Tata and Mahindra, driving their cars into U.S. market, dream Bollywood big

A decade ago, few people outside India were aware of the nation's megaconglomerate Tata Group -- or that India had an auto industry. Today Tata Motors (TTM) makes the cheapest car in the world, the Nano (at right), and has become the world's 19th largest automaker.

With Detroit in critical condition, two Indian carmakers are preparing to drive into the U.S. market: Tata and rival Mahindra & Mahindra (MAHMF). Tata Motors's recent $2.3 billion acquisition of Jaguar and Land Rover suggests that the subcontinent has Bollywood-sized dreams -- and the resources to make those dreams come true. Tata's and Mahindra's future here looks very promising, provided they learn to solve an age-old conundrum: that the price of gas tends to rise -- and when it does, so does the popularity of cars that use gas efficiently; and that Americans don't like squeezing into tiny, tinny cars.
Over the decades, U.S. automakers have tended to emphasize legroom over gas-sipping. While more efficient models like Chrysler's 1981 K-car sometimes have given the industry a moment of salvation, Detroit has seemed to regard such victories as anomalies, not fundamental lessons.

The Hummer is the most visible symbol of America's thirst for gasoline, but our gas-guzzling trucks are a close second. While many manufacturers assume that bigger is better, Toyota has carved out a major niche with the Tacoma, the bestselling midsize in the U.S. Priced $2,000 less than the Chevy Colorado and the GMC Canyon, the Tacoma gets two more miles per gallon (on the highway).

In many ways, Mahindra's decision to go into the truck business seems insane. Indian cars are renowned for their low price, not their strength or reliability. But Mahindra's truck -- expected to go on sale here this year -- runs on more efficient diesel, and the automaker predicts it will get 30 miles to the gallon. Admittedly, diesel-fueled cars tend to be pokey; then again, professional truckers with full rigs tend to avoid jackrabbit starts.

Mahindra has also announced plans to release a diesel hybrid, the Appalachian, by 2010, apparently sidestepping import tariffs by assembling the trucks in Ohio. Recognizing the prejudices of American consumers, Mahindra has hired Michigan-based supplier Lear Corp. (LEA) to create an interior design catering to our passion for large spaces and sumptuous textures. (Yes, leather seats will be available.) But ultimately, the biggest question is performance. Diesel could give Mahindra's trucks tremendous hauling power; the carmaker says its trucks can haul more than a standard V-6.

Of course, among Americans less attached to huge vehicles, India's cars are already famous. Tata's budget-conscious Nano, hailed as the crowd-pleasing successor to the Volkswagen Beetle, runs just $2,000: far cheaper than anything on the market in the U.S. And at just 1,400 pounds, the super-mini runs off a 2-cylinder engine. You probably won't see it in the drag-race circuit, or in NASCAR, but as DailyFinance's Tom Barlow notes, those specs give Tata plenty of room to add the kinds of amenities American consumers consider standard -- and the kinds of safety measures that our laws demand.

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