Carlos Ghosn this week said the small car that the Nissan-Renault combine is planning to produce in collaboration with Bajaj Auto would be even cheaper than Tata Motors’ Nano, though he did not disclose the price point he is keen on.
Let’s keep aside for now the elitist fears that millions of such ultra-cheap cars will convert our cities into a 24x7 gridlock. There is no reason why one set of Indians should enjoy the benefits of personal mobility while another should not. The entry of new competitors in this space will also put pressure on the profits of car companies, perhaps in the same way we are seeing price wars in telecom finally blowing holes in the revenues of telecom companies.
But the race to build ever cheaper cars has a broader significance. It shows that India could potentially redefine the economics of many key industries by clever engineering and radical redesign. It is worth noting that the likes of Ratan Tata and Ghosn are setting price-based goals for the engineers and designers, rather than being obsessed with speed and power. We are reminded of how Dhirubhai Ambani set an internal goal for the then-undivided Reliance Industries’ telecom business: A call should be as cheap as a postcard.
The global auto industry is at an interesting crossroads. The age of petrol will come to an end and climate change concerns are already driving a push towards alternatives such as hybrids and fuel cells.
Schumpeterian moments of radical technology change can throw a market wide open to challengers. US, Japanese and European car makers are currently ahead in the race to build a new generation of fuel-efficient cars.
But it is not inconceivable that the eventual discontinuity may arise from a lab or shop floor in India or China. It also matters that many global auto firms are in financial trouble and are culturally attuned to make and sell cars in the US rather than Asia.
India is already redefining the cost structure of the global car industry. This is just one example of what some experts have evocatively described as India’s strength in Gandhian engineering. Indian car firms should have the confidence to enter the race to find a replacement for the internal combustion engine as well.
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