MUMBAI, India — This country’s project to build the world’s cheapest car has driven into a quintessentially Indian ditch.
On Tuesday, the automaker Tata Motors said that political protests over land had compelled it to stop building the plant in eastern India for its much-awaited Nano model. The car was scheduled to go on sale next month for 100,000 rupees, or about $2,250, less than the cost of the optional surround sound system and DVD player on the Lexus LX 570 sport utility vehicle.
Late Tuesday, an executive with knowledge of Tata’s deliberations said the company would still begin making Nanos in October, under a backup plan to shift production to other sites. For the first two months, Tata will produce 10,000 cars a month instead of the planned 40,000, said the executive, who spoke on the condition of anonymity because he was not authorized to speak for the company.
The Nano has been dogged from the beginning by one of India’s most wrenching problems: how to create space for industry by moving farmers off their land and compensating them adequately.
In a tale rich with incongruities, the Communist-run government of West Bengal State invited the Tata Group, a symbol of Indian capitalism, to set up its plant in an area called Singur. It acquired 1,000 acres from farmers on the company’s behalf.
As the project advanced, some farmers who had sold their land demanded it back. The main state-level opposition party, the Trinamool Congress, led protests demanding that the land be returned. Most people sympathetic to Tata accused the opposition of inducing the farmers to protest, while Tata’s critics said the farmers had legitimate grievances.
The issue simmered for months. But in recent days, protesters began surrounding the plant, blocking roads and preventing Tata workers from reaching the plant. “The existing environment of obstruction, intimidation and confrontation has begun to impact the ability of the company to convince several of its experienced managers to relocate and work in the plant,” Tata said in a statement on Tuesday.
The halt to the plant has caused many Indian business people to warn of a chilling effect on investment in the country. It is also unclear how Tata will be able to keep the Nano’s cost so low, since part of the affordable price reflects the company’s savings on the land in Singur.
“It’s a slap on the face for Brand India,” said Suhel Seth, a longtime adviser to the Tata Group and the managing partner of Counselage, a strategic branding firm in New Delhi. “Which foreign company will want to come in when India’s most respected group cannot set up industry in a state?”
With its briefcase-size trunk, hollow steering-wheel shaft and a rear-mounted German engine that is no stronger than many lawn mowers’, the car has been called a “generational leapfrog in terms of cost reduction” by Daryl Rolley of Ariba, a company that helps global automakers find suppliers for parts and did work on the Nano project.
Critics say that an ultracheap car is being built for roads that have no space, under a sky already too thick with smog. They complain that Tata received a secret deal from the government and say that it took land from the poor to build cars for a swelling middle class that does not need government help.
Abhirup Sarkar, an economist at the Indian Statistical Institute in Calcutta, said, “The compensation paid for the land is measly,” according to Reuters. “It should be three to four times higher.”
But Tata rebutted such arguments on Tuesday, saying that it had trained workers in the area and built medical facilities, and that at its peak, the project had employed about 4,000 people, including many local residents.
“Operation successful, patient dead,” said Mr. Seth, the Tata adviser. “You had a successful political operation, but you’ve killed the aspirations of people, subverted the process of law and told politicians you can do what you will.”