Tata Motors (TTM: NYSE) debuted its entry for the cheapest car in the world this week. The Nano, a two-seater that runs for an enviable 54 miles per gallon of gas, will cost Indian customers only INR 1 lakh (100,000 rupees or $2,556).

The car is stripped down to say the least. It doesn’t have airbags or air conditioning, and you can just imagine sitting in Mumbai traffic in the middle of summer without air conditioning. The car doesn’t have a radio or a passenger-side mirror. But it will get drivers where they want to go, even if they arrive sweat-drenched and coughing from the constant smog in India’s cities.

The Nano or People’s Car looks more like a children’s toy (maybe the latest offering from Power Wheels?) than an actual road-ready vehicle to your average SUV-accustomed American. And Indian officials are concerned that the car will add to the already congested city roads. But the Nano will appeal to millions of drivers in India who can afford only a motorcycle at current car prices.

Tata began its career in the 1950s building commercial trucks. The company entered the passenger car market about 10 years ago, releasing the country’s first India-made family car in 1998. The commercial vehicle segment still accounts for much of Tata’s bottom line, though, and the Nano is part of its bid for higher passenger car sales.

And that bid is going to work. Tata will be India’s largest passenger vehicle producer by 2013, according to German research firm CSM World Wide. Tata will average about 1.2 million passenger cars, or light vehicles, as the study calls them, per year over the next five years. And the Nano could account for as much as 50% of those cars.

Investing in India: Tata picks up the luxury

Tata also has plans to take over two of Ford’s unprofitable, at least when they’re combined, luxury lines: Jaguar and Land Rover. Analysts are falling on both sides of the fence as far as the takeover is concerned. Some say moving ownership to a non-Western company will torpedo the two luxury brands.

But if anyone can make them lucrative, it’s Tata. The Tata Group is one of the most powerful corporations in India, and it’s already proved its global reach with the successful Tata Steel takeover of 100-year-old Anglo-Dutch competitor Corus last year.

Anyone who dismisses the Tata Group offhand is still living in the dark ages of India as an outsourcing economy. India has come a long way in the last 10 years, and the country is now looking to improve its image and produce global brands on par with those sold by European and American companies.

Luxury isn’t a new idea in India, like it is to the still adamantly “communist” Chinese. And the view of Indian products as shoddy and disposable is outdated. India already produces intellectual property to rival Western companies, with program development quickly becoming big business for the country. And now it’s planning to move into consumer goods.

Investing in India: Tata can make Jaguar roar

The takeover of Jaguar and Land Rover will be the first global luxury brand controlled by India. And the company, along with the Indian government, I’m sure, will take the opportunity to show off its international marketing and production skills.

Tata doesn’t plan to remove any of the hierarchy at the two automobile lines, at least not right now, which will certainly smooth over the transition. And the company will keep production of the Jags and Range Rovers in Europe. As one analyst put it, when America’s Ford bought Jaguar, Land Rover and Aston Martin, that didn’t change the brands’ collective image as luxury European automobiles, and the same will be true when Tata takes the reins.

If you don’t already own shares of Tata Motors (TTM: NYSE), now would be the time to pick some up and hold on for the long term. Tata is already on its way to conquering its domestic car market. Now the company is going after Europe, and in the next decade it will conquer that market, too.

by Stephanie Grimmett
Baltimore – (TFN)