Viewpoint: India and Tata Nano

Days after the big launch of the much awaited small car, the Tata Nano the debate continues on its implications on Indian economy and the infrastructure. I know this post comes a bit late, but so what keep reading. Many argue that the car is going to slow down India in its Economical growth, even noted Journalists like Thomas L Friedman, of the NY Times asking not to follow American footprints. Dr. Pachauri, who had sleepless nights on the car, adds that the car is not the transport solution for India. It was never intended to be.

To begin with, Tata Nano does make a car’s dream for many Indian’s come true. Many of them who had a two wheeler as the only mode of transport would like to upgrade to this one. The implication of this as envisaged by Dr Pachauri is that it would rather add to the no of vehicles on the street rather not hitting the Indian bike market. Definitely, I would agree to some extent on that. A car can never replace a bike. The average Indian buyer would still like to own the bike, while adding the car.

Agreeing with many, the car would also increase the traffic congestion situation in India, but I also add that attacking the small (read ‘also cheap’) car market in India is not the solution. The car does imply to change the economic geography of the citizens. What have to be looked upon are the policies that govern the car market in India. Definitely there shall be numerous ways to tax the car buyer with regard to controlling the traffic situation in India. If taxing is not politically feasible, then there can be different ways to police traffic situations in India. Taxing the car owner, in general can be seen as an elitist move by many. A move to tax the car owner can be seen as making the rich richer and the poor poorer. For many, the move will discourage buying a car. Taxing need not be in form of a direct tax levied at time of Income tax collection, but rather taxes can be levied depending upon the city’s traffic situation. For instance certain sections of the city can be cordoned off for using personal transportation and only public transportation. Many shopping roads, the crowd-ier sabji mandis, workplaces can be such a case wherein one is encouraged to use public/common transport.

The other issue that the small car boom that has arrived is the environmental concerns, which Dr. Pachauri long talks about. The foreseen increase in the no of cars shall also increase the petrol demand in the country. As of today the Oil companies loose around Rs 9 per liter of petrol sold. That translates to crores of rupees as of today’s sales per day. The Hindustan Times estimates that with the Tata Nano, increasing the no of cars on road, the demand is all set to sky rocket past expectations, and estimates that Tata’s car alone may lead to Rs. 164 crores in losses. Here’s an excerpt.

The Tata car will start off with a production facility for 2.5 lakh cars a year to start with, scaling up to a million per year by 2010. If we assume that the Tata car sells 2.5 lakh a year then in two years there will be five lakh new Tata cars on the roads. If on an average the cars use one litre of petrol a day (the car’s engine gives 25 kilometres to a litre) then the total petrol need in a year would be 18.25 crore litres. (India consumes over 1100 crore litres of petrol a year).

And if Tatas can add a million cars a year, that will add fresh demand for 37 crore litres of petrol every year. Its not just Tata, every carmaker is bringing in new small and big cars for India. In fact the automobile sector is growing at 22 per cent every year.

This is bad news for India, which imports 70 per cent of its crude oil. It’s even worse news for Indian petroleum product marketing companies. They lose over Rs 9 on every litre of petrol sold. With a surge in demand their losses will go up. The Tata car alone, may increase their losses by Rs 164 crore.

In such a case the government may have no option but to increase the present prices, even if the left goes red on that. The present scenario in India demands that we realize how much the government pays for the petrol, for out increasing demands. Oil companies insist that the petrol and diesel be freed from the government’s control, and rather subsidise only kerosene and LPG. It’s not just the government but the people themselves have to realize the need to go green, and cut petrol usage. For that regard the Tata Nano, is quoted to be very fuel efficient. Company figures claim a mileage of 20+, and confirmation to European and Indian emission standards. Here’s the excerpt from the Time,

Ratan Tata emphasized that the new car complies with India’s emissions laws and even with Europe’s much stronger Euro 4 standards. Emissions, Tata says, are “lower than a scooter’s today”. The company claims the car will also deliver 50 miles per gallon, or better than 20 kilometers per liter, which would make it one of India’s most efficient vehicles, and vastly more efficient than the average in the U.S.

Tata also argued that if the car adds to the traffic problems to a city, then it’s the Government’s problem to solve out the problem. Obviously, we do have traffic problem without the Nano on road, so why do we have these small cars being targeted. Just as the tax benefits on the small car has triggered a rage in the small car market as many manufacturer want to utilise the benefits, the Government should think of incentivising the development of ecofriendly cars, may that be hybrid/fuel call or electric for that matter and impose fuel efficiency norms.

But with India’s road infrastructure struggling to keep up with explosive growth in car sales, won’t the new Tata just add to the country’s road hassles? That’s a problem the Indian government has to deal with, not manufacturers, Tata said. “We’d certainly be concerned if our vehicle created absolute chaos all across India,” he told one questioner who complained that his morning journey of a few miles across Delhi took over an hour. “But if you had chaos today and it did not include our vehicles, then I would suggest the problem has to do with something else besides the presence or absence of our vehicles.” India, he agreed, “does desperately need mass transit systems… both within cities and between cities.” But poor Indian families also have a right to what millions take for granted elsewhere in the world. “Should they be denied the right to independent transport?”

It’s is a worth a thought that our transport policies need a change, a reform indeed. The policies regulating the infrastructure management in India need to shape up to meet the increasing demand in the country. There need to be faster planning with a foresight of the future to have developments, that won’t prove redundant in a short matter of time. I agree with Mr. Tata that everyone has the right to own a personal mode of transport and denying them would an elitist move. He is also qouted to say in an interview on the Tata website that the main attraction of the car is not getting the attention, rather the reactions are. an excerpt,

If you look at the coverage that has happened, you cannot fail to notice how the low-cost car has been turned into an issue of congestion, of pollution, of safety. Initially it was all about why a car at this cost was simply not possible; that talk is long gone, only to be replaced by these ‘new’ concerns. We are not really talking about how it will change the way people live or transport themselves, what their aspirations may be.

Indeed, Tata Nano is a beautiful example of Indian Engineering capabilities. The very fact that the small car boom has triggered a variety of global auto manufacturers like Nissan, Volkswagen etc to think of something similar, proves that it is a viable business option. The car which now shall cater to the transportation need of the rural India, a potential market which was not accessed by any of the business giants. The car influx into these areas does create market for other business activities. The spending power of the people increases thus creating business oppurtunities for many. The advent of personal transportation in rural market also helps in cultivating local business and entrepreneurship. That’s a real good sogn to see for all of us.

Time shall tell how long can the company stick to the 1 lakh price tag. As the lower end models shall deliver lower margins for the company, we may see some heavy marketing for the higher version and more features including better engine options. Tata Nano is not a story of Indian engineering that ends with the big bang launch. The story has just began. The car which now makes into history books as the world’s cheapest car, is poised to hit a million sales a year. If that’s not enough the car shall continue with innovation that will change the transport is perceived in India. Imagine a battery powered Nano, just like Maini Reva or a hybrid or a fuel call version of the car.

Source: http://mutiny.in/