betasam's Journal: Tata and the Indian One Lakh Car

Tata Motors India announced in 2004 a three year dream venture to create a 4-wheeler that would be priced at INR 1,00,000 which would be roughly USD 2,515. To do this, with most of the expert theories on how this could be achieved, Tata would actually have to sell this vehicle at a loss. I compare this to Reliance Communication's attempt to Mobile Telecom market share by price skimming. The largest market share in India for the 4-wheeler private vehicle is with Maruti Udyog Ltd., a collaboration with Suzuki, Japan.

Either which way, I don't see Tata gaining too much ground by hyping a product before any prototypes have been released in the field to get people believing. Over 3 years of hype, and no real product on the roads has made people start disbelieving in the venture. Most think its vaporware and possibly a cover for another project.

Clearly decreasing the cost of an automobile does not exactly provide a high volume market for cars in a country where the road infrastructure imposes strict limitations. Maruti's entire strength in the market is based on service coverage rather than just pricing and the availability of spare parts. In my opinion, companies started by visionaries like Tata (JRD) should think of public transportation as a larger problem that can be resolved differently.

Instead, gimmicks like a 1 Lakh car pull them low down into a sector they shouldn't really be looking into. Worse still their petrol engines haven't really shown them in good light. Their diesel versions are better, but that's just relativistic. I hope they revise the whole idea and come up with a concept car, a greener car or something of that sort rather than a "easily affordable" car. They shouldn't be reading Fortune at the Bottom of the Pyramid. That's not where they get their pickings anyway.