There was the $400 airplane seat that plummeted to $40. Then there was the $2,000 laptop reborn for $200. And now the $25,000 car has a $2,500 cousin.

Every now and again in business history, a disruption comes along that breaks the conventional wisdom about cost, tweaking and paring features once thought untouchable.

Likewise, the $2,500 car, introduced last week by the Indian company Tata, swims against the current, with a rear-mounted engine, a trunk that fits little more than a briefcase, and plastics and adhesives replacing metal and bolts in certain nooks.

In a moment of drama and some suspense, Tata Group chairperson Ratan Tata personally drove the car — which it calls 'Nano' — at the launch of the eight-day Auto Expo that began in New Delhi last week.

But the still-untold story of how the Tata car was built is less about big-bang innovations than about a long string of $20 trims: a steering-wheel shaft rendered hollow here, a small headlight leveler removed there, the use of an analog speedometer less accurate than its digital equivalent.

Nano has a 33 horsepower 624 cc engine and can accommodate four-five people.
The car is thus a triumph, not of one great invention but of a new engineering philosophy rising out of the developing world, with potential to change how cars everywhere are made, industry experts say. Just as Japan popularized kanban (just in time) and kaizen (continuous improvement), so Tata may export to the world what can perhaps be called "Gandhi engineering" — a mantra that combines irreverence toward established ways with a scarcity mentality that spurns superfluities.

"It's basically throwing out everything the auto industry had thought about cost structures in the past and taking out a clean sheet of paper and asking, 'What's possible?' " Daryl Rolley, the head of North American and Asian operations for Ariba, which provides parts for Tata and other auto makers like BMW and Toyota, told the International Herald Tribune.
"In the next 5 to 10 years, the whole auto industry is going to be flipped upside-down."

Low-cost cars are already having global impact. Tata's move, announced in 2004, has already inspired two rivals to plan their own ultracheap cars: the French-Japanese alliance Renault-Nissan and the Indian-Japanese joint venture Maruti Suzuki. Meanwhile, struggling Western automakers are increasingly borrowing from the cost-obsessed ethos of the developing world.

Yet it is unclear whether the Tata car itself, so small and wispy and lacking the most cutting-edge emissions and safety technologies, will ever drive a Western road — or whether it can sell briskly enough at home to reap a profit.

The "People's Car," so called in homage to Volkswagen's Beetle and Ford's Model T, is a carefully guarded secret. The company refuses to provide details of how it was built, and it has signed legal agreements with suppliers not to divulge details. But as the debut date approached, a handful of suppliers broke their silence to offer an early, impressionistic picture of how the automobile, a machine invented by a 19th-century German, is being propelled by 21st-century Indians across a new frontier — to cost as little as the optional DVD player on the Lexus LX470 sport utility vehicle.

The handful of people who got a sneak peak at the car describe a tiny, charming, four-door, five-seat hatchback shaped like a jellybean, tiny in the front and broad in the back, the better to reduce wind resistance and permit a cheaper engine.

"It's a nice car — cute," said A.K. Chaturvedi, senior vice president for business development at Lumax Industries, a supplier in Delhi that developed the headlights and interior lamps for the car.

Driving the cost-cutting were Tata's engineers, who in an earlier project questioned whether their trucks really needed all four brake pads or could make do with three. As they built the People's Car, for about half the price of the next-cheapest Indian alternative, their guiding philosophy appears to have been one question: Do we really need that?

The debut model has no radio, no power steering, no power windows, no air conditioning, and one windshield wiper instead of two. Bucking prevailing habits, the car lacks a tachometer and uses an analog rather than digital speedometer, according to Ashok Taneja, who until recently was president of the Automotive Component Manufacturers Association of India, representing many of Tata's suppliers as they signed deals with the company.

The frugal method also pervades the car's internal machinery, invisible to consumers but perhaps with even greater implications for the vehicle's safety and longevity.

To save just $10, Tata engineers redesigned the suspension to eliminate actuators in the headlights, the levelers that adjust the angle of the beam depending on how the car is loaded, according to Chaturvedi of Lumax. In lieu of the solid steel beam that typically connects steering wheels to axles, one supplier, Sona Koyo Steering Systems, used a hollow tube, said Kiran Deshmukh, the Delhi company's chief operating officer.

The car's cheapness could come at the cost of longevity.

For example, Tata chose wheel bearings that are strong enough to drive the car up to 70 kilometers, or 45 miles, an hour, but will suffer wear and tear above that speed, reducing the car's life span but never threatening consumer safety, according to Taneja.
"When I need silver," he said, "why am I investing in gold?"

Tata's focus on reducing the weight curbed material costs and also permitted a cheaper engine. People familiar with the car describe a $700 rear-mounted engine built by the German company Bosch, measuring 600 to 660 cubic centimeters, with a horsepower in the range of 30 to 35 — no more powerful than some commercial lawn mowers.

The Tata car, according to industry experts, runs on the somewhat forgotten technology of continuous variable transmission, a lighter alternative to the manual or automatic kinds. Conceived by Leonardo da Vinci in the late 15th century, it is an elegant, stepless transmission reliant on pulleys.

While it was never popular in the United States because of often sluggish acceleration, continuous transmission was once widespread in Europe and has resurfaced in the United States in offerings like the Nissan Murano SUV and the Toyota Prius.

Critics of the Tata car have asked how a car that prunes thousands of dollars from regular prices can comply with safety and environmental norms. The answer may be that it comes at a fortuitous moment in India's developmental arc, when India is affluent enough to support vigorous demand for cars but not yet so affluent as to have enacted the regulations common to wealthy countries. Tata executives say the car will comply with all Indian norms.

But those norms are changing, and so might the car's price. India's major cities plan to adopt the Euro IV emissions standard in April 2010, requiring a costly reduction in sulfur emissions to a 35th of those allowed in the current Euro III standard, according to Anumita Roychowdhury of the Center for Science and Environment in New Delhi. New safety rules mandating airbags, antilock brakes and full-body crash tests are also forthcoming, she said.
Roychowdhury gives the car "not much" chance of retaining its populist price tag. That happens to many ultra-cheap offerings: even the "$100 laptop" ended up selling for $200 over the recent holiday season.

In a recent interview, Ratan Tata, chairman of Tata Group, also suggested that the car's lightness, while favorable for the environment, had frustrated efforts to make it safe. "We will have far lower emissions than today's low-end cars," he said. But, he added, "The emissions standards were much easier to meet than the crash test."

That is understandable. In most North American cars, safety features alone cost more than $2,500, said Adrian Lund, president of the Insurance Institute for Highway Safety in Arlington, Virginia. But, he added, "If what we're talking about in India is people having the option of getting off the streets, from motorcycles and bicycles where they are at risk from bigger vehicles, this may actually be an improvement of the safety environment.

Even if the Tata car never plies Western roads, the philosophy behind it will influence global car makers. Manufacturers are searching for ways to make small cars for the middle class in India and China; to produce small cars for their own home markets, roiled by rising gasoline prices; and to improve the profitability of existing larger cars. With old tactics failing, Tata's car may be mined for applicable lessons.