Thursday, January 10, 2008

cheap, not dirty

The unveiling of Tata Motors' people's car—perhaps the most highly anticipated vehicle in more than a decade worldwide--had all the frenzied atmosphere of a celebrity perp walk. A hundred or more photographers jostled for position in front of the dais where the as yet unnamed economy car was to be revealed. Usually cynical old hacks burst into applause and even whistles when chairman Ratan Tata, after implicitly comparing the company's achievement to the first flight by the Wright Brothers and the invention of the computer, revealed that the car will be called the Nano and despite all speculation to the contrary it will indeed retail for the target price of 100,000 rupees (or $2500). “A promise is a promise,” was the line that got them.

There was good reason for the excitement. The Nano has been under development for four years, during which time no pictures have leaked to the media and only a handful of details about it had been revealed. It costs less than half the amount that Maruti Suzuki—the current market leader in India—charges for its cheapest model. And, as Tata himself revealed at the press conference, the first models to roll off the company's assembly line in Singur, West Bengal, will get about 20 kilometers per liter of gasoline (50 mpg), pass the head-on crash test mandated by Indian regulators and also the offset and side impact crash tests required abroad, and meet stringent European emissions standards that have yet to be adopted in India.

Tata's emphasis on these performance features was well considered. He has repeatedly insisted that the Nano will outperform India's current emissions standards, pollute less per engine than the motorcycles and scooters it is intended to replace, and get roughly the same gas mileage as the market-leading Maruti models. But he has been beleaguered by doomsday predictions from India's leading environmentalists. The most notable among them was Nobel prize winning climatologist RK Pachauri, who said last month that he feared Tata's cheap car for the masses would prove to be an environmental nightmare. “We will emit less pollutants than the best two-wheelers in the country. I don't mean per passenger mile or anything. I mean per vehicle. So I am both amused and intrigued by why we are being banned as an environmental disaster.”

To be sure, pollution and traffic conditions in India's cities are grim. A ten-mile drive across town during the morning commute can take an hour and a half or even more, as drivers forge eight lanes out of two lane roads and scrum for position—horns blaring—like NASCAR competitors. Worse still, as Anumita Roy Chowdhury, associate director of New Delhi's Center for Science and the Environment, points out, more than half of India's cities suffer from air pollution levels that are officially classified as critical. In Delhi, for instance, which has the largest number of registered vehicles in the country, adding about a thousand new vehicles per day, but has also forced taxis, auto rickshaws and buses to shift to less polluting natural gas, respiratory diseases are 12 times more common than the national average. That's not surprising. In the city's central Connaught Place district, the density of air pollutants at peak hours ranges between 286 and 617 micrograms per cubic meter—as much as 30 times the level that the World Health Organization says is a safe target for such particles.

It is also certain that the Nano will inspire other manufacturers to develop their own cheap cars and force Maruti Suzuki, at least, to slash prices to continue to compete in the economy segment. And both developments will have the effect of rapidly increasing the number of new cars hitting the road in India over the next five years. But the assertion that Tata's Nano--a car for the masses that, it is claimed anyway, will emit fewer toxic particles than the millions of vehicles currently on the road—will drive the already terrible situation to the brink of disaster both suggests that the car manufacturer is responsible for everything from building roads to encouraging carpooling and implies that for some reason India's poor should not be allowed to drive cars so as to make life as convenient and pleasant as possible for India's rich. “Were we to succeed and sell 500,000 small cars every year, we would then, at the end of five years, constitute approximately 2.5 percent of all passenger vehicles in this country,” Tata said. “We could hardly be considered a nightmare, [as] has been raised about our small car.”

Indeed, the Nano is hardly the principal culprit. Currently, much of India requires only Euro 2 emissions standards, which are ten years out of date, the diesel fuel and gasoline sold in the nation's pumps is so dirty that even engines equipped with modern emissions technology still pollute more than the current European norms, and there are few, if any, government measures to penalize gas-guzzlers or discourage unnecessary driving. “Currently, if you look at the way our transport system is taxed,” says Chowdhury, “The tax is actually higher per person for a bus than it is for a car.”

The real danger, therefore, is not from the Nano itself but from its potential effect on policymakers, who have been somewhat schizophrenically pushing India as a global hub for the manufacturing of small cars and scrambling to improve the public transportation infrastructure to make its cities more livable. If Tata distracts India's leaders from the latter mission by convincing them that one day everybody from the shoeshine boy to the president will be driving a Nano, and India's economy will develop along the path beaten by America and Henry Ford's Model T, that will indeed be disastrous. But if all goes well, the Nano could actually have a positive environmental impact. By setting the benchmark for emissions standards higher, and still producing the car for less money than its competitors, Tata has scuttled the perception that a car has to run dirty to be cheap. And by raising the specter of cities choked by even worse gridlock, it could spur city and state governments into action on infrastructure and public transport projects like the introduction of low-cost airlines and the huge surge in air travel did for the Bangalore, Delhi and Mumbai airports. In India, nothing happens until it is clear that a disaster is around the corner if it doesn't.

Tata's Nano could be that kind of disaster. A good one.

few defenders

Surprisingly, Ratan Tata has had few defenders in India in the leadup to the launch of his one-lakh Nano, a car that was first greeted with disbelief by global competitors and then scorn by environmentalists who have yet to take to bicycles themselves. In my estimate, there's more than a little racism and elitism here, along the lines of "brown people can't make good cars" and "the world will go to hell if poor people are allowed to drive."

One of the most interesting, though somewhat long-winded takes came from an unusual source--a guy named Vivek Sharma writing on a site called, of all things,

Tuesday, January 08, 2008

the world's cheapest wheels

When Tata Motors set out to build a $2,500 car, people said it couldn't be done. This week the company will unveil its vehicle of the future.

By Jason Overdorf
(Newsweek January 14, 2008)

Tata Motors is best known as a maker of industrial trucks from India's rust belt that launched the country's first completely indigenous passenger car, the Indica, 10 years ago. Next week the company will unveil another revolutionary new vehicle that will throw down the gauntlet in the highly competitive race to capture the first-time-buyer segment of the world's automobile market. Tata's not-so-secret weapon: the car is cheap. Unbelievably cheap.

Back in 2003, when chairman Ratan Tata revealed his plans to build a car that would cost less than 100,000 rupees (about $2,500 in today's dollars), rival carmakers said it couldn't be done. As time passed, and Tata kept at it, they hedged. Maybe it will be more like an enclosed motorcycle, they said. As tantalizing details about the car's design leaked, they started to get worried. Finally, in April, Renault-Nissan's Carlos Ghosn announced his own plans to build a $3,000 car in partnership with Indian motorcycle maker Bajaj Auto.

The move signaled that the race to create the world's best-selling starter car was on. The stakes are incredibly high, which is why the international auto industry is descending in unprecedented numbers on the New Delhi Auto Expo, where Tata will reveal the design for its People's Car for the first time on Jan. 10. The vehicle could have almost as large an impact in India as the original Volkswagen had in Germany back in 1938—perhaps doubling the size of India's passenger-car market overnight, and delivering a much-needed boost to the manufacturing sector in a country that has long suffered from so-called jobless growth. By encouraging parts suppliers to develop innovative ways to slash costs, it could also help build a highly efficient supply chain for the Indian automotive industry.

But the tremors won't be felt only in India. Small cars like VW's Gol, Nissan's Tsuru and Renault's Clio are already the top sellers in Latin America and Europe, and PricewaterhouseCoopers estimates that about half the growth in automobile sales between 2006 and 2011 will come from Brazil, Russia, India and China, countries that are expected to buy mainly small, cheap vehicles. Even in gas-guzzling America, where the cheapest car is today the $10,000 Chevy Aveo, buyers are warming up to subcompacts. As a result, virtually all of the world's major automakers are striving to develop cheap, fuel-efficient small cars that can first be sold in emerging markets, then exported to the West.

Until the past year, these cars were meant to be sub-$10,000 vehicles like the Renault Logan. Now, with Tata setting the limbo stick much lower, the price target has been slashed to below $5,000. Add to that Tata's pole position in the bidding to buy the premium Jaguar and Rover brands from Ford Motor Co., and it truly looks like the Indian carmaker has arrived.

If successful, the People's Car could help shift the growth dynamic of the entire Indian economy, which has until recently been based more on service than manufacturing expertise. When Suzuki first brought the Maruti 800 (currently the world's cheapest car at about $5,000) to India in 1983, it completely transformed the domestic component business, laying the foundation for India's current emergence as an auto-parts hub. Suzuki's Indian factories have always built for the domestic market, but recently it announced it will sell an Indian-made hatchback in Europe next year. Others have also set up production in India, attracted by its large domestic market and growing components expertise. Hyundai has been the most aggressive in its efforts to make India a manufacturing hub. It exported more than 100,000 cars built here to Europe, South Africa and Latin America last year, and it chose India as the site for the global launch of its new compact model, the i10. But even Ford and General Motors, slower to see India's potential, have ramped up their efforts.

Analysts are even more bullish on Tata's plans. "There's no doubt this car is going to create a new [automotive] segment altogether," says Abdul Majeed, a partner in the automotive practice of PricewaterhouseCoopers. "If you look at the Indian automotive market, the bulk of it—over 70 percent—is two-wheelers. But the price gap between two-wheelers and four-wheelers has been very significant." The price tag for the People's Car is a bit more than double the cost of a midrange motorcycle, like Hero Honda's 100cc Splendor. Majeed forecasts that Tata's new car could encourage 10 to 20 percent of India's scooter and motorcycle buyers to purchase a car instead. If that happens, it would mean an additional 1.8 million vehicles sold per year—almost equal to the current size of the entire Indian passenger-car market.

Most analysts are waiting for a view of the car before pegging sales estimates—a task made difficult because Ratan Tata has played his cards very close to the vest in the three-year lead-up to the launch of the People's Car, revealing almost nothing about the design and features of the vehicle, or how the company managed to slash costs—both of which will define how the car affects the global industry. Prototypes have been as jealously guarded. Virtually all that is known for sure about the car so far—courtesy of a scripted "leak" by one of the company directors after Nobel Prize-winning climatologist R. K. Pachauri suggested the People's Car could be an environmentalist's nightmare if it vastly increases numbers on the road—is that it gets 25 kilometers per liter (59 miles per gallon) of gasoline, meets European emissions standards and matches the Maruti 800 in acceleration. It was also revealed that the car uses more plastic and fewer bolts than conventional designs, lending credence to rumors that Tata engineers visited Lotus in Malaysia to study adhesive bonding as an alternative to welding.

But its other cost-saving measures could have the biggest impact. Promising huge sales volumes, Tata has worked closely with components suppliers to bring the price of each part into a predetermined target range. The efforts are reminiscent of the techniques Tata used a few years back to bring down the price of the Ace, India's first mini-pickup truck, to about $6,000—close to the cost of the three-wheeled vehicles generally used for small jobs. In a considerable feat of engineering, the company came up with a design that allowed it to cut two engines for the Ace from the same block it used for the Indica. Not only did that allow the company to avoid building a new assembly facility, it also allowed it to capitalize on further economies of scale. If the People's Car shows more of the same, Tata—and India—may well win the race to miniaturize the automobile.

Thursday, January 03, 2008

this just in: i ramble for rupees, too

Check out my latest word spew in Outlook. Don't worry, it's not a treatise about Narendra Modi or anything.

The headline reads:
Objective Observations By A Ludicrous Freak
Often, it all ends up as a strange, involuntary, one-man circus act by a bald white man