Indian auto makers flex engineering, design muscle

By Rina Chandran

NEW DELHI (Reuters) - Praise for Tata Motors' low-cost Nano car has been as much for its style and engineering as for its "world's cheapest" price tag, signalling India's intent to be more than just a cut-price manufacturer.

Analysts say India's reputation as a world-class information technology provider will help in that drive, but cost constraints and a growing shortage of skilled manpower may be roadblocks.

Tata unveiled the Nano on Thursday amid feverish media coverage, and said the curvy but compact car would carry a dealer's price of $2,500, affordable, it hopes, for millions of poorer customers in emerging markets.

"Tata reinvents the wheel," ran a banner headline on the front page of The Times of India daily on Friday.

India's engineering potential is "underestimated" by global auto firms, said consultancy KPMG, which says automotive services make up only a fifth of total engineering services revenue of $1.5 billion from global outsourcing.

"The auto industry competes for the same talent, but it is not as glamorous, and the pay is not as good," said Yezdi Nagporewalla, its national director for industrial markets.

Indian motorbike firms and components makers, whose exports are forecast to hit $20-$25 billion by 2015, have a longer history of developing innovative design and technology to be more competitive, said an analyst at consultancy Frost & Sullivan.

"But barring the top auto firms, others have not invested sufficiently in design and development," said V.G. Ramakrishnan, director of its automotive and transportation practice.