Friday, January 11, 2008

how green is a mini?

Tata's Nano may put millions of new drivers on the roads. It also may herald a new source of pollution.
By Jason Overdorf and Fred Guterl
Newsweek Web Exclusive
Updated: 9:26 AM ET Jan 11, 2008

The unveiling of Tata Motors' People's Car—perhaps the most anticipated vehicle in a decade—had the frenzied atmosphere of a blockbuster movie opening. For four years Tata kept every detail of the car's development top secret, and now a hundred or more photographers jostled to get the first shot. When chairman Ratan Tata, citing the first flight by the Wright brothers and the invention of the computer, pulled back the curtain on the newly named Nano, it turned out to be a four-seater, a bit more than three meters long, with a 642cc engine and made of plastic and glue instead of welded steel.

Despite speculation to the contrary, the car will retail for 100,000 rupees, or $2,500. ("A promise is a promise," Tata said.) At less than half what Maruti Suzuki, the current market leader in India, charges for its cheapest model, the Nano is priced to get urban Indians off their motor scooters and motorcycles and into a car. It is expected to inspire other manufacturers to develop cheap cars and force Maruti Suzuki and others to slash prices, bringing millions more new cars onto Indian roads over the next five years. But the prospect of a flood of new drivers in a nation of 1 billion people has inspired a backlash against the Nano from environmentalists, who fear it's a major new source of pollution.

The concern is that a supercheap auto will encourage development on the American model—relying on the car rather than mass transit. More drivers will add to air pollution, already a critical problem in more than half of India's cities, and to the carbon in the atmosphere that causes global warming. "This car promises to be an environmental disaster of substantial proportions," says Daniel Esty, an environmental expert at Yale.

Tata has worked hard to get out in front of its critics, at least on air pollution. The first models to roll off the company's assembly line in Singur, West Bengal, will get about 20 kilometers per liter of gasoline (50 miles per gallon) and meet stringent European emissions standards that have yet to be adopted in India. Tata insists that the Nano will pollute less than the two-wheelers it is intended to replace and get roughly the same gas mileage as the Maruti models. The Nano's catalytic converter appears to reduce most pollutants by about 80 percent—not as much as the 99 percent Western models do, but still a big reduction. Environmentalists, though, say that it will probably fail after a few years on the road. The reason: Indians typically don't keep their autos in tip-top shape. When the catalytic converter fails, emissions of pollutants could shoot up fivefold.

The story gets worse when you consider greenhouse gases like CO2, which escape catalytic converters. The more gas burned, the more CO2 released. The Nano is likely to replace motor scooters and motorbikes, which get about 54 kilometers to the liter, more than twice what the Nano gets, according to Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis, who has studied the situation in Delhi. That means fuel consumption and carbon emissions will almost certainly rise. "Every new purchase of this vehicle is increasing fuel use [per passenger] by a factor of two to seven, depending on how many people are in the car," says Sperling. That doesn't even account for a decline in fuel efficiency if the cars are not maintained well.

Western environmentalists know they have little moral standing to criticize Indians for wanting cars, particularly one that meets the highest Western emissions standards. But they're rattled in part because they didn't see this coming, and will have to recalculate projections for the buildup of greenhouse gases based on a world of many more drivers. "In none of our reports did we assume there'd be a car like this," says Judy Greenwald, director of innovative solutions at the Pew Center on Global Climate Change. "This is a new category. It will affect everybody's projections."

Indian leaders must also now grapple with the prospect that their nation will become an auto-based society like the United States much faster than expected. Tata's chairman chafed at the suggestion that his firm should be held responsible for the state of pollution in India—or the planet. "Were we to succeed and sell 500,000 small cars every year, we would then, at the end of five years, constitute approximately 2.5 percent of all passenger vehicles in this country," Tata said. "We could hardly be considered a nightmare."

the man behind the $2500 car

CEO Ratan Tata defends the Nano's environmental credibility
By Jason Overdorf
Newsweek Web Exclusive
Updated: 1:03 PM ET Jan 11, 2008

Four years ago Tata Motors embarked on an ambitious project to bring millions of people in India and elsewhere into the car-owning class. Today Chairman Ratan Tata unveiled the result: the Nano, a stripped down car with a 624 cc four-stroke engine that can seat four passengers. The car is a feat of engineering-it's made from plastic parts held together with adhesives-and meets all India's environment standards. Partly because of the visibility of the project, the Nano has become a lightening rod for criticism on the environmental impact of cars. Tata talked with NEWSWEEK's Jason Overdorf at the Delhi Auto Expo on the eve of the announcement. Excerpts:

NEWSWEEK: Some people have said this car is going to be a disaster for the environment. What impact will the introduction of these vehicles have on pollution levels in India?
Ratan Tata: Our car will meet all emissions requirements in India and in fact the emissions requirements overseas, present and future. Our engine today will meet Euro 3 [emissions standards] today and with small tweaking will meet Euro 4. It will therefore meet all the specifications of emissions that exist in India. We will emit less pollutants than the best two-wheelers in the country. I don't mean per passenger mile or anything. I mean per vehicle. So I am both amused and intrigued by why we are being panned as an environmental disaster before anyone even knows. And in fact the major NGO that's making much of the noise [the Center for Science and the Environment] already knows because I responded to them in great detail with what our numbers were. That appears to have been ignored.

One other point you made is that the sales numbers are not going to be so huge initially, right?
We're building a plant for 250,000 [cars]. It will be expandable to 300,000, and if you mirrored it that would be 500 or 600,000. It would be a challenge to get vendors and a whole infrastructure in place that would enable us to just endlessly build cars, apart from the resources that would be required. So if somebody thinks that we will be putting 2 million cars or 4 million cars into the market, I think that's a bit absurd. Today, with 4, 2 and 3-wheelers, every year [India adds] about 7 million [vehicles] in the market. [India] produced 1.4 million passenger cars last year, so it's kind of flat. What would this car do? Would it sit on top of that by adding 2 and 3 and 4 million? Would it wipe out everybody else? Would we produce and sell 7 million cars? No. It's reasonable to assume that we might be looking at in the next four to five years, maybe a half a million cars, which would be a very good number. No single platform would have that kind of number. What would half a million cars be as a part of an annual production that at that time, with 2-wheelers, 3-wheelers and 4-wheelers, might be 12 to 15 million vehicles? I don't see what the concern is, unless people are seeing ghosts.

I just want to raise one other thing. The noise is being raised by people who are doing nothing about pollution in a holistic manner. Nobody is doing anything about the total population and pollution from two-wheelers, from power stations, from generators. All of this has to be viewed together if one is truly worried about the environment. There are two scooter plants being established today-Honda and Suzuki-each one has about 250,000 unit capacity when they come online. They're not said to be polluting, they're not said to be congesting, they're not said to be unsafe. It's only us.

The other big question for everyone is how you brought down costs so dramatically. Is there a shortlist of two or three big innovations you made to cut costs?
When you start an exercise like this you dimension your product, and we dimensioned the size of our product. When you shrink the size of the product you obviously reduce the amount of material and material is the largest single element in [the cost of] a product. Then there are hundreds of innovative ideas that have brought the price down, or have in fact generated the kind of low costs that we have developed. And there are more on the anvil that will come from vendors, and not all of them will be based on volume.

Are there any that have the potential to change the way the traditional big guns in the auto industry are making cars?
The whole process of putting a car together perhaps needs to change by welding going to adhesives at some point in time. [Among] the most expensive parts of an assembly process are the paint shop and the press shop, so [global manufacturers will move to] materials that will lower the [capital investment] and operating costs [for] those types of units.

India has been talked about as becoming a small car manufacturing hub. What impact will the Nano have on that future?
It will only enhance it. It won't hurt it in any way. Finally, the people are going to decide if this car is going to do what everybody fears it will do or not. Not us. We have as a company put together a concept and converted it to reality, and we believe it is a very interesting value proposition but finally the market will need to decide. Who enters and who competes and what that product is going to do to us is a function of who addresses what the customer wants.

Renault-Nissan has already announced they are going to get into this game. Do you anticipate that this will be an active space that a lot of companies want to get into?
It will be. There's been self-denial that this space is a real space until we addressed it. We will have several people following us, including big companies, and we will need to raise the issue of why those big companies did not address those areas earlier. But possibly the first national car company to address it will be a Chinese company. The day they consider this to be an important segment of the market we will see a Chinese company come closest to us or even break our barrier.

Your coming into this market is somewhat similar to the entrance of Suzuki in the 1980s, in that it has the potential to create huge volumes. In working with suppliers, have you seen inklings of the kind of sea change that the launch of the Maruti 800 engendered?
We have. There was first a lot of disbelief among suppliers that we were really serious about this business. In West Bengal we conceived of a situation where they would be a campus-with ourselves and our vendors on the same campus. The acceptance of this and the investment in this was minimal at first. But now we can't provide enough space in our campus. Suddenly vendors are seeing large volumes, the ability to amortize investments they would have to make that they were not willing to do, and they've ceded their place to other vendors who were willing to do it. Now some of the majors want to come back in and play a role. In fairness, somebody else did take the risk, did place their faith in us, and they're there.

Tuesday, January 08, 2008

the world's cheapest wheels

When Tata Motors set out to build a $2,500 car, people said it couldn't be done. This week the company will unveil its vehicle of the future.

By Jason Overdorf
Newsweek (January 14, 2008)

Tata Motors is best known as a maker of industrial trucks from India's rust belt that launched the country's first completely indigenous passenger car, the Indica, 10 years ago. Next week the company will unveil another revolutionary new vehicle that will throw down the gauntlet in the highly competitive race to capture the first-time-buyer segment of the world's automobile market. Tata's not-so-secret weapon: the car is cheap. Unbelievably cheap.

Back in 2003, when chairman Ratan Tata revealed his plans to build a car that would cost less than 100,000 rupees (about $2,500 in today's dollars), rival carmakers said it couldn't be done. As time passed, and Tata kept at it, they hedged. Maybe it will be more like an enclosed motorcycle, they said. As tantalizing details about the car's design leaked, they started to get worried. Finally, in April, Renault-Nissan's Carlos Ghosn announced his own plans to build a $3,000 car in partnership with Indian motorcycle maker Bajaj Auto.

The move signaled that the race to create the world's best-selling starter car was on. The stakes are incredibly high, which is why the international auto industry is descending in unprecedented numbers on the New Delhi Auto Expo, where Tata will reveal the design for its People's Car for the first time on Jan. 10. The vehicle could have almost as large an impact in India as the original Volkswagen had in Germany back in 1938—perhaps doubling the size of India's passenger-car market overnight, and delivering a much-needed boost to the manufacturing sector in a country that has long suffered from so-called jobless growth. By encouraging parts suppliers to develop innovative ways to slash costs, it could also help build a highly efficient supply chain for the Indian automotive industry.

But the tremors won't be felt only in India. Small cars like VW's Gol, Nissan's Tsuru and Renault's Clio are already the top sellers in Latin America and Europe, and PricewaterhouseCoopers estimates that about half the growth in automobile sales between 2006 and 2011 will come from Brazil, Russia, India and China, countries that are expected to buy mainly small, cheap vehicles. Even in gas-guzzling America, where the cheapest car is today the $10,000 Chevy Aveo, buyers are warming up to subcompacts. As a result, virtually all of the world's major automakers are striving to develop cheap, fuel-efficient small cars that can first be sold in emerging markets, then exported to the West.

Until the past year, these cars were meant to be sub-$10,000 vehicles like the Renault Logan. Now, with Tata setting the limbo stick much lower, the price target has been slashed to below $5,000. Add to that Tata's pole position in the bidding to buy the premium Jaguar and Rover brands from Ford Motor Co., and it truly looks like the Indian carmaker has arrived.

If successful, the People's Car could help shift the growth dynamic of the entire Indian economy, which has until recently been based more on service than manufacturing expertise. When Suzuki first brought the Maruti 800 (currently the world's cheapest car at about $5,000) to India in 1983, it completely transformed the domestic component business, laying the foundation for India's current emergence as an auto-parts hub. Suzuki's Indian factories have always built for the domestic market, but recently it announced it will sell an Indian-made hatchback in Europe next year. Others have also set up production in India, attracted by its large domestic market and growing components expertise. Hyundai has been the most aggressive in its efforts to make India a manufacturing hub. It exported more than 100,000 cars built here to Europe, South Africa and Latin America last year, and it chose India as the site for the global launch of its new compact model, the i10. But even Ford and General Motors, slower to see India's potential, have ramped up their efforts.

Analysts are even more bullish on Tata's plans. "There's no doubt this car is going to create a new [automotive] segment altogether," says Abdul Majeed, a partner in the automotive practice of PricewaterhouseCoopers. "If you look at the Indian automotive market, the bulk of it—over 70 percent—is two-wheelers. But the price gap between two-wheelers and four-wheelers has been very significant." The price tag for the People's Car is a bit more than double the cost of a midrange motorcycle, like Hero Honda's 100cc Splendor. Majeed forecasts that Tata's new car could encourage 10 to 20 percent of India's scooter and motorcycle buyers to purchase a car instead. If that happens, it would mean an additional 1.8 million vehicles sold per year—almost equal to the current size of the entire Indian passenger-car market.

Most analysts are waiting for a view of the car before pegging sales estimates—a task made difficult because Ratan Tata has played his cards very close to the vest in the three-year lead-up to the launch of the People's Car, revealing almost nothing about the design and features of the vehicle, or how the company managed to slash costs—both of which will define how the car affects the global industry. Prototypes have been as jealously guarded. Virtually all that is known for sure about the car so far—courtesy of a scripted "leak" by one of the company directors after Nobel Prize-winning climatologist R. K. Pachauri suggested the People's Car could be an environmentalist's nightmare if it vastly increases numbers on the road—is that it gets 25 kilometers per liter (59 miles per gallon) of gasoline, meets European emissions standards and matches the Maruti 800 in acceleration. It was also revealed that the car uses more plastic and fewer bolts than conventional designs, lending credence to rumors that Tata engineers visited Lotus in Malaysia to study adhesive bonding as an alternative to welding.

But its other cost-saving measures could have the biggest impact. Promising huge sales volumes, Tata has worked closely with components suppliers to bring the price of each part into a predetermined target range. The efforts are reminiscent of the techniques Tata used a few years back to bring down the price of the Ace, India's first mini-pickup truck, to about $6,000—close to the cost of the three-wheeled vehicles generally used for small jobs. In a considerable feat of engineering, the company came up with a design that allowed it to cut two engines for the Ace from the same block it used for the Indica. Not only did that allow the company to avoid building a new assembly facility, it also allowed it to capitalize on further economies of scale. If the People's Car shows more of the same, Tata—and India—may well win the race to miniaturize the automobile.

Thursday, January 03, 2008

objective observations of a ludicrous freak

Often, it all ends up as a strange, involuntary, one-man circus act by a bald, white man

By Jason Overdorf
Outlook India (Jan. 14, 2008)

There is no one moment that has defined my experience in India, no epiphany when it was all made clear. Rather, my time here has been a confusing blur. A synaptic overload. In the course of my job (I’m a journalist), I travel to strange places and try to catch the essence of what is going on. I try to record a mental image of the scene—what the principals are wearing, what the hawkers are selling (and for how much), the particular sort of stink (nullah? body odour? diesel?)—and at the same time to get "the story". I’m not sure I ever succeed.

When I show up, everybody surrounds me to scrutinise my every word and gesture. Somewhere I have run across the idea that the presence of the observer has a subtle, often unreported influence on the phenomenon he’s meant to be observing. My experience is nothing like that. It’s more like the phenomenon I’m meant to be observing comes to a complete halt and normal life is replaced by a strange, involuntary, one-man circus performance by a bald white man. If I were to be truthful, I’d headline all my stories the same way: Objective observations made by a ludicrous freak, while ignoring the woman staring into his ear and trying to take notes with a serious and dignified air.

You think I’m exaggerating. But that is because Indians are capable of doing many things at once. You can conduct a heated argument while brushing off a beggar tugging at your sleeve, accepting a cup of tea from a servant and ignoring a religious figure of some sort who is chanting, setting something on fire, or just making some kind of piercing noise over a loudspeaker. You don’t even think about it. For you this is normal.

I’ll give you an example. Before the last national election, I took a taxi to Gorakhpur to write about Sonia Gandhi’s "road show". I’d managed to track down Salman Khursheed, then president of the UP Congress, and wangled my way into his fancy jeep (a Scorpio or Sumo or something) for the ride out to the villages where Sonia was supposed to whip up enthusiasm for her campaign. It was the only time I was going to have for an interview, and it wasn’t likely I’d get any time with Sonia herself.The convoy took off as though somebody had waved a green flag, all the drivers jockeying for a position close to Sonia’s car, bumping quarterpanels like some kind of khadi-clad nascar final. Every so often, a policewallah would come alongside in an open jeep, lean out like a polo player, and clout one of the Scorpios or Sumos or Qualises with his lathi to force it back in line. All the while, I’m firing interview questions at Khursheed and the other UP Congress bigwigs, with my eyes riveted to the road ahead so I won’t miss my last moment on earth. If I hadn’t had a tape recorder, the only thing I’d have gotten out of the whole experience would have been the thwack of a lathi on the roof and, when the driver made a move to off-road it through a deep ravine to inch closer to Sonia’s car, the sudden interruption of Khursheed’s erudite explanation of the caste equation in UP so that he could exclaim: "Mat karo! Mat karo!" Later, I listened to the tape. Sure enough, Khursheed had given me articulate, even eloquent, answers.

Another time, near Vidarbha in Maharashtra, I went to visit the families of some farmers who’d committed suicide. In one house, I remember, the man had killed himself only the day before, and his wife, probably in shock, lay without speaking in a bed in a darkened room in the back. There I was being shepherded around by an activist for the farmers who was really just a politician by another name. My usual circus-act arrival had attracted a lot of attention when we rolled in, and now we had an entourage of a dozen or so villagers who all wanted to go on record with the story of the tragedy.We trooped into the widow’s house, all the way to her bedside. It was a horrible invasion. But she didn’t react. If she had, she wouldn’t have been able to get a word in edgewise, there were so many people competing to tell me how bad things had become, watching my reactions, cataloguing the expressions of sympathy and concern I was able to muster. I was trying to look at the widow so that I could describe her in her anguish—steeling myself for a part of the job I’m not sure that I believe in—and everybody else was rubbernecking at me.

Sometimes, too, it’s the great Indian instinct for hospitality that throws my observations off kilter. I’ll be sent to a Dalit village someplace, or to the home of a notorious goonda, or to an encampment of bonded labourers, and everything will come to a stop as first a plastic chair is unearthed for me to sit on, then discarded in favour of a charpoy. Then tea appears. A conference develops: perhaps the foreigner won’t drink tea, foreigners get the loosies from all manner of things, and so on. The tea disappears and is replaced with Pepsi. Everyone talks at once. The translator summarises five minutes of narrative with a single sentence. I stupidly write down "woman in blue sari" and "boy in Nike T-shirt". I should be cutting my subjects, who earn all of 50 rupees a day if they are lucky, in on the proceeds from my article—which will affect a tone of outrage and perhaps occasion a coffee-table discussion or two. But instead they’re buying me Pepsi.

Those are, I suppose, after all, my defining experiences of India. It’s too immediate for definition. There are too many interpreters. Too many guides for me to look and listen properly. So I don’t experience India at all. I just try my best to stop it from experiencing me.

Jason Overdorf is a Delhi-based American freelance journalist and a frequent contributor to Newsweek