Guldasta

A bouquet of flowers picked along the way ….

Jeh Jawan, Jeh Kissan, Jeh Aam Aadmi May 9, 2007

Filed under: Automobiles,Business Houses,India — gurdas @ :

So, Tata Motors is going to launch a Rs. One Lakh (1,00,000) car!
So, I don’t think it can be done.
So what even if it can be done?
So, it will be crap and nobody is going to buy it!
 

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So much skepticism!! Typical statements you hear when the subject of discussion is the upcoming Rs. 1-lakh car from Tata Motors. And I remember hearing similar stuff when Tata Motors announced they will launch India’s first indigenously designed car – now known as Indica. But that was in 1998. The rest is history.

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Indica is maybe still not very refined and the overall fit and finish looks like it needs some help. But, guess what, it is India’s second largest selling car model that happily has some 144,690  units rolling off every year! Which means, every single day close to 396 people in India buy an Indica. Some numbers, eh?

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And the Tatas have learnt a few tricks from their experience with Indica. To me that means if anybody can pull off the 1-lakh car, it is the Tatas. A view held by many others. In an ongoing poll on sify.com more than 85% people say Yes to the question “Do you think Tata’s will keep their word in bringing out the 1 Lakh car in 3 years?” 

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Before we talk of other stuff, here is what is more or less known about this ‘super’ car:
Engine: 600cc (to be very exact, 630cc), 2-cylinder, about 34bhp, rear fit.

Gearbox: Might have a CVT, i.e. no gear shifting required.
Capacity: 4 seater, and by India’s standards that automatically means 5-seater!
Looks: very cute
Price: Rs. 1,00,000/- ex-factory… boy oh boy!
Name: “Jeh”, after J.R.D. Tata. Might change. But I would love it be this.

So, what does that price mean? Let us consider an on-road price of Rs. 1,20,000/-.The down payment works out to just Rs. 18,000/-. The EMI for the remaining amount on a loan period of 7 years would come to less than Rs. 1700/-
Voila!!
Note: when you buy a second hand car, the loan duration is calculated as:
7 – years since manufacturing

For a Maruti 800 (in excellent condition), it must be model 2002 or before to be available at 1.2 Lakh. This means, at best a 2 year loan. And the interest rates for second hand cars are significantly higher than new vehicle rates.

Is this the kind of reasoning folks at Tata Motors would have fallen on to estimate the threat from Maruti 800. I do not know. Any caveats I left out? Please tell me. 

That said, the biggest threat to the market pie for this segment is likely to come from Suzuki, a company known for its superlative grasp of small car dynamics.

http://www.financialexpress.com/fe_full_story.php?content_id=148278    

Who is a potential customer? 

  1. I would say every two wheeler owner who is looking to buy a two-wheeler costing more than 48000/-
  2. Intra-city taxi services. This could be a surprise market. Never before have we had a car that is great economics for intra-city taxi services. With this car, your typical 8hr, 80km inside city slot might become available for 30% less than today’s rate. And for every 1 Indica, the taxi wallah can now buy 3 Jeh.
  3. The college going 20 year old whose parents earn 4+ Lakh/annum. You might see a sudden churning in gender based vehicle sales with rich parents wanting to give their daughters a car rather than a 2-wheeler.
  4. The ‘other’ vehicle in a family where one spouse travels more and has a bigger car, while the other spouse travels occasionally (or to short distances).

What the car MUST achieve to become a hit? 

  1. Cost close to 1Lakh for the entry version and below 1.2Lakh for the version with AC.
  2. Good fuel economy. If it gives 30kmpl, landslide sales are more or less guaranteed. Anything above 25kmpl will be acceptable. Fuel efficiency is the least known figure of this car and I believe will play an important role in deciding how much of a success it is.
  3. Cute looks. Remember the Volkswagen Beetle? Cute looks = Love. And when in love, people become blind to even obvious flaws. I have a strong hunch that the Beetle is the car the Tatas have in mind The 1955 ‘bug’ (the Beetle’s nickname) had a rear engine, top speed of 115kmph and 34 bhp engine. And if you were to say “that was in 1955”, just remember that the Maruti 800 even today produces only 37bhp. http://en.wikipedia.org/wiki/Volkswagen_Beetle
  4. Should not be visibly compromised in safety and finish.
  5. An advertising campaign that forces home the utility of a car vis-à-vis a 2-wheeler. Like showing the pain of carrying home vegetables and grocery from the market. Or taking 2 kids and your wife to the movie. Or taking your old parents to the hospital in a rickshaw. Or struggling to save your precious documents from getting wet on a rainy day. Or desperately wanting a bath simply because the car ahead of you created a dust storm (while you were on the way to office). Or having your kid catch pneumonia because you’ll got wet on the way back from school. Unlike ever before, this car’s campaign must persuade the target customer to take on a small economic burden to offset the daily pain of not having a car. Spend no time comparing this car with other cars. Just pitch it against top-end 2-wheelers. And maybe low end second hand cars. 
  6. Partnership with finance agencies to deliver an innovative scheme which will minimise the economic burden of the 2-wheeler buyer migrating upwards.
  7. Give a “in your face” warranty – like say 3 years. Might not be feasible due to cost concerns. But if this can be done, it gives a subtle and yet full message that says “listen, this car is good quality”.


What does NOT matter

  1. Any technical wizardry. Like how many bit processor, fuel injection or carburettor, how many cylinders or valves per cylinder, bhp, cc. Who cares?
  2. Top speed figures. If the car touches 100kmph with 4 people seated, it is enough. Period.

Possible impact? 

  1. A major addition to vehicular pollution levels. I hope the Tatas have done their homework here.
  2. Space crunch on the roads. The government might have to take some drastic measures. At 8 million per annum, the 2-wheeler market is huge. If just 5% of that converts to Jeh, you have a figure of 4,00,000 –  that is nearly 2 times the total passenger vehicle sales from Tata Motors!!.
  3. A definite change in mindset. Remember, in India, the car is still associated with luxury. If the average Indian suddenly has a car parked in his house, he/she is going to feel important, and more worthwhile. Who knows we might see a revolution in the very approach to life in India.

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I have purposefully taken some sweeping projections. I wanted to do that because it is important to estimate what is possible. Maybe Jeh does not achieve even half of this. Maybe it will do twice as more. But what really touches me and is the single biggest reason that makes me pray for its success is this – the average middle class Indian will be able to take his family of four for an outing without having to worry about safety, wind, sun or rain. I do not care much if the college going kid gets a car or the taxi wallah gets his taxis – they are just numbers. The real thing is that middle class Indian who deep inside his heart feels a pinch every time he gets onto his 2-wheeler, has his wife struggling to balance one kid on her lap while he perches the other kid on the petrol tank.In an interview that appeared in the English daily Telegraph, Mr. Ratan Tata voiced being inspired by a similar scene.

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Mr. Tata, I love Jeh the visionary, I love you, and I am already in love with Jeh the 1-lakh car.

Bring it on!.

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A quick background so that my piece is read with a pinch of salt. 

I was born and brought up in Jamshedpur – a city literally built by the Tatas. An amazing oasis in the desert of Bihar (now Jharkhand). And how wonderfully they have kept it! My father retired from Tata Motors after a stint of 39 years. And though I have never met any of the top brass at Tata Sons, my life and the lives of so many around me, have been touched by their corporate governance and social responsibility standards. One needs to visit Jamshedpur and its surrounding areas to see what the Tatas have achieved.

In India, they have no parallel.

To hear what Suhel Seth has to say about Jamshedpur and the Tatas, click

http://www.tata.com:80/tata_steel/media/20040505.htm 

Links that helped me gather information

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The 1-lakh car


http://www.forbes.com/free_forbes/2007/0416/070.html
http://www.rediff.com/money/2007/mar/30tata.htm (same article as above, easier to read)
http://www.blonnet.com/2007/03/07/stories/2007030706000100.htm
http://www.blonnet.com/2007/04/05/stories/2007040504260200.htm
http://news.moneycontrol.com/mccode/news/article/news_article.php?autono=279302

http://in.rediff.com/money/2005/aug/31tata1.htm 

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Car sales
http://economictimes.indiatimes.com/articleshow/1078296.cms
http://www.indica.co.za/tata_motors/releases/20060404.htm
http://www.tata.com/tata_motors/articles/20051011.htm
http://www.indiaprwire.com/pressrelease/auto/200703022091.htm
http://tata.com/tata_motors/releases/20060904.htm
http://www.tatamotors.com/our_world/press_releases.php?ID=297&action=Pull
http://www.thehindubusinessline.com/2005/04/09/stories/2005040901570200.htm
http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20070503%5CACQRTT200705030757RTTRADERUSEQUITY_0557.htm& .

2-wheeler sales

http://www.automobileindia.com/two-wheeler-statistics/sales.html .

Just for fun – some other concepts

http://www.dancewithshadows.com/one_lakh_car.asp

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7 Responses to “Jeh Jawan, Jeh Kissan, Jeh Aam Aadmi”

  1. Lost Nerd Says:

    JEH is such an appropriate name – small but iconic!

  2. MadV Says:

    You’ve a unique interesting way of writing. Let words flow from your mind and roll on the key board.

    Awesome! That’s all I’ve to say.

    BTW this post has covered all the aspects. Your research has really paid off.

    Take Care.

  3. gurdas Says:

    MadV,

    Thanks for stopping by and the generous compliments. I am glad the effort was worthwhile for you.

    In a recent post, the Tatas announced that the cost might inch a little above 1 Lakh. Thats OK and kinda expected keeping in mind the increasing cost of steel. I am eagerly waiting to see this car launched and what impact it will have on our country. A part of me strongly believes this car will go down in history as the car that broke shackles and liberated the middle class Indian.

  4. Deeps Says:

    Hi gurdas,
    Nice article. seems like you did your homework and wrote from your heart.
    but the dream of the indian middle class that you envisaged might turn out to be a nightmare.
    The infrastructure in the cities is crumbling as it is with the spurt in 4 wheeler sales in the past 3-4 years.
    with the introduction of the 1-lakh car as you said even if 5% of the motorcycle riders go for it, then we have a big problem buddy. Just imagine the lines of “Jeh’s” waiting at every traffic jams. places where 2 wheelers could snake around have to be navigated by 4 wheels.
    Another point to consider is no matter how fuel efficient they make the car its not gona be more fuel efficient than a bike. this is also going to increase the demand for oil in the country.
    The dreams shown by the Tatas have also cast a blanket of suspicion on whether the country is prepared for it yet?

  5. leo john Says:

    Very well researched and presented article on a topic where proper information is sparse and liable to be in accurate. Lets all hope for the sake of millions of two wheeler drivers who risk life and limb for themselves and families that the cheap car becomes a reality. The financing options will be critical and so will the reliability. If an impression is created that the tata i lakh car is a lemon, it will disappear without a trace, safety be damned. But if it is atleast as good as the indica, suzuki’s small cars will be in deep trouble. Even the Tata Magic as it stands today can turn the market on its head if they make it a bit more ergonomic and slik with proper windows/doors/seats at a slight cost increment. Congrats again for the excellent article.

  6. gurdas Says:

    Deeps,
    Is India prepared for an onslaught of 4-wheelers? NO WAY.
    Does that mean the car industry should apply brakes? NO WAY.

  7. gurdas Says:

    Leo,

    I believe the Tatas will position the car as a good buy, knowing well that any car buyer will not like to be told what he is buying is cheap. Indica suffered from bad mouthing (largely true) and went on to recover, get complete grip on a niche market (taxis) and prove all doomsday soothsayers wrong.
    Had Jeh come before Indica, I would have been more sceptical. But with Tatas having learned the ropes with Indica, Jeh seems to have a good chance at success.


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