Can the world afford the Tata Nano?

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It costs just £1,277, allowing millions to buy a car for the first time. But green groups fear the planet will pay a heavy price...

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It's either the start of a people's revolution or the trigger for social and environmental headaches across the globe. The Tata Nano, the world's cheapest car, was unveiled with great fanfare in the Indian capital yesterday amid bright lights and blaring music.

Designed to put a stop to a family of four travelling on a single scooter, the new model from Tata Motors – and more importantly its price tag of £1,277 – should make motoring affordable for a new class of consumer in the developing world. But green activists predict trouble ahead for countries that already have inadequate infrastructures and soaring CO2 emissions.

Tata spent five years making its budget model "people's car", priced at just 100,000 rupees and marketed at India's developing middle class. The company's chairman, Ratan Tata, recalled the scene that had inspired him to build the car. "There was the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby," he said at the launch. "It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family."

Many environmentalists believe the new vehicle, with a price tag half that of India's current cheapest car, will simply clog up already busy and broken roads and add pressure to an infrastructure that is badly buckling. They stress the need to develop efficient, modern and affordable public transport, especially in cities such as Delhi, which now has a new metro system but where the bus service is overloaded and often deadly.

"My first reaction when someone says they need to buy a car is to say don't buy it," said Soumya Brata Rahut, a spokesman for Greenpeace India. "But people are buying cars, I cannot stop them. The revolution in small cars means there will be more and more."

Asked yesterday whether he thought India had adequate infrastructure to handle the hundreds of thousands of new Nanos that Tata hopes to shift when it goes on sale in a few months, Mr Tata said: "I think there definitely needs to be more investment in public transport [and] I think that India does not invest in our infrastructure." But he said such things were not the responsibility of his company.

Tony Bosworth, from Friends of the Earth UK, said: "The Tata Nano makes motoring cheaper and growing car sales in India will lead to big rises in carbon dioxide emissions. This is another blow to efforts to tackle global climate change. But per-person emissions will still be much higher in the West. Our priority must be to increase efforts to cut our own emissions and to show the rest of the world how to develop a low-carbon economy".

Though Mr Tata talked of helping solve the transportation needs of rural Indians with his new car, it seems his vehicle is targeted at the country's newly aspirational middle class which has new buying power as a result of the country's economic growth of 9 per cent per year. The overwhelming majority of India's population of 1.1 billion – more than 800 million of whom survive on less than 50 pence a day – will not be able to afford the car.

And yet while they may realistically only be available to a small percentage of Indians, given the scale of the country's population and a middle class sometimes estimated at more than 200 million, the possibility for sales of such vehicles is huge. It is also likely the car will be available elsewhere in south Asia.

While figures suggest that India has a vehicle density of just seven cars per thousand people, compared with 477 in the US and 373 in the UK, sales are increasing all the time. Although the current fleet numbers only about 10 million, last year saw one million new vehicles registered. In Delhi alone the total was 300,000.

Anumita Roychoudhary, a campaigner with the Centre for Science and Environment, said the Tata car was making driving too affordable and was ignoring the congestion and pollution pressures that such a trend would create.

"To stop that, you have to invest in public transport and you have to increase taxes on cars to reflect the true cost of driving," she said. "At the moment we're caught by a double whammy – the manufacturers are competing to build the cheapest car and we lack the correct public policy."

Tata is not alone in developing new "entry level" cars for the Indian market. This week Bajaj Auto said it hoped to begin production of its small car in two years, possibly in conjunction with Nissan-Renault. The Indian motorcycle firm Hero Group is also said to be working on a mini-car, possibly in conjunction with a Canadian company.

To an inexpert eye, the car itself – driven on to a stage at the 2008 India Auto Expo – looked something like a cross between the Ford Ka and the Smart car.

Mr Tata promised to make a "people's car" at a similar car show five years ago. He claims the media misquoted him over a promise to produce the vehicle for 100,000 rupees. Yet he said that once the purported promise became public, he felt obliged to honour it.

Five models that changed the world

Ford Model T (1908)

The first mass-produced cheap car (about £2,000 in today's terms), Henry Ford's "Tin Lizzie" revolutionised work and economics as much as transportation. Ford used assembly line techniques and standardisation of parts and tasks to create vast economies of scale in his River Rouge plant, the largest in the world – creating a method of manufacturing we we now call "Fordism". Famously available in "any colour, so long as it's black", this rugged machine put America on wheels. Some 15 million had been built, one every three minutes, by the time production ended in 1927.

Willys-Overland Jeep (1941)

The vehicle that "won" the Second World War and the grand-daddy of today's SUVs. No doubt Nazisim would have been smashed sooner or later, but the US Army's "GP" (from whence "jeep") utility reconnaissance car certainly did its bit, as anyone who's seen James Caan drive his through a wood in A Bridge Too Far can see. Four-wheel drive and simple construction were the secrets of its military and post-war civilian success. The Range Rover civilised four-wheel drive travel in 1970. Much changed, you can still buy the GP's successor, though it's now called the Jeep Wrangler.

BMC Mini (1959)

Difficult to believe that the industrial wreckage that is Longbridge was once the centre of such technical brilliance. The British Motor Corporation wanted a small, economical car to challenge the German "bubble cars". Sir Alec Issigonis thought of turning the engine sideways, making it drive the front wheels and putting the gears in the engine oil sump. A miracle of packaging, fun to drive and still much loved.

Saab 93 (1958)

There was nothing that remarkable about this little Swede, though the firm was a pioneer in aerodynamic shapes and ergonomics and enjoyed much rallying success. The truly significant thing is that this was the first production car to have seat belts fitted as standard. It was the beginning of a trend that saw Mercedes-Benz build the first car with passenger-protecting "crumple zones" the following year.

Toyota Corolla (1966)

The Corolla was the most successful of the many Japanese models that introduced reliability and a radio fitted as standard to a startled world. It was to become the most successful nameplate in automotive history, selling more than 30 million. The Corolla more than any other car created the massive Toyota concern, which is well on track to becoming the biggest auto maker in the world and is pioneering today's most popular green car, the Prius. The super-efficient "just in time" production ideas used on the Corolla have been copied worldwide.

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