[tt] WP: It Costs Just $2, 500. It's Cute as a Bug. And It Could Mean Global Disaster.

[Premise Checker]

It Costs Just $2,500. It's Cute as a Bug. And It Could Mean 
Global Disaster.
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/11/AR2008011101998_pf.html

By Mira Kamdar
Sunday, January 13, 2008; B03

The most hotly anticipated auto show of 2008 isn't the one set to
begin in Detroit next week. It's the New Delhi Auto Expo, which
opened in India three days ago 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 never seen before.

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, very, very few Indians can afford one. Even
at $2,500, the people's car costs 10 times more than 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. Maruti
Suzuki, an Indian-Japanese joint venture that brags that "more
than half the number of cars sold in India wear a Maruti Suzuki
badge," showed off a new "mini-car" of its own. And Ford tried to
steal some of Tata's glory by announcing just days before the
Auto 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 (as of 2006 the
world's second-largest car market) 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, which just
last year unseated GM as the world's biggest auto manufacturer
and pushed Ford out of the No. 2 spot it had enjoyed in the
United States for 75 years. So Detroit has staked its survival on
Asia.

To make the move, U.S. automakers need capital. Maybe that's why
Ford is selling off its prestigious Range Rover and Jaguar
brands. Just a few years ago, these brands, which exude an
oh-so-British sense of privilege, were part of a core strategy to
capture a piece of the high-end luxury automobile market. But
Ford is trading in prestige for practical global business
realities. In one of globalization's supreme ironies, cash-rich
Indian companies are snapping up the brands and companies left
behind by the mad rush to profit from Asia's billions. The two
top contenders to buy Range Rover and Jaguar from Ford? India's
Mahindra & Mahindra and Tata Motors. Surely we are at a
turning point when an Indian company -- in just one week --
unveils a car so cheap that U.S. manufacturers simply can't
compete, for a market they've never tried to tap, and emerges as
the likely buyer of two of the world's most expensive luxury
brands owned by that most iconic of U.S. companies, Ford. And
surely the glow of the American century is beginning to dim.

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. An assembly-line worker could purchase a new Model T with
just four months' wages. Demand soared. America's love affair
with the single-family car was born. Highway and road
construction surged ahead of mass transit. City tramways were
removed to make way for broad avenues carrying automobiles. If
India is headed for a similarly dramatic transformation, we need
urgently 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 -- the most common
source of electricity in the United States and the preferred fuel
for the scores of new plants being built in China and India --
then the electric car won't save us. Hydrogen-powered cars still
lie years in the future, leaving plenty of time for India and
China to put millions of new diesel cars on the road.

On the upside, India has fewer bad habits to break than the
United States. Because India has lagged in improving and
expanding its roadways, 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, of it.

As India becomes a car culture, it can find far better role
models than the United States. Rather, India should look to Japan
and Western Europe, with their super-modern, super-efficient
public transportation systems. India is blessed with an extensive
rail network that can be upgraded and modernized. New Delhi,
proud host of Auto Expo 2008, is also home to one of the world's
most impressive mass-transit systems, the Delhi Metro.

But while other Indian cities have asked the Delhi Metro team to
build mass-transit systems for them, the most visible pieces of
urban infrastructure in India are all geared for the automobile.
"Flyovers" carry cars above overcrowded city streets, and
multi-lane highways cut through old neighborhoods, sometimes
literally slicing homes in half. Pedestrians sprint perilously
across these new roads, which often lack crosswalks or
overpasses. Millions of bicyclists, who have no designated lanes
to use, weave dangerously in and out of stalled, steaming traffic
or try to pedal ahead as best they can on pitted, crumbling
shoulders.

In fact, India seems hellbent 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. Traffic-choked 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, home of honking gridlock, has pledged to
add hundreds of miles of new bicycle lanes, tax cars along the
lines of the London model 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, especially those that raise their eminence, and they don't
want to hear from us gas-guzzling killjoys. As one college
student told me last year: "Just when we can finally start to
enjoy the things you people have had for decades -- cars, air
conditioners -- you tell us, 'Sorry, too late, you can't now.' I
mean, you created this mess. You won't reduce your consumption,
but you tell us we can't increase ours."

She has a point.

miraukamdar at gmail.com

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."