Thursday, January 10, 2008

Ready or Not… The One Lakh Car Arrives

Today Tata announced the arrival of the world’s most inexpensive automobile, smartly named the Nano- for months people have been calling it by its sale price: the 1 lakh car. That works out to approximately $2,500, not bad for a brand new car that looks decent enough and can even keep dry five at a time.

In the next few years competitors such as Fiat, Suzuki, Bajaj and even Honda and Toyota will surely rush in; copying efficient manufacturing techniques in a segment of the market that will be hotly contested. In that, Tata is producing much more then a car- it is creating an entirely new market segment; instead of waiting for India’s economic engine to raise incomes to them- Tata has come to the people by offering a car at an unbeatable price point. Will it work? And what will be its impact?

It is widely expected that many who currently ride motorcycles (that cost 40-50% of what the Nano will) have aspirations of trading up to a car that was previously cost prohibitive. Surely, the improvement in safety is a huge benefit of upgrading to the Nano. Motorcycles currently jam India’s roadways and continuously weave through traffic, I have seen multiple motorcycle related accidents in my short time here. This could have a real impact on traffic fatalities.

Not my photo, but common enough on the streets of Hyderabad.

India’s roads are among the world most dangerous; according to this study traffic fatalities per 10,000 vehicles was more then10 times higher then the US (and due to the methodology the real risk might be significantly understated.)

But at the same time India’s roads have to be among the worlds most congested and practically, my biggest concern is my commute. It takes twenty minutes of weaving and bumping through stop and go traffic in one of these to travel the 1.2 miles to my office. With roads all over India already crawling along, what will the impact be of replacing many of the motorcycles with a car three times the size?

I cant help but lament that many south Indian cities are following the arms race model; building ever more freeways in competition with car sales rather then investing in mass transit. Though easier said then done, political squabbles need to be put aside and more projects like Delhi’s wonderful metro be undertaken.

All of these theoretic’s called for some on the ground research. So in the name of investigation your correspondent jumped aboard a ‘two- wheeler’ today on our way out to one of the field branches for some MIS testing. Transportation by two- wheeler is indeed much more efficient then that of their four-wheeled brethren, we shaved 40% off the time spent waiting in traffic by those who opted for the luxury of an SUV.

So this all may be a mute point- will the masses give up the efficiency and savings for the comparative comfort and safety of the Nano? Anecdotally, it seems so. In my informal poll, mostly at work where most incomes range between $500 and $1000 per month, there is real enthusiasm. My co-workers, who for the most part are the first generation to leave their rural towns and villages, view car ownership not only as efficient transportation but also a definitive signal of their success. Check back soon as I may be blogging from the backseat of an auto during my hour long commute…

1 comment:

Aaron said...

Is it just me or is is ironic that you are back on a motorcycle?