Nano - a better review

I found R Jagannathan's review of the Nano in the context of India's urban traffic issues in DNA's Opinion section interesting.

I agree with his view that the 2-wheelers occupy significant space if braking distance is considered in traffic. But this applies to traffic in Mumbai where some form of lane discipline still exists. Not so valid in others where 2-wheelers usually slot into any gap available and hence occupy less space, not that it makes for a pleasant traffic situation.

Jagannathan says that cars should be cheap but roads should be costly, charged for usage just like any other utility. So, the more one uses it by private transport, the more one pays. So, only the rich will use the road more often even if more people have cars. This point though is a valid one to control traffic congestion.

The other issue is the age old one of improving public transport, nice in theory, not so in practical implementation. It will need political will, a most risky option for any politician. This 'will' can only come to the fore if it will cost an election not to use it.

The larger Nano issues

As mentioned in my earlier post, if it succeeds, Nano will be a major business triumph making them Tata the dominant car manufacturer replacing Maruti.

Tata has officially launched the Nano as the world's cheapest commercial car. This is expected to lead to a rise in car ownership in India. It is considered beneficial if one is to believe the media hype surrounding it.

As with all issues, the Nano launch will have its pros and cons, its supporters and critics.

The pros

1. An affordable car to a larger population base in a country where transport facilities overall are very poor.
2. Greater mobility as a car can carry more people over longer distances, also it is less tiring as it is compared to riding a bike.
3. All households having an income enought to afford two bikes will now afford a car.
4. It helps leverage the advantage of the improving inter city transport infrastructure (albeit slowly)
5. With a larger car owning population, the government will be under more pressure to ensure good infrastructure (hopefully)
   

The cons

1. The demand for fuel will go up significantly if the car is a major hit across the country.
2. The number of road fatalities will go up what with an already poor record at current traffic volumes.
3. The poor won't have much benefit except maybe a little less strain on public transport.
4. The generally poor infrastructure and endemic corruption in corporations will mean that urban India will have more traffic stress.
5. Cities will suffer additional traffic congestion.
6. Traffic pooling, though nice in theory, is unlikely as people who buy a Nano won't keep it at home.

I might have missed a few obvious ones in both of the above. For me, as of now the cons outnumber the pros.

Nano - Tata bid to capture Indian Car Market

Though one does not know the actual cost breakup of the Nano, it is likely that Ratan Tata won't mind selling it at a slight loss. In spite of all the hype about nation building, this is a purely business decision.

• Manufacture low end product and deliver to capture market even if at an initial loss.
• Move up the value chain using the leverage as the dominant car manufacturer.

Tata already has some penetration on the car segment through its Indica series. The Nano will strongly challenge Maruti's long hold as the numero uno car manufacturer. If it succeeds, Ratan Tata deserves full credit from a business perspective as he was willing to take that risk.

In the next post, I will look at some of the pros and cons of the Nano for India as a whole