Thoughts on the Tata Nano

The Tata Nano was launched this past week amidst much fanfare and hype. People have been quick to laud Ratan Tata for belief in the execution of this 1 lakh car that places itself within the reach of the common man while still giving its manufacturer business viability. One may even go so far as to say that Tata has gone one step further than Maruti in pushing a car that is closer to middle class accessibility.

A few facts before some interesting questions about the Nano :

• According to this estimate the annual car market in India is 1.4 million cars. The same article estimates the total number of 2-wheeler sales in the country to be 5 times the car sales - that is 7 million.
  
• The Tatas plan to put on the street around 5 lakh cars over the next 2-5 years ( 2.5 % of the annual car market). This is a short term figure and assuming they will even capture 10-20% of the 2-wheeler market, one can expect almost 7 lakh Nanos ( 10% of 7 million) in the best case or 14 lakh Nanos (20% of 7 million) in the worst case. In the latter case, the annual market for car sales virtually doubles! Insane, isnt it? All of that isn't happening in a year though, it will take a while to get so many cars on the street.

The Nano is seen in a positive light by many. Some, if not the most publicized positives, are :

- The Nano is seen as a replacement for '2-wheeler families' who can afford the 1 Lakh price tag. From the viewpoint of traffic safety and customer convenience, this is a big plus. While I do not have the numbers, Indian traffic scenarios have a high percentage of accidents due to 2-wheelers. One can expect this number to come down significantly assuming the Nano eats into the 2-wheeler segment.

- Tier B and Tier C cities could well see people going in for the Nanos, especially as the price tag will be viable for people in these cities. On a positive side, more cars in such cities *may* lead to better infrastructure and transport initiatives for these cities. (There's a flip side but I'll come to that shortly)

- On an emotional level, the Nano will see greater convergence between aspiration and accessibility for the common man. Inclusive Growth as we call it will see more people owning cars.

Some of the publicized and not-so publicized negatives now :

- The Nano is all set to congest and burden infrastructure in metros to a level we may not be prepared for. As metros struggle with flyovers, ring roads and other measures to grapple congestion, the Nano means more cars on roads and this may well see longer lines and waiting at signals. One can even make a case for 2-wheelers since they tend to reduce congestion and are able to efficiently use road space and find their way through traffic.

- Fuel emission. The Tatas claim that the Nano meets Euro III and IV norms, which is a good thing. What remains to be seen is whether pollution standards in cities can be maintained with more cars. Obviously this is not an issue directly linked to the Nano as long as it conforms to existing emission standards.

- Fuel consumption. Again a side-issue, nevertheless an important one. More cars will imply more fuel consumption. While the fuel consumption per car is not likely to be an issue, the net fuel consumption as more Nanos come on the road will be. Again, what does this mean for the end customer's pocket and the country's fuel consumption in general remains to be seen.

- Urban sprawl. A lot of people I know have debated this issue. As more cars are bought, it is observed that cities also tend to grow. Often people do not hesitate to travel to work places in city centres from suburbs or from the edge of cities. Does this imply greater congestion in city centres? In the face of lack of infrastructure to support speedy transport, will car-owners simply chuck the car and prefer mass rapid-transit systems? Or will more affordable cars lead to the slow death of public transport and mass rapid transit systems because not as many people will use it as before?

While it is easy to construe this Nano launch as India Shining and get wrapped up in jingoistic fervour, the car itself will raise some interesting questions and demands.

- Will local governments take the cue and speed up infrastructure development in already congested and soon-to-be congested cities? This is at best an optimistic thought given the speed at which our governments are known to execute such projects.

- What will be the role of public transport amidst new and affordable car markets ? I think rapid transport could well get a shot in the arm if infrastructure does not take off.

- As cities grow (and they are likely to), will businesses move their operations to where their employees reside? Highly unlikely considering not every business has this flexibility.

It is one thing to think that Ratan Tata has opened a Pandora's box unwittingly in the process of making dreams come true. It is another if the Nano sets the ball rolling for better roads and infrastructure.