Only 10 years since it unveiled its first car, India's Tata Motors will tomorrow unveil a new 100,000 rupee model (€1,700), less than half the price of the cheapest car on the Indian market at present.
Dubbed the "People's Car", it will determine Tata's place in the global motoring arena, where the battle is increasingly being fought in countries such as India, China and Russia.
The new model, using re-engineered plastics and modern adhesives, is a far cry from the premium Jaguar and Land Rover brands Tata is negotiating to acquire from Ford.
Tata's drive to produce a cheap, no-nonsense, small car was born from close observation of a local market where millions often ferry families of four, plus baggage, on motorbikes and scooters.
Critics initially derided Tata's plans, but global car makers have taken note and are scurrying for their own versions to meet growing environmental and cost concerns.
The People's Car hits the market at a time when oil prices are near $100 (€67.95) a barrel, a move to fuel-efficient "green" cars is gaining momentum, and drivers wallow in nostalgia with the revival of the Fiat 500 and BMW's Mini.
In Italy, the cheap and efficient Fiat 500 replaced the scooter for millions of people, and its 2007 relaunch won a warm response. "Small cars have always been popular in India, even when oil prices were low," said Ashvin Chotai, an Asian car industry analyst based in London.
"Globally, higher oil prices are accelerating a shift towards compact and small cars, and regulatory developments . . . and congestion and parking constraints are reinforcing it," he said, adding this was not a short-lived fad.
But environmentalists worry that a car so cheap could be more damaging, adding more pollution and increasing India's dependence on oil imports.
Anumita Roychoudhury, at the Centre for Science and Environment in New Delhi, has said the shift to greater car ownership could be a "timebomb ticking away". "When you lower the price that drastically, how will you be able to meet safety and emissions standards? It's just not sustainable, whether from an environmental point of view or in terms of congestion," she said.
Tata has said the four-seater People's Car will have a 600cc engine and will have an initial production run of 250,000 units. It expects eventual annual demand of one million cars.
With car ownership in India at just eight per 1,000, there is huge potential to upgrade two-wheeler owners, who bought about seven million bikes and scooters in 2006/07.
An entry-level motorbike costs 35,000-40,000 rupees (€600-€700).
"If the vehicle concept can't work in India, it's extremely unlikely to work in any other part of the world," said Chotai.
- Reuters
Pros and cons of Tata that could change the transport scene in India
- Tipping the ratio from scooters to cars, and so improving public safety on India's crowded and sometimes chaotic roads, was one rationale for creating the People's Car, according to Ratan Tata, the company's 70-year-old chairman. "That's what drove me - a man on a two-wheeler with a child standing in front, his wife sitting behind, then add to that the wet roads - [ it is] a family in potential danger," Tata wrote on the company website.
- Retailing for 100,000 rupees (€1,700), Tata's rear-engine, four-seater is expected to put automotive ownership within the grasp of the millions of young families who make up the country's aspirational middle class. At that price, it will cost less than half the cheapest car on the market now, the mini Maruti 800, and more than double an entry-level 100cc motorbike.
- Environmentalists worry that a car so cheap could lead millions down what they see as the wrong road, with soaring car ownership damaging the environment and locking India into greater dependence on oil. India imports 70 per cent of its crude oil.
- Indian climate change expert RK Pachauri, chairman of the Intergovernmental Panel on Climate Change, says the car is giving him "nightmares".