Nano Car, Mega Disaster?

The Tata Nano costs just $2,500. It's cute as a bug. And it could mean global disaster, writes columnist Mira Kamdar.

Published: 27-Jan-2008

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The most hotly anticipated auto show of 2008 wasn't that one that took place in Detroit this month. It was the New Delhi Auto Expo, which opened in India and managed to beat Detroit to the punch by a week – and $2,500.

That's the sticker price of the most eagerly awaited new car in decades: the Indian-made "people's car," dubbed the Nano. It's the brainchild of Ratan Tata, scion of the massive Indian conglomerate known as the Tata Group.

He had long dreamed of giving middle-class Indian families a safer alternative to piling Mom, Dad and the kids onto the only motorized transportation they could afford: a motorcycle.

True, the car doesn't meet U.S. safety standards. Still, by putting distribution in the hands of its dealers, taking advantage of cheap Indian labor and using lower-cost materials, Tata Motors has driven the price of a car down to levels not seen in decades.

This is good news for the millions of people in the developing world who never imagined that they could own their own car. But it's a problem for the rest of us.

It's a problem for Detroit, which is racing to enter India's booming small-car market but will now have to completely revolutionize its production and distribution to compete.

It's a problem for America's beleaguered auto workers, who will become even more expendable as Detroit moves its manufacturing efforts to India and other Asian countries.

And it's a potentially gigantic problem for the environment. India's urban roadways are already choked with traffic, and the air quality of its major cities is ghastly. If millions of Indians and Chinese get to have their own cars, the planet is doomed. Suddenly, the cute little Nano starts to look a lot less winning.

So is there any way to steer out of the Nano's way?

Unfortunately, shifting manufacturing and sales to rapidly growing Asian markets makes eminent business sense to the U.S. auto industry, and the Indian market is white hot.

The country's economic boom has spurred a car-buying frenzy, and India is set to become the world's largest auto market within a few decades – reaching as many as 600 million units by 2050. That's more than twice as many cars as are currently registered in the United States.

India isn't there yet, of course.

Much as Tata would love to see the car become king, few Indians can afford one. Even at $2,500, the people's car costs 10 times the annual income of most Indians. At this point, there is only one car for approximately every 1,000 Indians. In the United States, the ratio is three cars for every four people.

But to the world's car manufacturers, this wild disparity suggests a market whose potential has barely been tapped.

So, to avoid being steamrolled by the Nano, a slew of auto industry leaders unveiled their own efforts at India's Auto Expo.

Ford tried to steal some of Tata's glory by announcing just days before the expo began that it plans to invest $500 million to develop a small car in India, in addition to similar sums Ford has committed to small-car production in China and Thailand.

General Motors has made India one of its most important design hubs and is investing $300 million in a new factory there.

This is part of a massive shift in the industry. U.S. automakers are finding themselves less and less able to compete in the United States with proven innovators such as Toyota. So Detroit has staked its survival on Asia.

Remember, it was 100 years ago, in 1908, that Ford introduced its own people's car. The Model T revolutionized the auto industry and brought the world into the age of mass production and Big Oil. America's love affair with the single-family car was born.

If India is headed for a similarly dramatic transformation, we urgently need to think about what it would mean for an already overheating world.

No magic bullet can reconcile mass ownership of automobiles with global warming. More diesel-driven cars mean more greenhouse gases, and ultra-cheap cars mean cutting corners on emissions standards.

Some environmentalists have high hopes about filling car tanks with biofuels, which in the United States means corn-based ethanol. But corn requires more carbon to produce than it saves as a fuel source.

Others tout plug-in-and-go electric cars. True, they produce no carbon, but if the source of the electricity used to power the car is coal, then the electric car won't save us.

On the upside, India has fewer bad habits to break than the United States. Because India has lagged in improving and expanding its roads, it has very little to undo. It doesn't have to completely change an economy that runs on oil; most of its citizens consume very little, if any.

But India seems hell-bent on catching up to where the West was in the mid-20th century, rather than sprinting to where it needs to go in the 21st.

Meanwhile, car-addled Western societies are starting to change their ways. London is taxing cars to encourage drivers to use the Tube instead. Paris has introduced a charming, affordable new system of bicycle rentals. Even New York has pledged to add hundreds of miles of new bicycle lanes and require all taxis to be hybrid vehicles.

We can only hope that India and other Asian countries emulate our good new habits rather than our bad old ones.

India is a highly status-conscious country, and no status symbol is more exhilarating than a new car. (Sound familiar?)

Its new middle class is eager to acquire the goods that only now are within its grasp, and they don't want to hear from us gas-guzzling killjoys.

Mira Kamdar is a Bernard Schwartz Fellow at the Asia Society and the author of "Planet India: The Turbulent Rise of the Largest Democracy and the Future of Our World." Her e-mail address is miraukamdar@gmail.com.

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