Tata team seeks ways to keep Nano at Rs 1 lakh

Tata Motors has set up a separate team at its plant in Pune to examine ways to cut manufacturing costs on the Nano, the small car scheduled for an October launch, to bring the ex-showroom price down to the psychological Rs 1 lakh mark, Managing Director Ravi Kant said today.

At present, the Nano's ex-factory price is Rs 1 lakh, making it the world's cheapest car. Transport costs and value-added tax, however, put the ex-showroom price at Rs 1.2 lakh to Rs 1.3 lakh.

Kant declined to elaborate how the price reductions would be effected. Experts believe the company will either look at better price negotiations with component suppliers or through very minor re-engineering on the basic model.

Tata Motors has been able to reduce the cost of the car by making things smaller and lighter, doing away with superficial parts and changing material wherever possible.

For instance, the 623 cc petrol engine was made of aluminium instead of cast iron, saving weight and cost. The engine has also been placed at the rear of the car, putting less pressure on steering systems.

"We haven't taken a call on any price cut on the Nano, the launch date of the car is still far away and something might be planned by then," a company official said.

Kant said the company had received lakhs of enquiries through the internet for the Nano. "The response has been overwhelming so far."

The surge in pre-launch demand had prompted Chairman Ratan Tata to state that the company is open to licensing the Nano design to other automakers for manufacturing.

This move by the company, analyst believe, will help Tata Motors achieve economies of scale, thereby reducing the time lag of delivery of the car.

Tata Motors intends to open bookings for the car three months from now.

The company plans to produce 2,50,000 Nanos in the first phase and add 1,00,000 in the second phase, taking production capacity to 3,50,000 cars probably by the end of the next financial year.