The automobile industry believes that it will be very difficult for Ratan Tata to deliver a car with a price tag of Rs 1 lakh (Rs 100,000).
This was the broad consensus that emerged from a dipstick survey that Business Standard conducted among senior executives in car companies like Maruti Udyog, Ford India, GM India and Fiat India as well as among car dealers and auto-analysts.
Tata had said in Geneva recently that Tata Engineering is working on a car which will cost Rs 1 lakh without being subsidised by other products of the company. He had said that the car would be ready in five years.
Auto analysts argue that with taxes accounting for almost half a car's ex-factory cost, Tata will have to produce a car within Rs 70,000 for it to be priced at Rs 1 lakh in the market.
At present, they say, it is not possible to make a car for less than Rs 1.5 lakh (Rs 150,000) and costs will only increase over the next five years.
Jagdish Khattar, managing director of Maruti Udyog, the country's largest car-maker, said India's cheapest car, the Maruti 800, is produced at an ex-factory price close to Rs 1.2 lakh. "But if Euro III or IV [emission] norms or new safety standards are introduced, our cost calculations will go for a six. In any case, even at today's standards, I cannot produce another car at the cost of the 800," he said.
Most industry observers feel that such a low-priced product will call for a new definition of a car. "We need to ask ourselves, what is a car," said KPMG UK automotive group head Michael A Bacon.
Added Khattar, "We'll be watching with great interest, because if he can do it, it will be great for the country. But what we have to see is whether this will be a car in the sense that we understand it today."
Indeed, component manufacturer Sona Steering's chairman Surinder Kapur, however, thinks Tata's aim is "absolutely achievable." He suggests that the car could be based on a three-wheeler kind of engine of, say, 600 cc capacity.
Kapur cited the example of Suzuki, which graduated from a two-wheeler company to a producer of low-cost cars by leveraging the strength of its cheap components.
Still others believe that the claim needs to be taken seriously since it has been made by Tata. "I am sure he must be working on something. His remarks need to be taken very seriously," said Raghuptai Singhania, managing director of tyre producer J K Industries.