I have always been of the view that every economy should be seen from different perspective. It's just possible that one size will fit all. I had discuss about this for mobile phone in my previous article "Affordable mobile phone" that i had originally wrote in a Feb 2004 post when I was working in France. I am sure this is true for every product. Requirements of every market are different for different reasons. Most of the people first look for basic commodities and particularly in Asian countries consumers are very much aware of what they need. It is always not easy to sell more just by using marketing and advertising. Advertising can increase sells to an extent but it will not help in achieving full potential. Same is true in case of cars in India. It is true that having car is still a status symbol in small cities but it has to be taken in very literal sense here. People in small cities are not much brand conscience and they are more concern about the total cost of the car. A cheaper car with high running and maintenance cost will not be preferred option. Second hand car is not mature in India and many a times second-hand cars are not preferred because of prestige issue so need for a affordable car has always been there. As economy is booming and middle class is having more and more money to spend, aspirations are also rising and some of the two-wheeler companies have successfully exploited this by selling Rs 60,000 + (US$ 1500) motorbike in India. I always wanted to buy a motorbike but this was too much to pay for an two wheeler in India so I never bought. A new car was costing almost US$ 5000 minimum so consumers have no other choice but to buy a motorbike and more expensive it is more prestige it brings to the family. To fulfill this demand two players came into market, first the two-wheeler manufacturers (Bajaj Auto, Hero Honda, TVS Motors) with joint ventures with foreign (mainly Japanese, Honda, Kawasaki, Yamaha) brands and second, banks. After 2001, banks started giving loan very easily for the motor vehicles (it is one of the most secure loan because of compulsory insurance policy in India and this is in the name of bank till the loan is paid in full). Easier it was to get loan from bank, easier it was for the companies to launch new models with high energy engine. Though after a point it was just complete non-sense to increase the horse-power of the engine. When it is difficult to drive a motorbike over 30 Km/hr, why on earth company needs to sell a motorbike with 180 cc engine. It was complete waste of money and natural resources (e.g. precious oil). But without any alternative this system was working perfectly fine.
Sometime in 2005, Ratan Tata, chairman TATA group talked of his vision to produce a car for US$ 2200 (Rs. 100,000) in an interview. That was the beginning of claims and counter-attack on each other that such a car can not be produced or this will not be car etc etc. It was obvious that two-wheeler manufacturers were threatened by this car because they were enjoying high profit margin without doing much. These days, there are so many features in the dashboard those are just not required by everyday user in a small city of India. What is required is a car where a family of 5 can sit comfortably and it runs by engine. Speed is never desire factor because most of the crowded street never allow anyone to run a car too fast. Four doors are not always required either. Security locks, AC, music system are not required either. If engine is put in the back, it will also save cost in power transmission assembly. And it is not always required for a corporation to earn huge profit by selling cars, a group like TATA can earn money by selling steel too. Perhaps it is less highlighted fact that most of the steel for making cars comes from TATA Steel. If the sell of this car goes up, sell of steel from TATA steel will go up and the group will earn profit there. this is the benefit of being conglomerate. Even if we discard this factor, fact is lot of money goes in taxes in the form of excise, income tax on earning of manufacturers, income tax of dealers, sales tax (VAT), profit of dealers. If all these taxes and profits can be reduced to half, this car can be produced with high standards.
That is the India story. but this does not end here. This same car with little high standards can be sold in many other countries too. Price tag may go little higher (may be upto US$ 5000) but that is still a good deal. I am sure many countries in Africa will be become biggest importer for this car because of already well-known brand name there. TATA groups is also aggressively pursuing Ford to buy Jaguar and Land Rover. These brands will give TATA group a global reach to sell their made-in-India cars.
Lets wait and see what they unveil on January 10 in Auto Expo in New Delhi, India.
Sometime in 2005, Ratan Tata, chairman TATA group talked of his vision to produce a car for US$ 2200 (Rs. 100,000) in an interview. That was the beginning of claims and counter-attack on each other that such a car can not be produced or this will not be car etc etc. It was obvious that two-wheeler manufacturers were threatened by this car because they were enjoying high profit margin without doing much. These days, there are so many features in the dashboard those are just not required by everyday user in a small city of India. What is required is a car where a family of 5 can sit comfortably and it runs by engine. Speed is never desire factor because most of the crowded street never allow anyone to run a car too fast. Four doors are not always required either. Security locks, AC, music system are not required either. If engine is put in the back, it will also save cost in power transmission assembly. And it is not always required for a corporation to earn huge profit by selling cars, a group like TATA can earn money by selling steel too. Perhaps it is less highlighted fact that most of the steel for making cars comes from TATA Steel. If the sell of this car goes up, sell of steel from TATA steel will go up and the group will earn profit there. this is the benefit of being conglomerate. Even if we discard this factor, fact is lot of money goes in taxes in the form of excise, income tax on earning of manufacturers, income tax of dealers, sales tax (VAT), profit of dealers. If all these taxes and profits can be reduced to half, this car can be produced with high standards.
That is the India story. but this does not end here. This same car with little high standards can be sold in many other countries too. Price tag may go little higher (may be upto US$ 5000) but that is still a good deal. I am sure many countries in Africa will be become biggest importer for this car because of already well-known brand name there. TATA groups is also aggressively pursuing Ford to buy Jaguar and Land Rover. These brands will give TATA group a global reach to sell their made-in-India cars.
Lets wait and see what they unveil on January 10 in Auto Expo in New Delhi, India.
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