Monday, January 14, 2008

India's Tata Nano is only the tip of the iceberg

The release of, and controversy over, the new Indian Tata Nano (new car around $3,000, what's not to love?) got me started thinking about global automotive production, global warming, and all that.

First I tried to find out about global automobile production, which has changed radically over the past few years, as China, India, and Brazil have surged forward in production.

Here's the Top 22 for 2006 (every country that produces more than half a million cars per year):

This is a list of countries by automobile production in 2006 mostly based on OICA accessed in September 2007.

1 Japan 11.484.223
2 US 11.263.986
3 China 7.188.708
4 Germ. 5.819.614
5 S. Korea 3.840.102
6 France 3.169.219
7 Spain 2.777.435
8 Brazil 2.611.034
9 Canada 2.572.292
10 Mexico 2.045.518
11 India 2.019.808
12 UK 1.648.388
13 Russia 1.508.358
14 Italy 1.211.594
15 Thail. 1.194.426
16 Turkey 987.780
17 Belgium 918.056
18 Iran 904.500
19 Czech 854.907
20 Poland 714.600
21 S Africa 587.719
22 Malaysia 502.973

How volatile is the market? In 2007 China's output jumped another 1.7 million (the entire UK production in 2006) to hit 8.88 million. China actually claims higher passenger car production than the US or Japan, although this is misleading as the People's Republic includes light vans in the category, while the other two nations don't.

What's the future of China's automobile industry look like?

The BMW Group points out the following:

While in the United States there are approximately 1.2 vehicles and in Germany 1.7 vehicles for every inhabitant, car ownership in the People's Republic of China is still very much in its infancy. In 2004, the country's 1.3 billion inhabitants possessed a total of 30 million vehicles, of which 11 million were trucks. China's market potential is, therefore, proving an irresistible draw for the international car industry, with more than 160 million cars needing to be sold simply to reach the average worldwide rate of motorization. At the same time, China itself considers motorization to be one of the decisive steps in the modernization of the country, with the establishment of its own internationally competitive car industry being one of the key factors in its future economic development. In terms of technology, however, China's car industry still has much catching-up work to do. The opportunities are enormous, however, and the time opportune.

How does China plan to capitalize on this opportunity? According to industry analysts, one of the strategies China will pursue is massive investment in hydrogen technology vehicles:

This is because the international car industry, too, is facing a time of upheaval. For more than 100 years, cars have been driven by oil-based fuels, and even if there is disagreement concerning when exactly oil reserves will start to decline, it has long been clear that fossil fuels are set to become much scarcer and much more expensive during the next few decades. There is, therefore, a need to find replacement technologies, and up until now hydrogen technology has seemed by far the most promising. This could enable China to simply skip over 20th-century automotive technology and within a few decades establish itself as the leader of the global car industry. This is because the technology is relatively new, and China, therefore, far less behind than in the case of conventional car manufacturing technology.

The jury is obviously still out on whether the Chinese leadership can pull this off over the next two decades.

Meanwhile, Brazil (world #8) is also forging ahead not just in automobile production, but in perfecting the commercialization of "flex-fuel" vehicles:

FFVs - or Flex-Fuels, as Brazilians normally call the vehicles - can run on 100% ethanol or gasoline or a combination of both fuels. The number of FFVs on the road is considered a leading indicator of potential ethanol demand, as almost half of the ethanol used in Brazil is pumped straight into the tanks of those vehicles.

Drivers are attracted to FFVs not only because biofuels may be better for the environment than fossil fuel, but because ethanol in Brazil usually costs much less than gasoline.

How much less? About half, depending on location. Figures from Brazil's National Petroleum Agency (ANP) for September showed national gasoline prices at an average of Brazilian reais (R) 2.49/liter ($5.20/gal). That compares with R1.33/liter for ethanol in the same month, according to the ANP. In states such as Sao Paulo, the country's ethanol powerhouse, the biofuel in September was available at an average of R1.09/liter versus R2.37 for a liter of gasoline.

The extent to which those FFVs are beginning to dominate the Brazilian automotive scene is also impressive:

After a slow start in 2003, Brazil's FFV fleet hit 4m units in September, as low ethanol prices and a growing variety of flexible-fuel models are drawing more consumers to that market. Automobile industry association Anfavea says Brazilian carmakers now offer 63 FFV models, including compact cars, SUVs and pickup trucks.

FFV sales in September accounted for 86.3% of Brazil's total automobile sales, up from 79.6% in September 2006. At 167,409 units, FFV sales in September rose by 39% compared with 120,298 units a year earlier, the association says.

Brazil started producing FFVs in March 2003, when 49,000 units were sold. FFV sales hit the 1m mark in November 2005, 2m in August 2006, and 3m in March 2007, according to Anfavea data.

The fastest-growing automobile industry on the planet belongs to India. With the Nano entering production the country is a sure bet to break into the world Top 10 in the 2007 or 2008 figures. Here's the dramatic growth since 2002:

2002: 723,320
2003 989,550
2004: 1,298,700
2005: 1,308,925
2006: 2,019,808

Even before the Nano, then, Indian production and demand--especially for passenger cars--was booming.

And even before the Nano, Indian automotive production has come in for heavy criticism from some sectors.

The leftist Asian Monitor Resource Centre essentially sees new car production as the vanguard of the neo-colonialist imperial-running-dogs:

First off, cars are bad for pedestrians:

Pedestrians are treated as second class citizens, as vehicles and their infrastructure take precedence in both urban and rural environments. Pedestrians are inconvenienced by the priority of traffic, cumulative hours of waiting for safe opportunities to cross roads, and crammed onto narrow paths, while cars enjoy several wide lanes.

Cars produce poisonous fumes which we are all forced to breathe; these fumes are particularly damaging to children’s development. In addition, vehicles of all sizes litter our roadsides, which they often use as free car parks.

On flat land, bicycles are great eco-friendly transport. Yet in the UK, cyclists make up 45 percent of all road accident fatalities. And in a move that beggars belief, Shanghai is about to follow Beijing’s example by banning bicycles from its busiest routes to make way for more cars!

Next, cars kill people:

Road accidents kill and maim millions around the world each year. As middle classes emerge in Asia, so car ownership also grows, and deaths are rising steadily each year.

China’s car sales in 2003 – up by 82 percent – may be good news for manufacturer and government incomes, but motorisation has resulted in China having the highest road accident rate of any country of the world – scary news considering that only a fraction of Chinese people drive cars. Things are so bad that the Beijing government announced in December that commuting workers injured in auto accidents will be paid compensation by all companies in the municipality.

Of course, cars stink and pollute:

With the technology to produce ever more efficient ways of using petroleum products, the industry still thumbs its nose at the environment. The sports utility vehicles (SUV) that are so common now have worse fuel consumption than Ford’s Model T of 100 years ago, and can be a low as 10 miles per gallon. This has a disastrous effect on global oil reserves and encourages oil companies to use ruthless tactics to control them.

Governments add to environmental problems by building ever more roads needed to drive the cars on. This uses up huge areas of prime agricultural land.

The solution? Ban cars. I'm not kidding:

Car producers automate as much production as possible, yet they still need large numbers of workers, so they move production to the Third World. For this reason it is essential that car workers here are organised into strong, democratic, and independent unions. Despite some of the problems outlined in this issue of ALU [Asian Labour Unions], car workers in Asia Pacific are relatively well treated compared to workers in other sectors.

Although public transport is far more efficient and less damaging to the environment than private cars, governments continue to encourage private transport. Even workers who can afford to buy cars must recognise the insanity and unfairness of private transport. ALU’s support for the right to work is well documented, but at the same time we believe that the transition from private to public transport is ecologically inevitable. This does not mean that auto workers will necessarily lose jobs; rather they may transfer to public vehicle production, and develop this sector.

However in the short term auto workers may not come to terms with environmental concerns. As in other industrial sectors that foul the environment, auto workers can be in direct conflict with environmentalists.

Getting rid of private cars will not be easy in the face of a powerful car/road/oil lobby. Part of the solution is to switch from private to public transport; another part is to stop using fossil fuels to power vehicles. If strong auto unions can be convinced of the need to eliminate private cars, this would contribute greatly to the battle of cleaning up the world.

From an American or western industrialized perspective, what's important about the foregoing can best be summarized thus:

1. The fastest climbing automobile production appears to be no longer centered in the West or the Pacific Rim, but in China, India, and Brazil.

2. The new cheap car is an Indian homegrown product.

3. Flex-fuel vehicles are a Brazilian homegrown product.

4. China intends to be the world leader in hydrogen technology for cars.

While our own automobile industry stagnates (partly through market saturation and partly through government over-regulation), innovation is alive and well in the developing world.

And that innovation exists in some surprising places--like the world's number 18 automobile producer (just shy of 1 million units in 2006).... Don't look back--guess.

No, not them.

It's Iran, the biggest automobile producer in the Middle East.

Here's Autosavant in April 2007:

Iran is not the first country that springs to mind when you think about nations involved in vehicle manufacturing, but they are by far the biggest new-car producers in the Middle East.

The final figures are not in, but Iranian vehicle production is expected to eclipse 1.1 million units for the 12-month period that ended March 21, 2007 (Iranian calendar starts March 21).

Passenger car production accounts for approximately 84% of that total with over 55% of the passenger car production coming from manufacture of the Pride sedan by various companies, a re-working of an old Kia hatchback model whose tooling was purchased in the late 1980’s through a joint venture agreement. The Pride is far and away the most popular-selling car in Iran, and production is split between both gasoline and CNG (compressed natural gas). Manufactured in Iran by Iran Khodro, one of the manufacturing companies and Iran’s largest car company, the Pride is joined in production by the Peugeot Roa, Peugeot 405, Peugeot 206 and Peugeot Pars. The company also builds Samand, Peugeot RD and Peugeot 405 CNG passenger vehicles. SAIPA, the second-largest auto manufacturer is responsible for Pride CNG production.

The world, both in economic and environmental terms, is much more complex than we generally like to think.

The combined production of China, South Korea, Brazil, Mexico, India, and Thailand EQUALS or EXCEEDS that of the entire European Union, and is increasing at a far more rapid rate.

We can raise our MPG standards all we want, only to find whatever change the West makes in greenhouse gas emissions is easily offset by the production of developing nations.

Not to mention the extent to which this new competition will be driving up oil prices.

We need to start paying attention.


B. Varughese said...

I didn't read this entire article, after seeing "ban cars." That's a very dumb idea. We should banish patent law. that way ideas can be used to create better products without litigation.

GOVERNMENT can only stunt growth at the most, government never really promotes growth... unless it picks up the slack for all the taxes they collect, in which case a private entity can still manage the funds much more effectively.

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