Early in September 2009, the small island nation of Samoa became the first since the 1970s to order motorists to start driving on the opposite side of the road. The Samoans have made this switch to help end their reliance on expensive imports from the US, where traffic moves on the opposite side of the road as compared to countries like India. With caveats aplenty, this tale encapsulates the two big auto developments of the year. First, the buzz really built up around smaller, cheaper and more fuel-efficient cars. Second, the US has ceded its position as the world?s biggest car market. There?s no doubt that the next decade?s narrative will be shaped by these two shifts.
To recap, in 2009, auto saw the best of times and the worst of times. The latter quality dominated early in the year, when the Detroit majors appeared in desperate need of life support. Italian carmaker Fiat controls Chrysler today, whose new chief executive Sergio Marchionne has voiced optimism in apocalyptic terms: ?People who have lived through traumatic experiences where death may have been an option end up living their life differently.? GM survived by way of US government loans and a cash-for-clunkers programme, but its Saturn and Saab brands are headed towards the graveyard; new lifeblood has been injected only by the sale of a big stake in GM?s Chinese venture to Shanghai Automotive, which is also picking up a 50% share in GM?s India operations. Ford actually said no, thank you, to a government bailout. Its Fusion Hybrid has won praise.
This brings us to the good news coming out of 2009. The world?s gasoline infrastructure has achieved ubiquity over 100 years. But it may take a fraction of that time for an alternative fuel trajectory to come into its own. The Great Recession was bad; the failure to achieve a Copenhagen treaty for globally binding emission cuts was as bad or worse. On the flip side, efficiency standards are being reconsidered with great urgency everywhere. The US is moving ahead with new corporate average fuel economy rules, which will help cut both oil consumption and carbon emissions. India has committed to emissions intensity cuts, which entail mandating fuel-efficiency standards. These are already in place in China, alongside tax policies that incentivise demand for more efficient autos. For example, sports cars and SUVs attract a 40% sales tax as opposed to vehicles with high fuel economy that are subject to just a 1% sales tax.
Counteracting the growing green controls is the fact that auto demand is almost outstripping supply in precisely the regions that give the Detroit Three reason for hope as American buying is cut back. China sales have now surpassed those in the US, an astonishing turnaround since three decades ago when the US was manufacturing 56 times more vehicles. Indian sales are a tenth of the Chinese ones, but they still represent a growing and therefore critical market. India has also emerged as the super-compact and basic car leader, beating the Japanese at this game. And think about Samoa.
Its population is around 1,79,000; it has few paved roads. It too wants more cars. In all likelihood, so does Tuvalu?that superstar of the underdogs in Copenhagen.
Global warming can?t not be a factor in these countries? calculations for the future. Like Tuvalu, Samoa is at the forefront of countries whose very existence is threatened by rising sea levels. A tsunami in September had the government urging villagers to move to higher ground permanently. Indian and Chinese vulnerability is well-known, as is the fact that their cities are already carrying heavy pollution loads. With a car penetration of about seven per 1,000 people as compared to 600-1,000 in the West,
India already sees 1,20,000 people dying from polluted outdoor air every year. An exponential increase in vehicular density will only exacerbate this problem. Yet such an increase looks inevitable. As a growing middle class in developing countries aspires to now own the American romance with four wheels that it has long envied from afar, who?s to naysay its desires? Even as streets get increasingly clogged, who can convince Indian and Chinese masses to keep peddling away on bicycles? Increasing road capacity helps, as do improvements in public transport. But given that the appetite for a gleaming machine of one?s own still demands primordial satisfaction, smarter machines suggest the only way forward.
The 2009 Shanghai auto show saw Chinese companies displaying eight electric cars, at various stages of development. Warren Buffet has supported the electric China story by buying a stake in Shenzhen-based BYD (Build Your Dreams). With the auto momentum emphatically shifting east, next week?s New Delhi auto expo is bound to be big news too. Many global majors?Toyota, Honda et al?will be making their presence felt, but special attention will be gathered by the likes of the Ford Figo. This small car won?t draw notice on the same scale as the Tata Nano did at the 2008 Auto Expo. But its unveiling will be part of a global shift to cheap, compact cars. As for the Nano, celebrated as the world?s cheapest car, it will be seeking both European and American debuts in the coming years.
Early in 2010, Tata will be launching an all-electric version of the Nano in Norway.
The shift to low-emission cars, whether these are electric or hybrid or powered by hydrogen fuel cells, will be driven by oil prices to some extent. Remember when oil prices were jacked up in the early 1970s, and grumblings grew over how more than a tenth of the US gross national product was being spent on fuelling, maintaining and building roads for autos. Well, once global crude prices dropped back, it didn?t take long for Americans to start buying big cars again. Some think the pattern will be repeated if the Great Recession draws back in 2010.
But what if green car technology grows to deliver great values? A law of prediction endorsed by Arthur C Clarke is that when a scientist states that something is impossible, he is very probably wrong. Today, it looks like green cars become affordable only when they are backed by government support. But we would bet that this equation would flip in the coming decade.