It may be an Indian consumer’s dream—cheap cars for $2,500-3,000 (Rs1-1.5 lakh) within reach of millions of a swelling middle class. But it could also prove to be a traffic and environmental disaster.
Nissan Motor Co. and Renault SA announced last week they were studying a $3,000 car to compete in India against Tata Motors Ltd’s planned low-cost “People’s Car” (to be priced at around $2,500) to hit the market next year.
Carlos Ghosn, head of Nissan and Renault, said on Wednesday that Mahindra & Mahindra Ltd would be the “natural” partner if the company decides to produce the $3,000 car in India.
“If it’s possible to be done, it will be done in India,” Ghosn told reporters in Bangkok.
“If it’s done, it will be done for Renault and Nissan,” he said. “Mahindra would be the natural partner.”
For its supporters, cheap cars like these are what the Volkswagen Beetle was to Germany or the Mini to England— the spoils of an economic boom for aspiring middle classes. To its detractors, India will see an explosion in traffic and pollution on its already clogged roads from its more than 1.1 billion inhabitants.
It will add to India’s CO2 output just as many Western nations push the Asian giant to control emissions. “India just can’t cope with this kind of pace of expansion,” said Anumita Roychowdhury, associate director at the Delhi-based Centre for Science and Environment. “It’s just not sustainable, whether from an environmental point of view or in terms of congestion.”
The World Bank this year said air pollution in India was already “of great concern”.
India has low car ownership rates—there are seven-eight cars per 1,000 people compared with 300-500 cars per 1,000 people in many Western nations, but annual passenger vehicle sales in India are expected to double to two million units by 2010.
In Delhi alone, more than 200,000 vehicles are added to its streets every year, where they battle with cows, rickshaws and motorbikes for space.
It’s all part of a middle class that will expand by 10 times from its current size of 50 million to 583 million by 2025, according to consultancy firm McKinsey.
“It’s a colossal market,” said Murad Ali Baig, an auto columnist. “The low-price car market is already robust. Imagine what will happen when even cheaper cars are available? “The question is— where are all the bloody roads to cope?”
The government is busy trying to build and widen highways across the country, including a highway system that will link Delhi, Mumbai, Chennai and Kolkata.
But air pollution is already at “critical levels” in more than half of India’s main cities, according to the Centre for Science and Environment.
Environmentalists say that while new cars will have emission limits, these are still 10 years behind European levels.
“Cars in India will be on the road for between 10 years and 15 years and no one will monitor to see if their emissions worsen over the years,” said Roychowdhury. “India is creating a car culture just when other countries are trying to learn from their mistakes.”
But many Indians who weave their motorbikes in between traffic would jump on the chance of the comfort of a car. “If I can buy a Rs30,000 scooter, then I can now hope to buy a car for Rs100,000 when it comes out. Now, people like me can think about owning a car,” said Aman, a 39-year-old Indian chauffeur who earns about $150 a month. “I drive cars for my employers. Maybe I will drive my own car one day.”
Officials say they are boosting public transport—pointing to metro plans in major cities.
Kamil Zaheer of Reuters and AFP contributed to this story.