How Tata has built a car that costs less than a motorbike

21st February 2013

Consumers are familiar with the price of electronic products falling, whether it is digital cameras, wide-screen televisions or DVD playersand even passenger cars have reduced in price in real terms over the past decade.

But January’s launch in India of the Tata Nano car, priced at just 100000 rupees (around E1720), has come as a shock to many people.

Everyone appreciates that labour costs are lower in India than in Europe, but material costs are similar. How can a car cost less than we are used to paying for good quality motor scooters here in Europe?

When the Nano was unveiled the senior managers from Tata made it clear that this is a ‘proper’ four-door family car, not a motorised quadricycle or four-wheeled moped. Given that the two-seater Smart Fortwo costs around E9000, it is worth taking a closer look at the Nano to see how it has been designed so as to achieve such a low showroom price.

First, however, Tata acknowledges that there is really no profit margin on the base model; profits will come from customers specifying the deluxe models with air conditioning, electric windows, colour-coded bumpers and other options. And this highlights one way in which the Nano costs have been held down – the standard model is very basic by modern standards. Nonetheless, care has been taken to ensure that the car has adequate performance, meets current emissions standards (EuroIV), is fuel-efficient (20km/litre) and is safe thanks to crumple zones, intrusion-resistant doors, seat belts and other features.

Indeed, the Nano will inevitably be considerably safer than the popular mode of family transport in India today, consisting of a motorbike or scooter with the father driving, his child standing in front, and the mother seated behind, holding a baby.

Furthermore, the Nano is better suited to all-weather journeys and is a genuinely affordable alternative for many people.

Family car

Tata has launched the Nano as a family car for four or five people, but the company concedes that the Nano is no limousine, with its dimensions of 3.1m long by 1.5m wide and 1.6m high. Once again, though, the compact dimensions help to keep costs down, as the smaller the vehicle is, the fewer materials are required for its construction.

A small, lightweight car can also be fitted with a smaller, lighter engine. In the Nano’s case, the 624.6cc, 33PS, 48Nm twin-cylinder aluminium engine is mounted transversely under the rear seats, ahead of the rear axle line and mated directly with the four-speed transaxle.

No common components

Because the Nano was being designed to be such a low-budget car, all components had to be designed from scratch, with nothing carried over from Tata’s other vehicles.

Furthermore, this clean-sheet-of-paper approach enabled the company to use production technologies that were appropriate to the Nano’s specification and projected volumes. For example, it is reported that hydroforming is being used for tubular structures, and rollforming is being used in place of stamping. Other design features have contributed to the reduced weight, such as a ribbed roof that adds stiffness and enables thinner steel to be used.

Elsewhere on the car, great care has been taken to minimise tooling and production costs. One small example of this is similar handles and mechanisms for the left- and right-side doors. In preparation for exporting the Nano, it has also been designed with a central instrument binnacle instead of mounting the instruments in front of the driver – which is a concept seen on other ‘people’s cars’ such as the Morris Minor and Morris/Austin Mini around half a century ago.

Girish Wagh headed the team of almost 500 people that developed the Nano over a four-year period. And although some of the vehicle’s production processes may seem ‘low-technology’ when compared with the heavily automated plants found in Western Europe, a great deal of digital analysis was carried out during the design and development phases of the project.

In addition, Tata empowered and encouraged everyone in the company to contribute ideas and suggestions, on the basis that collective thinking – and a vast pool of common sense – would benefit the design and engineering, as well as helping to save costs.

Where particular expertise was deemed essential to the success of the project, Tata used leading suppliers as development partners, such as GKN for the drive shafts and Bosch for the multi-point fuelling system and electronic engine management system.

High volumes are an important element in low-cost products, and Tata wants to build one million Nanos per year.

However, a conventional plant to build such high volumes would require a substantial investment, so Tata has looked at a distributed manufacturing model, in which entrepreneurs can establish manufacturing facilities based on Tata’s low-cost manufacturing unit that offers a low break-even point.

Nonetheless, Tata has constructed a new factory in Singur, and many of the suppliers are establishing their own facilities in an adjacent vendor park. It has been reported that around 90 per cent of the car’s components will be outsourced, with some 75percent coming from single-source suppliers that have received long-term contracts and high-volume commitments in exchange for even lower component prices.
Similarly, unconventional servicing concepts have been investigated, such as training self-employed people who can be certified by Tata to perform servicing at the customer’s premises.

A dream comes true

The Tata Nano is the type of project that stems from one person’s vision, and the Nano is the brainchild of Ratan Tata, the company chairman. Originally he wanted to create a ‘people’s car’ as a safer, all-weather alternative to two-wheelers for families of four or five. Mass transport in India is either not available or of poor quality, and the nations improving economic climate means that there is a market for a low-cost car. The first ideas centred on a low-end ‘rural’ car with plastic roll-down curtains instead of doors and windows. However, as the project progressed, it became clear that the market would respond better to a low-cost version of a conventional car.

Something else that changed during the design phase was the choice of materials and production processes. For example, high-technology engineering plastics and adhesives were abandoned in favour of welded steel, as the high-volume production targets meant that waiting for adhesives to cure was impractical.

For several years the Nano has been talked about as a 100,000 rupee car, and this figure is one aspect of the project that has not changed. Ratan Tata says that the figure of 100,000 rupees was first quoted in an interview with him in the UK’s Financial Times. Although he had only said that the car would cost in the region of 100,000 rupees, he decided to adopt that figure as a target price.

Over the intervening years, this has been increasingly challenging due to inflation and rising costs of raw materials such as steel.

Nevertheless, the Nano was launched on 10th January 2008 and Ratan Tata said the Nano will be on sale later in 2008 for 100000 rupees plus value-added tax and delivery charges.

A European approach

The most popular European low-cost car is the two-seater Smart, but its price is four to five times higher than that of the Nano. While the two cars are similar in some respects, they are far apart in more ways than price. Smart’s philosophy is to offer a compact, safe, clean, economical yet fun vehicle primarily for transporting one or two people around urban areas. No doubt the Smart Fortwo has been the subject of considerable value engineering to reduce the manufacturing and assembly costs, but not to the same extremes as seen in the Tata Nano.

Furthermore, Smart cars are available with a wider range of powertrains, with a particular emphasis on fuel economy and exhaust emissions (but note that Tata plans to introduce alternatives engines and transmissions for the Nano in the future).

The Smart micro hybrid drive (MHD) is based on a conventional 71PS petrol engine with an automated manual five-speed gearbox. However, the starter motor and alternator are replaced by a belt-driven combined starter-generator unit to serve the car's fuel-saving start-stop function.

When the driver brakes and the speed falls below 8km/h, the engine is automatically switched off. As soon as the driver’s foot comes off the brake pedal, the engine restarts, first gear is selected and the car can be driven off – all without any noticeable delay.

Fuel savings are said to be 8percent in the New European Driving Cycle (NEDC), giving 4.3litres per 100km. Carbon dioxide emissions are reduced by a similar percentage to 103g/km. In city traffic, fuel savings can be as high as 19 per cent.

For drivers wanting a ‘zero emissions’ vehicle, Smart is trialling an electric drive (ED) version of the Fortwo in Paris and London during 2008, with a view to this variant entering series production in 2009. With fully charged batteries – which takes around eight hours – the Smart ED can travel approximately 115km in the Extra Urban Driving Cycle (EUDC). An 80percent charge is possible in four hours and it is claimed that the battery will last for 10 years.

The Smart ED’s 0-60km/h acceleration time of 5.7 s is similar to that available from the petrol variants, despite the electric motor’s power output being much lower at 41PS (30kW).

Many drivers will also be attracted to the Smart ED because they can enjoy tax advantages and additional benefits such as exemption from road charging schemes. Although the carbon dioxide emissions are quoted as being zero, it has to be remembered that much of Europe’s electricity is generated in power stations that emit carbon dioxide and other pollutants.

With the two cars aimed at very different markets, it is not surprising that the Tata Nano and Smart Fortwo have little in common beyond their compact dimensions. Nevertheless, the remarkably low showroom price of the Tata Nano does suggest that Western automotive manufacturers could probably reduce the price of their vehicles considerably if they were able to devote resources to that, instead of working towards higher specifications than their competitors, and striving to meet ever-stricter safety and environmental targets imposed by politicians.

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