Nano reinforces India's claim as small car hub: CRISIL

The launch of Tata Nano, the world's cheapest car, has enhanced India's position as a small car manufacturing hub and can potentially expand the domestic car market, according to CRISIL Research.

Nevertheless, scaling up challenges is expected to be humungous. With the on-road price to the customer estimated at Rs1.2 lakh (approximately $2,300), the Tata Nano will enhance India's position as a highly cost competitive manufacturing hub for small cars.

Alternative low cost car models launched worldwide in the past two years have been priced at least 50-per cent higher than the price of the Nano.

According to CRISIL Research estimates, the new price point reduces the cost of ownership of an entry level car in India by 30 per cent, and to below three times the cost of owning a motorcycle. This will make the car affordable to an additional 14 million families, including a section of the 58 million two-wheeler owners.

India has been gaining significance as a small car manufacturing hub with small car exports of 0.3million in 2008-09. Small car exports have grown at a CAGR of 21 per cent during the last five years and are expected to more than double by 2013-14.

 This growth has been enabled by increasing manufacturing competitiveness across the board, driven by continuous improvement in quality andproductivity. For instance, the time required to manufacture a vehicle at Maruti Suzuki has halved between 2001-02 to 2007-08.