The real reason Tata's Rs 1-lakh will change everything: it's green!
Tata's Rs1-lakh will debut at the Delhi's Auto Expo, which starts January 10th. The Rs1-lakh will also be at the Geneva Motor Show this March. Tata group chairman Ratan says Tata won't make a hybrid Rs1-lakh (also known as the people's car) because it would be too expensive. The Rs 1-lakh will be the cheapest car in the world and he won't make a hybrid because of the cost? I hope Ratan understands the real reason Rs 1-lakh will be a hit: it's not the low cost but the car's green credentials. Let me explain.
5 minutes and 30 seconds into the video above Ratan Tata is asked about the several thousand dollar car. He says he thinks a cheap car could be done because he already makes a car for $4,000. So, this begs the question, is a $2,500 car really anything new? Below the fold is a video of Top Gear test driving the cheapest cars you can buy today. It includes economy cars from Kia and Hyundai that you can pick up for just over $10,000. The Kia and Hyundai cost much less to make but the $10,000 mark is crossed once you take into account (as Jeremy explains in the second video below the fold) the added costs of shipping, taxes, middle men, etc etc etc.
If the Rs1-lakh comes to the states, I expect it would be priced, at best, several thousand dollars below the $10,000 mark set by Kia and Hyundai. Breaking the $10,000 price ceiling for a car will be an achievement but by itself, I don't think price will be the game changer everyone imagines. You still have to pay for insurance, fuel costs, repairs, parking, etc and lets not forget something that Top Gear reminds us of in the videos below: economy cars really, really, really suck. Just because the Korean car makers are getting a little competition from India and prices might fall won't make people suddenly like economy cars.
Go below the fold to read why Rs 1-lakh is a game changer.
[Source: Google video, Economic Times, Business Standard, YouTube, Yahoo Autos]
So what is Tata doing right if they are just another economy car company? Two things. First, they focused on fuel efficiency which no sub-compact car company has done before. The Rs1-lakh will get 59 miles per gallon and I bet you will see things like weight reductions in other sub-compacts and a greater focus on fuel efficiency as the Rs1-lakh takes market share. Second, they allow their cars to be used by companies to make air cars and fuel cell cars. Electric cars companies find it difficult to get a car glider (a car without the engine), but Tata reached out to companies with interesting green technologies.
If Tata just focused on very high-mileage, green car technology and did not mention cost at all, the excitement would be just as high for the Rs 1-lakh. In fact, I would not be surprised to see the prices for the Rs 1-lakh go up a lot with over-priced options as they notice interest from people looking for low operating cost and green technologies alone. Take heed, Kia and Hyundai: Tata is using Toyota's playbook, so don't be like GM in the recent past by denying the logic and excitement of green cars, then lose market share.
Reader Comments (Page 1 of 1)
Lascelles Linton 6:35PM (1/06/2008)
Before anyone says anything, yes, I left out the Chevy Aveo and I am sure you can name (and please do!) a sub $10,000 car from x years ago, in whatever country like the FSM Niki and I did not mention leasing or car share or even the used car market ... but please try to look past a shallow look at the cheap car market at general idea of the article. Thank you :D
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rgseidl 7:00PM (1/06/2008)
Most of the vehicles on India's roads are two-wheelers with two-stroke engines. If Indians do want to switch to something with four wheels and a four stroke engine, it'll be because they can finally afford to do so. Two adults and 2-3 growing kids on a scooter is a hairy proposition.
The situation is very roughly analogous to that of Europe in the mid-1950s. Buying a car allowed the average Joe to demonstrate that he was participating in the economic recovery that followed WW2. The environment had precious little to do with it, climbing the social ladder was all that mattered.
Tata's RS1-lakh car will be small and spartan by today's standards, much like the original Fiat 500, Mini and BMW Isetta were in their day. That does mean lightweight and therefore easy on the gas, but fuel demand will still be higher than for the two-wheelers the car replaces. Moreover, the already high death toll on India's notoriously congested and dangerous roads will probably increase.
The car won't make it to the US because meeting safety and emissions standards there would make it a losing proposition.
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Manvinder Singh 11:57PM (1/06/2008)
I disagree,
Tata's 1 lakh car is primarily targeted at the Indian two-wheeler segment.
Picture this.
An average two-wheeler in India wont cost more than $1000. The current cheapest car in India is the Maruti Suzuki 800cc which costs around $5000-5500.
The next cheapest option is the Suzuki Alto (~$7000). The Alto and the 800cc are the no. 1 and no.2 most selling cars in India because there is a huge lower middle class which is moving up the economic buys one of these two as there 'first car'. Its a big big event in Indian families when daddy brings home the Maruti 800.
Tata wants to bring a disruption in this trend. By offering a half priced option to the Maruti 800. Its adding a step in the ladder between the Bajaj scooter and the Maruti 800.
Sadly, nobody in India buys cars because they are green (yet). The electric car Reva sells more cars in London (G-Whiz) than probably in the entire country combined.
Btw, the popular perception amongst Indians is that the car is going to be an environmental disaster as it would not replace existing driving options ( I dont see myself changing from a Suzuki Swift to a Tata 1-lakh car) but it would simply increase the number of cars as a whole. Add to this the problem of lack of road infrastructure in cities like Bangalore and Mumbai and we see a disaster on our hands.
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Lascelles Linton 10:03AM (1/07/2008)
I am surprised you both don't think it will come to the states. Comments are always so surprising :D They clearly have targets on Europe and Australia. I just wrote about Air Car releasing this year for $3,600 Euros to $8,000 Australian dollars. With all the loop holes in the American system and the Nissan rumor, you don't think something will happen? Hey, that gives me an idea for an article...
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fred schumacher 8:35AM (1/07/2008)
Don't pay any attention to Top Gear. They're a bunch of jokers who do silly stunts to get a laugh. They're perennial adolescents and cars are their toys. When it comes to understanding transportation they're clueless. That can also be said for most of the automedia.
Tata has joined Mitsubishi and VW in understanding the importance of automobile morphology and the needs of basic point-to-point transportation. The 1-lakh joins the iCar and the Up! with high volumetric efficiency, no overhangs, parsimony/no excess fat or complexity, function over fashion, rear engine/transmission in compact package, crash absorbing front. Welcome to the new world of the RENO (Rear Engine No Overhangs).
This is the car William of Ockham would have designed. Non sunt multiplicanda entia praeter necessitatem. Keep it simple. What is the task and then use the simplest path to meet its needs.
Honda's hydrogen fuel-cell car provides the same fuel mileage as the Tata and about the same interior space at a cost 400 times higher. A true production vehicle won't see that much spread, but the Tata provides a lot of efficiency at extremely low cost. Its marginal rate of return is very high.
I hope Tata buys Chrysler's auto production capacity away from Cerberus and goes into production in North America. Let them keep Jeep.
The
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cody 9:40AM (1/07/2008)
I drove a Kia Rio, the smallest Kia in the USA. It didnt suck, and I drive a 07'335xi
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super390 9:40PM (1/07/2008)
The fastest way for this car into the US is as an NEV. No crash testing, no smog certification. Not sure if that's good from an image standpoint. Then again, Tata owns Jaguar now, so who cares?
There is a bottom-feeding importer who is trying to bring Russia's cheapest microcar into the US as a converted NEV with lead-acids and a standard golf cart motor. I was surprised that a golf cart motor could take a 1400 pound car to 25 mph. We won't run out of golf cart parts in the US anytime soon.
A vehicle like that might use about 80 wh/mile in urban driving with regenerative braking. So a pair of Trojan 1440 wh batteries, taken to 80% charge (it's a tough battery) might yield 29 miles range at a cost of $150 and 133 pounds. The problem is that going beyond that pushes on the total weight of the vehicle. Any other battery chemistry will force up the price at least 100%.
I think at $4000 an NEV like that would be a bargain compared to current offerings. I wonder how high the price of gasoline would have to rise in India for buyers there to take a $1500 premium to go electric?
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