline hour was not just for the Nano. On the Jaguar-Land Rover deal, Mr Tata said: "These are two iconic brands. It wasn’t a hostile bid but an invitation to pursue and we are fortunate to be in this line of discussion with them. The plan would be to retain the image of these brand sand not hamper them anyway. If the deal is complete our ambition is to nurture and grow these brands through our support."

That’s right up Ford’s alley given that the American company trying to work out a repeat of its Aston Martin experience with JLR. Aston Martin’s engines were and continue to be made by Ford in a separate unit of its Cologne factory. In JLR’s case, the engine supply agreement was reportedly the most important point in the negotiations.

According to Ford sources, the reason why the deal has not been sewn up yet is because "the idea is to make sure everyone understands their obligations". Ford does not want to end its relationship with JLR once it is sold to Tata Motors. "It wants to retain long term relationship and make sure it is mutually beneficial for JLR, Ford and Tata Motors," said the source.

Clearly there’s more to David Richards’ banter with Bombay House brass than the Nano.