Tata's Nano driving India's Detroit

Ideal infrastructure and the breakout popularity of a $2,500 US car have turned the Indian city of Chennai into the Detroit of South Asia.

"India must think small to stay big," the head of India's largest conglomerate, Tata Group, quipped recently.

It was a throwaway line by Ratan Tata, the chair of Tata Group and one of the world's richest business leaders. But despite its pithiness, it contains a kernel of truth — at least in terms of India's burgeoning auto industry.

Hyundai, whose tiny Getz cars are shown here waiting to be exported to Europe, is just one of several auto companies building cars in the southeastern port city of Chennai, which is turning into India's Detroit. ((M.Lakshman/Associated Press))

In early 2008, Tata's automotive division unveiled its much-anticipated vehicle, the Nano, to the masses. With a price tag of $2,500 US, it brings car ownership within reach for hundreds of millions of people who otherwise would never consider buying a car.

Luxurious, it is not.

With a flat nose and sloped roof, the world's cheapest car can theoretically fit five people. Tata claims it's more fuel efficient than some motorcycles and meets all emission standards in developed countries, but to be sure, the basic version is Spartan: no radio, no passenger-side mirror and only one windshield wiper, for the driver. Air conditioning for muggy Indian summers is extra but included in the deluxe edition of the vehicle.

The company, the first Indian engineering firm to be listed on the New York Stock Exchange, has numerous manufacturing centres across India and throughout the world. While the Nano is made at several of them, the city of Chennai is fast becoming the next great automaking hub.

The industrial city on India's southeastern coast is a manufacturer's dream. Multinational giants such as Ford, Hyundai and Chrysler have already set up shop there, eager to take advantage of Chennai's huge deep-water port, affordable land and cheap labour.

"The existing hubs need to watch out for Chennai as an upcoming production base, and probably a Detroit for South Asia," economist V.G. Ramakrishman of auto consultancy Frost & Sullivan says.

Luxury cars becoming popular among wealthy Indians

The local Hyundai factory, the most automated plant in India, has three shifts working around the clock and closes only on Sundays. The plant makes 2,100 cars a day, and as with Tata's Nano, its best-selling model is the tiny Hyundai Getz.

The cars India is cranking out at a blistering pace are being bought locally (demand is so strong that more than 500,000 people recently entered a lottery to win the right to buy a Nano), but they're also finding their way overseas to dealerships in Europe.

Conversely, high-end European cars, such as Rolls Royce and Mercedes Benz, are finding a market among suddenly affluent Indians.

"The earlier generations might find it difficult to flaunt wealth," Mercedes dealer Mohan Mariwala says. "Today, it is: you worked hard for it, so might as well show it, and might as well enjoy it."

Ashok Vichare, right, owner of the first Tata Nano car sold in India, greets the crowd as Ratan Tata, chairman of the Tata Group of companies, applauds. ((Rajanish Kakade/Associated Press))

In 2005, Tata inked a landmark deal to produce cars and drivetrains for Chrysler's current owner, Italian carmaker Fiat. Thus far, few Indian-made cars have made it to the North American market, but that day, too, is coming.

Considering the dazzling growth India has experienced over the past few years, Canada has lagged behind in terms of investing in the country.

The combined GDP of the two countries is on its way to $4 trillion, and yet two-way trade between India and Canada is just $5 billion, Prime Minister Stephen Harper noted at a press conference on his trade mission through India on Monday.

As it stands now, there's more Indian investment in Canadian firms than the other way around. But with the breakout success of the Nano, India's entrepreneurs and politicians are hoping that trend will soon start moving in the opposite direction.

With files from The Canadian Press and Nahlah Ayed