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Wednesday, January 9, 2008

The World is Waiting, but......

The world is waiting for tomorrow. The Indian Auto Expo at Pragathi Maidan, New Delhi is starting tomorrow. All eyes are on the biggest invention, Tata's 1-lakh car. Bajaj has already unveiled its near 1-lakh car. So, what's the big deal?

India is the 11th largest passenger car market in the world. And it is also the 2 nd largest two-wheeler market in the world. The Tatas and Bajaj-Renault wants to swap the numbers. They are betting on converting the two-wheeler owners into four-wheeler owners. But, is it worth it?

Most of the smaller cars on the Indian roads, especially Maruthi 800, Alto, Swift, Hyundai Santro and its clones are affordable by the medium-middle class. Even if they can't make a lump sum payment, many will be able to take a 5-year loan and buy one of them. It has also been noticed that many of the so-called middle class (I am referring to the section which BJP targeted in its "India Shining Campaign") which owns a car will have a two-wheeler also.

So, it can be said that Bajaj and Tatas are targeting the lower-middle class. Then, there are some problems that are bound to come up.

It has been rumoured that the Tata car will have all the specifications of a normal small car meeting all standards. The mileage is hyped to be around 25 km per litre(petrol). This is where the problem arises. The rising fuel price is going to be the greatest roadblock, not the price of the car.

Petrol price have been zooming for past few years. And, recently it crossed the $100 mark. I have some numbers. Consider an Indian with a motorcycle. It gives him a mileage of around 75 km pl. So, he shells out around 50 rupees for that. With the 1-lakh car, he will have to spent thrice of that(@ 25 km pl). Fuel expense is a daily one to him. Even though he can come up with 1-lakh to buy the car, the recurring fuel expense will surely put him out.

We have to consider the biggest hindrance, the roads. Even without these 1-lakhs roaming around, the traffic is unmanageable. So, let's not think about future!!

Another factor that can keep the medium and upper middle class buyers far is the ego factor. Who wants others to say that that guy comes in a 1-lakh car? I don't want that.

Tatas and Bajaj are innovative to design such a low cost car. But at present, what India needs is fuel efficiency. We want our cars to consume less and run more. We want our cars to be green. So, it's better if time, energy and money can be spent on designing cars that can run on alternat fuels. Make hybrid cars. Toyota Prius is really costly. So, make a prototype of a 2-lakh hybrid car. That will get you buyers and save the nation a lot of money. And will create a greener environment.

Inspired by the interview with Vijay V. Vaitheeswaran, in The Hindu Business Line dated 9th January 2008. It can be found here. He talks mostly of having cars running on alternate fuels like ethanol. Being a fan of Toyota and having done some research with Hybrid cars, I prefer Hybrid. And there is also the risk that people will start drinking ethanol fuel!! It's India.

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