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Car Buyers in India Lining up For World's Cheapest Car

In India, customers are lining up to buy the world's least expensive car, the Nano, which went on sale this week. The impact the Nano is expected to have a positive effect on the auto industry, which is facing a worldwide slump in sales.

Forty-year-old bus driver Ram Nath in New Delhi never dreamed of owning a car on his $300 a month salary. But he was among the first in line at a dealership when orders for the Nano opened.

After taxes, the base model of the car will cost about $2,200 - making it the least expensive automobile in the world.

Ram Nath says he is happy that a car he can afford is now on the market. He says he too, like richer people, can take his family out in a car on holidays.

The Nano, produced by Tata Motors, is entering the market at a time when the auto industry is facing a worldwide slump in sales. But demand for the "People's Car" as it has been billed, is expected to be strong in a country where cars are out of reach for most of the billion plus population.

The head of the Society of Indian Automobile Manufacturers, Dilip Chenoy, says the Nano will have a positive impact on the auto industry by creating many first-time car owners.

"It's created an excitement in the market. The auto market was really till now just under a lot of negative influence, and a lot of negativism in the market," said Chenoy. "The first impact Nano has had is create a lot of enthusiasm for the purchase of a car. The second is, it is going to create a new segment … it is going to get a whole new type of customer added to the market."

Orders for the car close on April 25. Not all those purchasing the Nano are first-time car buyers. Many are buying it as a second car. Some want it because it is inexpensive, others want it because it will be easily maneuverable on India's crowded roads.

The first cars are scheduled to roll out in July, but only 50,000 cars will be manufactured in the first year. As demand is expected to outstrip production, the company says it will pick the first 100,000 owners by lottery.

After about two years, when production increases, the company plans to export the car to other developing countries, as well as the United States and Europe.

Chenoy says the Nano's impact will not be restricted to just creating new buyers. He says automakers worldwide are closely watching the engineering skills that went into creating a vehicle at this price.

"The whole process of manufacturing, designing, and the concept of a cost of a vehicle has been redefined and that would actually have a longer lasting impact across different segments and different countries going forward," said Chenoy.

The no-frills Nano is a little over three meters in length and runs on a 623 cc engine. It has a top speed of 105 kilometers per hour.