The Rs 1 Lakh car from the Tatas

I have been reading about the Rs 1 Lakh (about US$2,500) car that Tata Motors is planning on selling soon.

It scares me witless. These days, oil is selling for around US$85 a barrel. India imports most of its fossil fuel requirements. It is a poor country and cannot afford high priced oil — and oil is going to become increasingly costly because demand will continue to rise and supply will continue to fall. That is Econ101. India is also a very small country relative to its population. With 17 percent of the world’s population and 2 percent of the world’s land area, land is at a premium in India unlike say in the US (where the population density is a tenth of what it is in India.) You cannot just have cars: you need fuel and you need space to use the cars in. It is insane to not do basic arithmetic (“Those who refuse to do arithmetic are doomed to speak nonsense”) and realize that cars are not the solution to India’s predicament regarding transportation within its cities.

What India needs is foresighted leadership. It needs people to figure out that in the densely populated cities of India, efficient public transportation systems must be built now. For the existing cities, these public transportation systems should have been built decades ago. And that is not all. About 70 percent of India’s population lives in rural areas. This rural population will have to sooner or later have to be urbanized if they have to have any hope of rising out of their economic poverty. They cannot be accommodated in the existing cities which are bursting at the seams. New cities will have to built and right from the beginning public transportation must be built-in for them.

I think at the end it does not matter how cheaply the cars get built. The bottom line is gas will get to be expensive enough that few will be able to afford using those cars. And even if you could afford the gas, the question will be where will they actually drive? In Mumbai, most of the day you cannot cover more than 3 or 4 miles per hour by road.

Yes, those cars scare the hell out of me.

Follow up post: What and How.

[Related Posts:
1. Trains and the Transportation System.
2. An Integrated Rail Transportation System — Part 1
3. An Integrated Rail Transportation System — Part 2 ]

11 thoughts on “The Rs 1 Lakh car from the Tatas

  1. Pankaj Wednesday October 17, 2007 / 11:25 am

    India especially bombay is veritable Hell on earth,Those who are cursed are born in india.

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  2. Michael Wednesday October 17, 2007 / 11:59 am

    When 70% of the rural folks get urbanized, then even more energy is needed.

    Even without those 1 lakh cars, the number of vehicles in the cities are growing very fast.

    A capitalist, having obsessed with the concept of “growth”, is forced to do these kind of things. Shareholders want returns fast, they are really not interested in a long term solution.

    Atanu, I feel that foresighted leadership is a myth. If a capitalist thinks like that, then his business is doomed as his competitor will do it anyway. If a minister imposes some short term restriction in favour of a long term solution, people cry foul (that there is no more a free market).

    The problem is not at the root (Tatas/Birlas), but at the leaves (public). So, a foresighted citizenship is needed before a foresighted leadership.

    I try not to focus on these kind of things, but every time I get on roads, it reminds me where I am.

    -Mike

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  3. shiv Wednesday October 17, 2007 / 1:23 pm

    The one lakh car is a marketing gimmick but a scary one. However the silver lining in the cloud will be the fact that this is probably the last straw for most cities. I can imagine Pune or Bangalore with this kind of products crowding the roads. However for once it is interesting to see the ‘Adam smith’ of our generation arguing for regulation rather than go with the ‘market’. There are some shades of grey after all 😉

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  4. anish Wednesday October 17, 2007 / 8:32 pm

    You are absolutely right. The solution is not more cars but simply better, efficient and reliable public transportation.
    The US which is regarded as the role model for all developing countries itself has such a bad record in this that only three cities – Boston, Chicago and New York have any public transportation at all.
    We should realize that we have to think out our own way and not just imitate the US and China. But when and how? Phew.

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  5. Notsure Thursday October 18, 2007 / 5:04 am

    Given the nature of indian economy
    the tata sol is not a bad one.
    The griping mullahs should be left alone and let the market decide.
    along with the other religious the kind whose refrain is that a birth is “curse” if it happens in Mumbai.
    PS
    I dont own a car in US.
    Why b/c where I livein belmont ma and work in cambridge ma. Whop did da. public transportation is good and so is the availability of rental car/truck for the 1 time/yr when i need it.
    People economize things WORLDWIDE.
    and I say that as a TATA hater.

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  6. DP Chalasani Thursday October 18, 2007 / 8:29 am

    It actually might turn out to be very good for India. As you say, a cheaper car means more can afford it and therefore more cars. Higher gas prices mean there will be a demand for alternative fuels. Perhaps, seeing the huge demand for cars in India, entrepreneurs may come up with alternative fuel systems such as methanol, cellulosic ethanol, fuel cells etc.

    Its surely a possibility. Never underestimate the market!

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  7. Amit Saturday October 20, 2007 / 2:19 am

    Atanu, how about the magical free market? Where’s your faith that it will in the long run, fix any problems arising out of this issue? 🙂
    After all, in another post regarding taxi-cabs, you were in favor of free market taking care of any discriminatory actions by taxi-cab drivers.
    /tongue-in-cheek

    Well, there’s also the issue of increased pollution – noise, air etc. that will result because of increase in the number of cars, the time and loss of productivity as people spend more time in traffic, hence leading to more stress (hey, a bullish market for psychotherapists!!) and other issues arising out of more cars on the road.

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  8. abhilash shastry Saturday October 20, 2007 / 4:28 am

    Atanu:

    I wonder if you own a car or not.

    To me it looks like what happens in an unreserved train compartment. Those who are outside keep cursing the inside people for their callous attitude — till they themselves get inside. After they are in, they suddenly discover that the compartment is already overcrowded and cannot support more people.

    Same here. My job is important and I cannot do without my car. However, you have been managing so long without a car. So why do you want one now? Can’t you see that our roads are already overcrowded, there is pollution due to cars and India cannot afford expensive forex needed for gas? Can’t you see that your car is going to cause pollution, congestion and forex crisis in a way that my car doesn’t?

    In a nutshell, free market economy is fine as long as it does not touch my privileges. The moment it does, I start seeing undiscovered virtues in controls and regulations.

    Talk comes really cheap. Doesn’t it?

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  9. Harsh Gupta Sunday October 21, 2007 / 9:10 am

    oil = around 84 dollars barrel
    1 barrel = 42 gallons
    2 dollars per gallon (raw gas)
    3 dollars per gallon (refined gasoline price in usa)
    1 gallon = almost 4 lts.
    therefore if america is not super-subsidizing gas, india should have around 3*40/4 = 30 rupees per liter of petrol.
    in india its around 50 rupees

    therefore, i guess this cost definitely covers for all potential pollution pigouvian taxes and geopolitical risk premia.

    moreover, there is already some parking fees, some car taxes (local or national – whatever). the parking fees etc may not go to the govt., but they do come out of the user’s pocket.

    so PRIMA-FACIE INCENTIVES FOR BUYING A CAR DONT SEEM TO BE SCREWED UP IN INDIA EVEN AFTER TAKING INTO ACCOUNT EXTERNALITIES

    but you are correct – more metro-like urban systems have to be made in many more cities – you are absolutely correct on that one.

    nonetheless more urban ring roads, flyovers, bypasses and some newer/wider roads within the city too need to be built.

    regarding your comment that india has just 2 percent of the world’s area that doesnt really matter coz even if u 300 million cars in india and each occupies say 3.3 sq. m then thats just a billion sq. m, which is 1000 sq. km which is BASICALLY THE SIZE OF DELHI. so size aint a problem.

    along with urban roads (and new cities, more vertical cities, more PUBLIC TRANSPORT), we need many many more 4 lane state and national highways too. india will have to have some suburban sprawl. true american style is absolutely not recommended here, but some will and should happen.

    thats the only way congestion would decrease.

    SUMMARY
    1. people will buy more cars.
    2. but we should invest in public transport ALSO, and more in non-carbon energy R&D.

    ps: Vinod Khosla was here with all his ethanol ideas, but the B-school people didnt create enough publicity…..arrrrrrrrrrghhhhhhhhhhhh

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  10. Notsure Tuesday December 11, 2007 / 10:21 am

    Hey Atanu
    Looks like Tommy F your alleged “worlds mad”man agrees with you

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