[Texgreen] The future of Detroit

[Roger Baker]

For a poor country, India is way too car addicted. Sort of like the =20
United States. Bangalore with a population of 6.5 million is perhaps =20
the worst example, but its hard to rebuild a city infrastructure, so =20
the obvious solution given current reality is to emulate Henry Ford =20
and engineer good cheap cars in competition with Toyota.

Of course the much smarter solution is to spend the same money on =20
improving the rail system, which can lead to much more energy =20
efficient cities. If the US were smart it will send engineers to =20
Japan and learn how to build high speed trains.

But given the current economic and political reality, its probably =20
makes sense to start importing cheap well-designed cars.

-- Roger

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 =46rom the NY Times, October 12, 2007
In India, a $2,500 Pace Car
By HEATHER TIMMONS

NEW DELHI, Oct. 11 =97 A revolution is taking place in India that
could change what most of the world drives.

Next fall, the Indian automaker Tata Motors is scheduled to
introduce its long-awaited People's Car, with a sticker price of
about $2,500. Hot on its tail may be as many as half a dozen new
ultra-affordable vehicles =97 some from the world's leading carmakers,
including Toyota and Renault-Nissan.

With a median age of just under 25 and a rapidly expanding middle
class, India will overtake China next year as the fastest-growing
car market, according to estimates by CSM Worldwide, an auto
industry forecasting service.

To tap that emerging market, automakers are starting to respond to
Indians' desire for small and cheap cars. As a result, car companies
are coming up with new ways to develop and build automobiles
worldwide.

"Ask one billion people, and 99 percent of them are going to say
they want a car," said Jagdish Khattar, managing director of Maruti
Suzuki India, the country's largest car manufacturer. "The problem
is, How many can afford it?"

For a long time, only a few carmakers in India concerned themselves
with that question. The small-car market in this country is
dominated by Hyundai Motors India, Tata and Maruti Suzuki, which is
a joint venture between Maruti of India and Suzuki of Japan. Maruti
Suzuki has more than 50 percent of the car market, thanks to models
already as low as 195,000 rupees (about $5,000).

Now, foreign carmakers are entering the competition, increasing
pressure to make cheaper yet appealing cars. =46rom June to September
alone, Skoda, a subsidiary of Volkswagen, said it would start making
and selling the Fabia, its small car, in India; Toyota's chairman,
Fujio Cho, said his company might introduce a new small car to
India; Ford Motor executives said they were studying the situation;
and Renault-Nissan announced it would set up an engineering and
design center, adding to previous plans to build a plant in India.

Renault-Nissan =97 a car-building alliance between Renault of France
and Nissan of Japan =97 has been talking with local scooter maker
Bajaj Auto about building a cheap car that analysts say could cost
as little as $3,000. Hyundai is adding a new small car model to its
existing line and doubling its local production, and Honda is
planning a small car tailored to the Indian market. On Thursday,
Fiat stepped up a partnership with Tata, announcing a 50-50 joint
venture to make cars, engines and transmissions in India for the
domestic and overseas markets.

India differs from giant slow-growth and no-growth auto markets like
the United States and Western Europe, and even from fast-growing
markets like China, in that the emphasis is on small, low-cost cars =97
but with four doors, not two, and room for the extended family.

While the Indian upper classes are snapping up roomier models and
even imports like Mercedes-Benz, first-time buyers will provide a
big chunk of growth for years to come.

By 2013, CSM predicts, India's market will expand an average of 14.5
percent a year, compared with just over 8 percent for China. CSM
estimates that in 2013, the Chinese will buy 10.8 million cars,
compared with 3.8 million in India, but says there is already a glut
of local and foreign manufacturers in China, making India a more
attractive long-term market.

If global manufacturers can figure out how to make small, cheap cars
in India, they are expected to start exporting them to other fast-
growing markets where the proportion of car ownership remains small =97
places like Southeast Asia, Africa and the Middle East.

But first they have to conquer this market. A. T. Kearney, an
international management consulting firm, estimates that a car with
a $3,000 list price could attract 300 million buyers in India by
2020. Of course, forecasters were bullish on China for decades
before its growth finally took off. And economic upheaval or
political change could stall India's expected growth, too.

But the millions of Indians who will buy cars are likely to agree
with Shuchita Bagga, who bought her first auto in July. "Budget was
the most important thing," said Ms. Bagga, 26, a trainee in human
resources who earns about 375,000 rupees a year (about $9,500) and
paid a little more than 235,000 rupees ($6,000) for it. "I'm not in
a position to buy a big or an expensive car."

In addition to new economy types like Ms. Bagga, car manufacturers
are looking at India's approximately 65 million scooter owners,
mostly men. Currently, entire families commute on scooters, with the
man of the house driving, his wife sitting side-saddle on the rear,
and as many as three children wedged in between.

The People's Car will create a situation where "someone who never
even dreamed of a car finds it within reach," said Ravi Kant, the
managing director of Tata Motors. "Imagine what excitement there
is."

Environmentalists and safety advocates are less enthusiastic.

Anumita Roychowdhury, the associate director for the Center for
Science and Environment in New Delhi, said the ultra-affordable
vehicles would worsen India's pollution and traffic congestion.
Already, nearly 60 percent of India's cities have pollution levels
that are considered critical, she said.

On the safety front, auto executives insist the cars will comply
with the safety standards of the markets they are sold in. But in
India those standards do not currently include full-body crash
testing, airbags or antilock braking systems.

Critics worry that thousands more cars on the roads will increase an
already high accident and fatality rate in India, and those
traveling in cheap cars are most likely to be injured or killed.

Given their need for speed and bulk, the car demands of North
America are "almost diametrically opposite" those of India, said
Craig Cather, the president and chief executive of CSM. That might
limit the expansion of the ultra-cheap cars into mature markets like
the United States and Western Europe.

But that does not mean much. The automotive supplier Robert Bosch
estimates that vehicles priced under 7,000 euros (about $9,870) will
make up 13 percent of the world's market by 2010, or 10 million cars
a year. And by then, sales of low-price cars will grow twice as fast
as the rest of the market, according to Bosch.

To satisfy that market, manufacturers and suppliers will
need "exceptional creativity and inventiveness," Wolf-Henning
Scheider, president of Robert Bosch's gasoline services division,
said in a speech in June. "Slimmed down versions of existing
components and systems are not sufficient."

Daryl T. Rolley, general manager for international operations at
Ariba, a sourcing and procurement company working closely with Tata,
agreed. "There are so many legacy costs built into a design, and
trying to engineer those out is difficult," he said. "It's better to
start with a clean sheet of paper and engineer low costs in."

The competition to make cars less expensive could finally help make
India an automotive research and development hotspot =97 after years
of false starts and complications from bureaucracy, poor
infrastructure and labor unrest.

Maruti's factory in Gurgaon, south of New Delhi, for instance, is
reached by a potholed road filled with cows and fringed with stands
selling juices and snacks amid crumbling concrete storefronts. On a
recent visit, parts of the garbage-strewn road were washed out in a
sudden shower. Blaring traffic backed up in the early afternoon.

But inside Maruti's gates, the company has created a self-
sufficient, streamlined island: 4,700 Maruti employees work inside
the gray buildings, as do at least as many employees of suppliers,
whose warehouses and production plants ring Maruti's main factories.

The site generates its own electricity and recycles its own water.
Inside the main factory are all the materials the company needs for
two hours of production at the current rate of one car built every
21 seconds. The nearby suppliers' warehouses stock materials for
hours more.

Maruti, which is still majority owned by Suzuki, has plans to
increase its already highly automated process, with the goal of
cutting its production time in half and trimming costs. Already,
giant swiveling robots do much of the welding. Manpower is employed
mostly to check for errors.

"We have made the entry for our competitors smoother," Mr. Khattar
of Maruti said.

While he acknowledged that India would never be a global
manufacturing hub for all automobiles, Mr. Khattar said the country
did have a major role to play in the manufacture of compacts. What
India can offer, he said, is "frugal engineering."

Saher Mahmood contributed reporting from New Delhi.