| |
Cars
Dwijottan Bhattacharjee
You could yawn about the population explosion, it is so old a problem. These days, though, there is all set to be another population explosion -- this time of mechanised quadrapeds.Cars are set to take India over, if the auto expo is to be believed. New models of all description -- small, medium, big, cars for the adventurous, for the elegant, for who knows who else (if Mitsubishi is to be believed, in this age of feminism, a special car will be launched for women too) -- are going to speed down the dusty, pot-holed, unkempt, insecure Indian roads at least within 2000 AD. After the cheers die down of the hype and hoopla rising above the dark Delhi smog, therefore, car companies are expected to buckle down, invest thousands of crores, and wheel out millions of cars. More importantly, Indians are expected to buy them in the millions, providing the car firms good returns (defined in Indian business as being in excess of 20 per cent). Whoops. What price an afterthought? Afterthoughts can be pegged
around three points -- finance, the marketplace and infrastructure. The investment projections come in a bad year, when industry has been reluctant to spend on projects. Just as low interest rates was all set to improve matters, the uncertainties of the south-east Asian crisis, the rupee tumble and the consequent attack of the Reserve Bank of India on liquidity has renewed the depression of the finance managers as well as credit dispensers in banks. International fund-raising is not impossible, but difficult and expensive.Take Telco. The cheers rang loudest for its small car at the expo. Through all the noise, what appears is that the Mint is still an idea -- a "concept". The "indigenous" car has been designed in active association with an Italian firm. Its claims to absolute indigenisation depend on the emergence, successful financing and implementation of TACO, the ambitious auto-components venture of the Tatas which will have to bring together a number of international component majors under a single
umbrella. The project is expected to cost Rs 1,700 crore. Telco has a strong balance sheet, and a fairly successful track record. But it has never made a car before. Nor is it the usually done thing for general purpose vehicle-manufacturers or truck-makers to add cars to their range. With both domestic and international debt set to be more expensive, and with a larger Tata group equity recast having to mesh with any equity expansion possibilities, financing will be, to say the least, not easy. The same problems would be faced by all the other start-up manufacturers, which include several important foreign manufacturers. Finance apart, the market itself will need to evolve to accommodate more models-in terms of purchasing power, accessibility and aspiration levels. As investment options improve, the average Indian will be looking to make more money from his money, not jump into the next car, goes one Cassandra prediction. That is overstating it. But to believe that there will be dramatically more Indiansin urban India than those already targeted who will pay equivalent of at least a year's salary extra for a power window or a power steering is an assertion that requires serious examination, especially in light of the fact that consumer products companies are only now recovering from an earlier error of moving too early into "top niche" products. One only has to look at shoe major Bata's complete strategy reversal in favour of cheap, affordable products to confirm this. Besides, the power steering and power window would still make sense on bigger, wider, smoother roads. Road building, administration and commercialisation (recommended wholesale by the Rakesh Mohan Committee as early as in October 1994) has not even begun, and in the absence of a stable government, does not look likely to start immediately. Speed, far from a USP, could be a deterrent on such roads. Does this mean the Indian auto industry is doomed to stagnation? That is as ridiculous a statement as the bold assertions doing the rounds thesedays that India will have the number of models being touted. The reality is that demand is low, investments are expensive, and political stability is conspicuous by its absence. Under the circumstances, the noise made on new models should be considered only one insignificant indicator of the auto scene to come.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
|
 |
