The tale of the creation and design of the world's cheapest car is one of innovation and ingenuity, both inside and outside Ratan Tata's organization

By Manjeet Kripalani

May 12, BusinessWeek

At Tata's Engineering Research Centre, near the bucolic surroundings of the Tata Motors (TTM) factory in Pune, a suburb of Bombay, there are two cars on display. One is a complete prototype of the Nano, the $2,500 compact car Tata unveiled in January, which has all the essentials and safety features of India's higher priced automobiles along with a sticker price that will forever change the economics of low-cost cars. The other is a neat bisection, with the car's innards clearly visible. "Every day we invite people to come and examine the car and ask: 'How can we make more savings?'" says Tata Motors Chief Executive Ravi Kant.

That quest to build the world's cheapest car hasn't ended. The Nano should be available this fall, but the mission began back in 2003, when Ratan Tata, chairman of Tata Motors and the $50 billion Tata conglomerate, set a challenge to build a "people's car." Tata gave an engineering team, led by 32-year-old star engineer Girish Wagh, three requirements for the new vehicle: It should be low-cost, adhere to regulatory requirements, and achieve performance targets such as fuel efficiency and acceleration capacity. The design team initially came up with a vehicle which had bars instead of doors and plastic flaps to keep out the monsoon rains. It was closer to a quadricycle than a car, and the first prototype, Wagh admits candidly, "lacked punch." Even a bigger engine, which boosted the power by nearly 20%, was still dismal. "It was an embarrassment," says Wagh.

But the failure was also the catalyst for Tata's decision to build a proper car, not an upgraded scooter on four wheels or anything flimsy or cheap-looking. "We didn't want an apology for a car," says Ravi Kant. "We were conscious of the fact that whether it was a $2,500 car or not, it ought not to have looked like a $2,500 car."

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photo: The Nano, nicknamed the "people's car", will cost $2,500 when it goes on sale later this year (Tata Motors)