The world’s cheapest car, the Nano, rolls out in India this week. Manufacturer Tata Motors says it will change the way Indians drive, for the inauguration places the personal car within the reach of people who once could only dream of owning one. Indeed, the Nano has been marketed as an ‘aspiration’—the right of every Indian to a car. No quibble here. There is no question an affordable car is better than an expensive one; or that a small car, being more fuel efficient, is better than a big one. No question, too, that every citizen of India has as much right to a car as every citizen of America, where vehicle numbers are obscene: some 800 vehicles for 1,000 people (old and young) against our measly 7 per 1,000 people (urban and rural).
Let me roll out my concerns. The issue is not the Nano. The issue is all cars and whether cars still are the future of the world economy. Over years, in different continents, vehicle manufacturers invented and re-invented this appliance for self-mobility, for different market segments. In India, two-wheeler manufacturers can rightly claim that over the 1980s they, too, provided technology innovation and affordable mobility for vast numbers. They can also claim they were the first to break the class barrier. Then, in the early 1990s, when Sanjay Gandhi’s people’s car, the Maruti 800, hit the roads, gender barriers also fell—this was a car women could drive and it gave new freedoms. No question, therefore, of what Nano will bring to new owners.
But this launch comes at a time when the production of personal vehicles itself is becoming old-economy. It is not surprising the car industry has become the first big dinosaur of the 21st century. Every country today is working to bail out its automobile industry. The big four companies are still on the brink of closure. There is huge over-capacity in the world of cars—sales are down and the industry is bleeding. You might think it is a temporary phase: cars will zoom again, as recession blues turn pink. But this is far from the reality.
The fact is cars could only make it big in the old economy because they were highly subsidized, or incentivized through cheap bank loans. If people could not afford the next car, the bank worked overtime to make sure the loans kept rolling, even if that eventually broke the bank’s back. But that is the past. The future, too, will not be too different. The bank might recover, but the cost of the fuel to drive the dream vehicle will not. Oil experts will tell you black gold prices will rise again, when the world economy re-boots.
Add to this what can only be called the mother of all subsidies—the free-ride personal vehicles have got, in the world, to emit large amounts of greenhouse gases and pump them into a common atmospheric space. As the rights over this ecological commons will be determined, as they must, carbon dioxide emissions from the cars of the rich will have to be limited and taxed. This will cost. It will make driving more expensive.
The global automobile industry knows it is not our future. It is our past. Unfortunately, this message has not yet come home. Unlike the car-saturated West, we still have a large number of people who are potential buyers. But the fact is in India, because of the even greater price-sensitivity, personal vehicles are viable only if they are subsidized to the brim.
Take the Nano. My colleague Chandra Bhushan has calculated the incentives rolled out by Narendra Modi’s Gujarat government amount to a fat write-off—as much as Rs 50,000-60,000 per this Rs 1 lakh car. In other words, its cost is so low only because the state has doled out a largesse. Every past and present automobile has got this benefit (more or less). We can afford a car because our government pays for it. We can also afford it because we are not asked to pay the price of its running—the tax on cars is lower than what buses pay in our socialist country. We do not pay for its parking, a cost, which, if added, would make us think twice before we bought or drove our new dream vehicle, whatever the variant.
As the Nano rolls out, think of how we subsidize the car and tax the bus. Public buses pay taxes as commercial passenger vehicles, each year and based on the number they carry. In many states, they pay over 12 times more tax than cars. Think of the public transport bus service in your city and ask how much of its revenues go in taxes: half, in most cases. Think also that the same Tata company, that has managed to roll out the car of our dreams in record time, does not possess the capacity to build the buses cities need.
Such an old-economy approach becomes completely perverse when one considers that already today, and definitely tomorrow, the greater proportion of people who are or will commute are using and will continue to use public transport—a bus or a train. Today, as much as half of rich Delhi takes a bus, and another one-third walk or cycle because it is too poor to even take the bus.
Think again about the car inequity in India—7 per 1000 people. Can the government write off the costs—Nano style—so that all can buy the car? Can the government pay for our parking, our roads and our fuel, so that all can drive the car? If not, then is this the right right at all?
The issue, then, is not the right to own a Nano. The issue is the right to a slice of the public subsidy so that everybody has the right to mobility. There is no other right.
— Sunita Narain
Sunday, April 12, 2009