From: Reuters
Published June 19, 2008 08:40 AM

How green is my low-cost car? India revs up debate

Shweta Kumari is waiting impatiently for Tata Motors' new Nano to hit Mumbai's car showrooms later this year.

With a price tag of about $2,500, the Nano will cost about half the price of the cheapest car currently on the market, easily affordable for Kumari, who works as a software developer.

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"I can drop my kid at school, go to work and go shopping more comfortably," said Kumari, who now shares a car with her husband.

But some environmentalists are dreading the prospect of hundreds of thousands of low-cost cars hitting polluted and over-crowded roads around the world in the next few years.

"In the current policy and regulatory framework, the low-cost cars will be disastrous," said Anumita Roychowdhury, associate director of the Centre for Science and Environment in New Delhi.

Car makers, warily eyeing sliding sales in developed markets such as the United States and Europe, disagree.

They argue the small, fuel-efficient vehicles are a greener option than gas-guzzling SUVs and larger cars as oil soars above $130 a barrel and as consumers in emerging economies such as China, India and Russia get behind the wheel in ever increasing numbers.

Tata Motors, which unveiled the snub-nosed Nano to a rousing reception in January, says the world's cheapest car meets the strictest environmental criteria, and its lean design delivers high fuel-efficiency of about 20 km/litre of petrol.

The car, with a dealer price of 100,000 rupees ($2,330), will have tailpipe emissions well within Indian requirements. It is less polluting than motorbikes and scooters, Tata Motors says on the Nano's website.

"The concern is really about the sheer numbers," said Mohit Arora, managing director for India at JD Power Asia Pacific.

"They may be more fuel-efficient than bigger cars, but they will still emit carbon and NOx (nitrogen oxide) ... and that's a valid concern."

The numbers are staggering.

Still only 8 in 1,000 people in India own a passenger car. In China, it's about 20 but in Japan and the United States, it's at least 450 cars per 1,000 people.

Every day, about 17,000 private vehicles are being added to China's already congested roads, while Indian passenger vehicle sales are expected to rise by almost 50 percent over the next three years.

Such explosive growth will demand a rethink from auto makers.

"Over the next 5-10 years, technology, moral pressure, regulatory pressure and high oil prices will push even premium car makers into making changes to their engines," said Steve Howard, chief executive of The Climate Group in Britain.

India is at the forefront of the move to low-cost cars, and is doing its best to promote their green credentials.

Indian motorbike maker Bajaj Auto says its $2,500 car, which it is building with Renault and Nissan Motor, will aim at a fuel-efficiency of 30 km/litre, or twice an average small car, and carbon dioxide emissions of 100 gm/km.

"That would make it far superior to cars even in the European Union, which wants to bring down carbon emissions to 120 grams per km (from 2012), and the 180 gm/km that India is fighting to defend," said Managing Director Rajiv Bajaj.

The Bajaj venture will have an initial capacity of 400,000 units, while Tata expects eventual demand of 1 million Nanos.

NEW REALITY

Rival car makers including Fiat, General Motors, Ford Motor, Hyundai and Toyota Motor have all expressed interest in building a small car that is affordable to more middle-class consumers in emerging markets.

"Growth is in the emerging markets, and the bulk of demand there is for small cars because people are much more sensitive to fuel prices," said JD Power's Arora.

But not everyone is sold on the small and super-cheap car. Honda Motor Co, the world's biggest motorcycle maker, is notably cool on the likes of the Nano.

"I don't see the draw of that kind of car," CEO Takeo Fukui told reporters recently in Tokyo. "In India, the roads are so congested that it's easier and quicker to navigate the traffic on a two-wheeler."

Honda and Toyota are leading the way on cleaner gasoline-electric hybrids, and some environmentalists argue getting prices down on these technologies is where efforts should be concentrated.

GM expects to launch its plug-in hybrid Chevrolet Volt in 2010. Renault/Nissan are building an electric car for Israel that will be subsidised by the government and which chief executive Carlos Ghosn has said will be the most environmentally-friendly mass-produced car.

LOW COST TECHNOLOGIES

Tata Motors, which is working with a French firm on using compressed air as fuel, has signed up for the Progressive Automotive X Prize, a $10 million competition to build the first mass-produceable 100 miles per gallon (42 km/litre) energy-equivalent vehicle.

"India has a fantastic reputation for producing clever solutions at a very low cost," said Nicholas Stern, author of a landmark 2006 report on the economic costs of global warming.

"In the West we don't have a similar drive to find low-cost solutions," he said on a visit to Mumbai this year.

"A lot of technologies are already sitting on the shelves of manufacturers, but it's been easier to persuade consumers to buy bigger cars rather than greener cars that are more expensive."

Governments must now use a carrot-and-stick approach to push for cleaner emissions and better fuel efficiency, JD Power's Arora said, such as tax incentives and stricter regulations.

India's recent cut in excise tax small cars has encouraged several manufacturers to draw up plans for small cars, he said.

And The Climate Group's Howard cautions against demonising low-cost cars or belittling their importance in emerging economies such as India, despite concerns about their impact.

"It's easy to look at cheap, mass-produced cars and say, 'Oh, they're going to cause more pollution'. But it's an elitist view that only a small percentage of the population should own cars." ($1=42.9 rupees)

(Additional reporting by Chang-Ran Kim in Tokyo; Editing by John Mair and Lincoln Feast)

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