Learn Italian: Sapevo che la macchina era pronta quel giorno. - I knew that the car was ready that day.

This sentence is an example of indirect speech in the past. If the original thought or statement was 'The car is ready today' (oggi), we have to shift the time word when reporting it in the past. 'Today' shifts to 'that day' (quel giorno).

Why is the verb era used here instead of the present tense è?

In Italian, when the main verb (sapevo) is in a past tense, the verb in the connected clause usually needs to shift to the past too. Since the car being ready was an ongoing state happening at the exact same time you knew it, we shift the present tense è into the imperfect tense era.

Could I use the passato prossimo ho saputo instead of sapevo?

You could, but it would change the meaning. Sapevo is the imperfetto, which describes an ongoing state in the past: you already possessed the knowledge ('I knew'). If you used ho saputo, it would mean you acquired the knowledge at a specific moment, translating closer to 'I found out' or 'I learned'.

Why does pronta end in -a?

The adjective pronta (ready) must agree in gender and number with the noun it describes. Since la macchina is a feminine singular noun, the adjective takes the feminine singular ending -a.