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Cheap Cars and Dear Gas - A Precognitive Prevarication

By: Anantha :+: Under: Business, Cars, Economics, Opinion, Tata, Technology
On: ⋅ February 5, 2008 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

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Last week, I speculated that 2008 could turn out to be India’s solely because of the trendsetting auto industry. It can be argued that these trends are by no means cutting edge technological. Rather, this upswing in newsworthy snippets has solely been caused by some smart economics and business decisions. And curiously one company, Tata has featured in most of these discussions.

It has mostly been about Nano. Tata’s new golf cart like roundabout has created ripples in the world automotive press. Skepticism abounds regarding the car’s emissions, but I consider this a damning sign of the ignorance of the world’s automotive press. The fact that the car can accommodate 4 adults and could boast of 50mpg performance has been lost in the brouhaha over emissions(I’ll leave my emissions explanation for another day).

Not for long, though. The fuel consumption of the Nano and other cars of its type, has now entered the fray as a major talking point, set off by CNN, no less. But not in the way you would expect.

The debut of the $2,500 car is just another reason Americans will pay more at the pump, and highlights a need for some creative urban planning in the developing world.

The debut of the $2,500 car may be billed as a mobility breakthrough for billions of people in the developing world, but for U.S. motorists it could mean one thing: higher gas prices.
Rising demand from the developing world has long been cited as a main driver behind the runup in oil prices. That demand will only get more intense with staggering growth in car sales - and by extension, gasoline use - in places like India and China.

One word - bollocks. Another word (or two) - Bullshit. Plain bovine excreta, that’s what this argument is.

In 2007, the best selling car in the country that consumes 25% of the world’s oil was a truck, the Ford F150 which boasts of a fuel average of 15mpg. And the F150 and its variants sold almost 690k units. Two other similar gas guzzlers sold roughly 620K and 360k units respectively. In contrast, when the Nano’s production reaches max capacity,5 years from now, it is expected to sell 500k units a year. Now I might be poor at math, but how will a car, whose sales volumes is lower than the current best seller’s and whole fuel economy is thrice that of the best seller, cause a spike in gas consumption and ergo prices? Not unless you prevaricate and stretch the truth.

The basis for this article seems to be a much hyped fuel price estimate. “Experts” have claimed that around 5 years from now, gas prices in the US will touch around $5 per gallon. The doomsday conspirators seem to think that the flirting with small roundabouts in developing countries like India will be one major reason for this.

“We’ll get into a situation where we’ll have to compete with them for gasoline, $4, $5 a gallon, who knows how high we could go.” said Peter Beutel, an oil analyst at the consultancy Cameron Hanover.

Someone tell me how I can get Peter Beutel’s job. At least someone remind him to do his background reading before he spews off. Either he is terribly uninformed or he has a inflated sense of entitlement.

A quick check with a friend on Gtalk confirmed that my measure of fuel prices in India was right. Currently petrol (aka gasoline) retails for Rs. 47 per litre. Now with a few nifty calculations, one can surmise that this translates, at current conversion rates, to $4.53. To make my point clear, I will tell you this - people in India pay roughly 50% more for gas even today and they pay a price that the US expects to see only 5 years later.

So does anybody else think that the bozos at CNN and our friendly neighborhood oil analysts should get their head checked?

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