Will Tata Nano be the netbook of cars?

It's cheap, it's boxy, and it's apparently safe. Word has filtered out that the Tata Nano, the world's cheapest car, just passed EU crash test standards. This raises a very interesting possibility. The Nano, which will cost less than $3,000, was originally targeted at the developing world. But could the Nano tap into a ready market of low-budget buyers in the developed world as well? Could it be the netbook of the car industry? And should competing automakers be scared?

The version of the Nano that passed the EU crash tests was reinforced to reach safety standards that are comparatively higher than those of India. Tata Motors (TTM) strengthened the bumpers and front doors of the EU-ready Nano, among other modifications. To its credit, Tata quite openly admitted that the standard version sold in the Sub Continent would not have passed the EU crash tests. But meeting that standard is good for Tata and its customers.

The key economic drivers that produced the Euro-ready Nano are remarkably similar to those that led to production of netbooks. The stripped down PCs primarily used for Web surfing that comprise the fastest growing segment of the consumer PC sector, were originally designed for the developing world, where discretionary dollars and performance expectations were lower. But as wireless broadband became ubiquitous in many parts of the developed world, the need for simple Web tablets grew.

Netbooks became an obvious candidate to fill that niche. The tiny Web devices with small hard drives use cheaper components and come at sub-$400 price tags. Intel, in particular, has struggled with the netbooks conundrum. The Atom processor, a favorite of netbook makers, is by some accounts cannibalizing Intel's sales of higher priced processors. Reductions in price matching improved performance has been the norm since the dawn of tech (Moore's Law). But netbooks threaten to kick those price reductions into high-gear and turn the PC segment on its head.

The Nano, with its possible entrance into developed markets, could follow a pattern that appears to be emerging. Technology built for the developing world is proving increasingly disruptive in the developed world. A tricked out Nano could prove to be a powerful entry in the EU market, putting pressure not only on the makers of so-called mini cars, but also on makers of motorcycles and scooters. The price points are not that different. One could also envision a scenario where Nanos, equipped with electric motors and batteries, become big players in the electric car market.

This is not to say that a Nano will replace the beloved SUV or family minivan. But it just might become an option as a second car, or the teenager's first car in richer nations. And it's very presence in the market could place profound downward pressure on automotive pricing. Ideally, this would spur new innovation and perhaps finally push automakers to think more deeply about advancing a product that has remained more or less the same for the past 50 years. That is already happening in the PC segment as a result of netbooks' popularity and the shrinking product standards gap between the developed and developing worlds.

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