Automobile growth in India: Revolution or nightmare?

As the global automakers are desperately in search of new growth markets – western markets mired in global recession in Europe, US or Japan having come to a point of near-stasis – the Indian middle class market is a fair game.

Therefore, there is general despair about not too many incentives put in place to lift India’s automobile market in general in this year’s annual budget. Still, now that the major global players like General Motors, Ford, Mercedes-Benz, Volkswagen, Suzuki, Honda, Fiat, Hyundai, Porsche, Audi etc are active in the country, it might make us revel in the fact that we have finally “arrived”.

There was a time when luxury-car brands like Audi or BMW or marquee names such as Chrysler or Peugeot, made an appearance in India only in movie trailers or at auto shows. But not anymore. As the economy has grown, so has India's appetite for luxury automobiles, making it an important target for foreign automakers with all eyes trained on the expanding base of middle class. And why not?

The National Council of Applied Economic Research (NCAER), the forerunner in shaping this debate, classified the aspirational middle class into two sub-groups: “seekers” and “strivers” which at 2001/2002 prices, grew from 5.7 per cent of all Indian households in 2001/02 to 12.8 per cent of all households in 2009/2010 corresponding to about 28.4 million households – assuming an average household size of five people – with a total of 153 million people.

Not all of them buy cars. But to the global automakers, precisely this population is the captive market. In countries with a developing car culture, such as some Asian and formerly Eastern European countries, the role of status associated with a car tends to be much more prominent when compared to countries where cars are part and parcel of everyday mobility. All the major global automobile manufacturers have invested in manufacturing in India with an eye on exports to third-country markets. In view of India’s narrow roads, they are focusing on small cars.

Therefore, for the aspirational class, the fact that the Indian passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011, must sound somewhat akin to our social mobility. That we could beat old and new auto based abroad must read as heart-warming. If the findings of Ernst & Young study furnished in 2010 are anything to go by, India will beat China, North America and Europe to become the fastest growing automotive market.

See that at the backdrop of our smugness that car ownership per capita in India, and in China, is minuscule compared to that in America and Europe. For the environmentalists, it is a relief because if China and India begin to own cars at the American scale, it would cause a global tsunami in global oil prices, not to speak of the unmitigated disaster to the fragile environmental well-being it would result. And ironically, this gives the global automakers a lusty reason to root for the largely ‘untapped’ passenger car segment. The scenario is quite unsustainable.

Road fatalities

And to play spoilsport, the Geneva-based International Road Federation once estimated that India already accounts for about 10 per cent of the million-plus road fatalities in the world – and the absolute number will continue to rise unless checked as more Indians take to the roads. Figures produced by the Indian government already put the social cost of accidents between 2-3 per cent of the GDP every year.

To have the cars ply on the road, we need navigable roads. We are way short of quality roads and the number of them. We have fractious land laws in the country across the states. In view of our poor road infrastructure and road fatalities and a woebegone public transport system – that has a skewed metropolitan bias – we are already faced with an acute problem of automobile congestion, pollution and energy guzzling and criminal apathy towards traffic rules in all our cities. It is in the fitness of things in this year’s Union Budget the government sought to make infrastructure creation central to its road map for economic growth by raising infrastructure investment by Rs 70,000 crore.

The average level of ownership of cars in India, 13 per 1,000 population in 2013, is expected to grow exponentially. It is low in per capita terms but in view of our landmass and population size, the growing number of cars has serious implications for energy security, air pollution, road safety, and equitable allocation of road space. In 1975, Singapore became the first city in the world to impose a congestion charge. It is about time India learnt from the experiences of cities that have decoupled car ownership from economic growth, and reduced the rate of growth of car ownership in India. The Rs 75-crore support for electric vehicles under Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme for FY'16 is just a small-step towards eco-friendly cars.

Automobile revolution in India must cease to be seen as a hallmark of upward mobility as it is plain out of sync with the modern canons of urban planning. Disincentives must be put in place on car ownership in Indian cities – in the instance of Helsinki and Madrid, Tokyo and Singapore – that have declared “war on the car” to create pedestrian-friendly city centres – that might as well serve as a template for other developing countries to follow.

The future of India lies in shoring up its integrated land use and transport planning, traffic management, restricting car ownership, influencing travellers’ behaviour, enforcing Bharat V emission norms and finally, revamping its public transport system.