Tata Motors Ceases Nano Car Production Amidst Social Unrest

September 8, 2008 · Print This Article · Email This Post

Tata Motors LogoWhen Tata Motors of India unveiled the Nano car as the world’s most inexpensive automobile in January, crowds mobbed the ninth annual Auto Expo at Pragati Maidan in New Delhi to see the tiny mini-automobile, which was seen as the car of the future for India’s working class. With an affordable list price of $2,500 (or 100,000 rupees), the Nano was hailed as a milestone in transportation history, and was compared to the Wright Brothers’ first flight and the first lunar landing. But production of the “People’s Car” has ceased, in the wake of increasingly violent clashes with poor farmers who wanted their traditional agricultural lands — taken to build the Nano plant — returned.

The Nano Car, Manufactured in India by Tata MotorsAs India becomes increasingly industrialized, land conflicts with the two-thirds of Indians who still live off the land have become more common. While the government of India envisions the country as a hub for small car manufacturing, the Singur incident illustrates the clash between traditional Indian land use and a Westernized economy. Hundreds of Singur area farmers have protested against Tata for nearly two years, claiming that they weren’t sufficiently compensated for land where the Nano factory is located. The West Bengal government gave 997 acres to Tata Motors for plant development in the most fertile area of Singur, which will ultimately result in the eviction of an estimated 15,000 farmers. The farmers, along with thousands of supporters of West Bengal’s leading opposition political party, the Trinamool Congress Party (the Grassroots Congress Party) ratcheted up the pressure, blockading the highway next to the Tata plant in August; in another recent incident, workers were trapped inside the factory by protesters.

A subsequent Tata Motors press release said: “The situation around the Nano plant continues to be hostile and intimidating. There is no way this plant could operate efficiently unless the environment became congenial and supportive of the project. We came to West Bengal hoping we could add value, prosperity and create job opportunities in the communities in the state.”

Burning Tata Nano Car in Effigy Near Kolkata, India

The press release added: “Construction of the plant has faced challenges at various points of time. There has however been a significant decline in the attendance of their staff and contractual labor since August 24, 2008. Some of the international consultants working on the plant have returned home and the construction work in the plant has been stalled since August 28, 2008. In fact, the existing environment of obstruction, intimidation and confrontation has begun to impact the ability of the company to convince several of its experienced managers to relocate and work in the plant. Further, several persons engaged in the construction and commissioning work who had taken accommodation at Singur and nearby areas have since vacated and have gone away due to intimidation and fear.” Tata apparently plans to relocate the plant and its machinery to other sites it owns across India.

With the red-hot Indian economy growing by about nine percent annually, creating new affluence and a greater demand for durable consumer goods, the A. T. Kearney international management consulting firm predicts that inexpensive cars priced at less than $3,000 in India might attract as many as 300 million buyers by 2020. And by next year, the automotive forecasting service of CMS Worldwide predicts that India will surpass China as the fastest-growing car market in the world.

Even as the Nano was heralded in January, environmental activists burned a Nano in effigy near the Kolkata location of Tata’s manufacturing unit. The Trinamool Congress Party threatened then to stall the car’s manufacture; while India has public domain laws, there are no provisions for the taking of land for private business purposes. Even the Kolkata High Court has acknowledged that the Singur land acquisition was illegal. Tata Motors invested about $350 million in the Singur plant, while about 60 key suppliers invested additional millions for plants and equipment in the Singur area.

Vilasrao Deshmukh, Chief Minister of Maharashtra, IndiaTata Company Chairman Ratan Tata has pledged to launch his Nano by the end of the year. Meanwhile, business leaders in Maharashtra state, where the Indian business capital of Mumbai is located, called attention to their pro-business credentials. When the state’s chief minister, Vilasrao Deshmukh, spoke at the opening of a new $300 million General Motors factory in Pune (a manufacturing hub about two hours southeast of Mumbai), he invited the Tata Group to the area, saying he would “roll out the red carpet” for a Nano automotive plant.

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