Tata Nano: Will this Inexpensive, Subcompact Car Impact U.S. Auto Makers?

When India's Tata Motors introduced the Nano, the $2500 subcompact car, it was hailed as a breakthrough for families in India. For the first time, millions of India's families will be able to afford a car of their own. Even without the air-conditioning and radios that westerners are used to, people in India will be lining up for their chance to own the car. Many families in India use small scooters for transportation. While there is no doubt that the Tata Nano will revolutionize Indian society, what, if any, impact will the Tata Nano have on the U.S. market?

With the average cost of a new vehicle in the U.S. topping $28,000, a new car is out of reach of many Americans. Many lower-income families buy used cars that lack the newest safety features and often suffer from mechanical problems or low gas mileage. Even the 2008 Chevrolet Aveo5, the most inexpensive car in the U.S. at $10, 030) is out of the reach of some families. If India can make the Tata Nano for $2500, could Ford, Chevy or Dodge engineer a similar car for under $5000?

Another Chevrolet Aveo model, the 2007 LS Sedan has a base MSRP of $12, 010 and comes standard with cruise control, power front seats and an in dash iPod jack. While these amenities are nice and are surprising in such an economy priced car, they aren't really necessary Could Chevrolet strip such niceties from the Aveo and trim the cost to make the car available to low income Americans? Other cars in the $10,000 range include the 2007 Saturn Ion 2 and the Kia Rio. All of the low cost vehicles lack automatic transmissions, but all pass government safety standards and include features, like air conditioning, side curtain air bags, emission systems and radios, that the Tata Nano owners could only dream of.