One Lakh Rupee car (People’s Car) : India’s boon or bane ?

The much talked about and the much awaited india’s dream car, the one lakh rupee car will be unveiled by Tatas during an auto Expo in Delhi on January 9^th 2008 (http://www.ibnlive.com/news/tatas-to-unveil-rs-one-lakh-car-in-auto-expo/54915-25.html). What does this mean to different parties?

to Tata motors: It is going to increase their existing car market share. It could tap the low income group market, which is untapped by any car maker.

to the people of India and its ecomomy: Once this car is on the road then almost every household can afford to have their own family car. Considering the oil price touching $100 a barrel on the New Year’s eve – its going to lead to inflation indirectly. India imports most of the oil from other countries and provides it at a highly subsidized rate, which costs the treasury hundreds of billions of rupees every year. India was a favorite destination to all the MNCs who wanted to setup a shop here and because of which there was the ecomomy boom and middle class affordability to buy cars, which lead to heavy congestion on roads. In a largest democratic country, building new or improving the existing infrastructure is a slow process and hence at present sate the whole process seems to have reached a saturation state. This is leading more and more companies to choose other developing nations as their destinations. And, the cheaper car is just going to make this situation worse.

to the environment: Making a car that cheap doesn’t come with out any major limitations. They have to cut down on all those costly parts, which reduce emissions to the environment. Though, there is an opinion that this is just a start and as the time advances there will be advancement of technology and reduction in cost, which will help to build a safer and complete car for this price in the future. Considering the statistics this opinion doesn’t make much sense. Suppose that we can get the technology to reduce the present emissions per car by half. But then, we are going to add more and more cars on the road and the emissions equation doesn’t balance, it simply increases. (Unless you develop a hydrogen fuel based car, for which to be built at this cost will at least take a few decades).

The intial claims or leaks about the car seems to be very favourable (25 km per liter petrol, eco-friendly car meeting all the international emission standards) http://www.forbes.com/markets/2007/12/19/tata-budget-car-markets-equity-cx_rd_1219markets03.html. Anyway let’s wait for 3 more days ( the clock is ticking…) and see how it is going to impact.