The Cheapest Car Ever Made

[jayakris]

Saw this tremendous article in the June issue of the Automobile Magazine, as I was sitting at a tire shop in Costa Mesa, California, today getting a flat repired.  Got into a long discussion with the shop owner who was just dumbfounded that it was possible for a $2500 car to be made!

2008 Tata Nano, by Robert Cumberford

He calls it the most significant new car since the Ford Model-T !! .. Just check out the intro paragraph!

Here it is at last, the $2500 car that Ratan Tata proposed several years ago, perhaps the most significant new car since the Ford Model T was introduced 100 years ago. As with the Ford, the design and engineering is less important than the philosophy behind the car's conception. Although the clever shape was created by Justin Norek in Turin, the Nano was engineered and executed in India by a highly motivated and usefully underequipped team with a mind-set that no long-established manufacturer could summon.

Boy, how times have changed.  How our country and our people are viewed around the world, is radically different from how it was even a decade back.

Anyway, the article made my day, and made me forget the flat on my accord.  I should perhaps wait for Indian tires to be exported out here I guess

Jay

[puneets]

Mahindra & Mahindra have been slowly increasing their presence in the US. Their tractors and other such earth moving equipment line is much cheaper than the usual ones (Caterpillar, John Deere) and is also pretty reliable. They did brisk business during the Katrina rebuilding phase and sold a lot of units. I guess they're planning to introduce their SUVs and some other diesel based passenger vehicles soon.

[PKBasu]

Yes, Puneet, Mahindras are making steady progress (albeit from a small base) in the US market. Nice to see.

Jay, thanks for that article on the Tata Nano, which I loved. My main fear about the Nano is that these wonderful models are being created and displayed in various motor-shows around the world, but the reality of the car is being manufactured in a town in West Bengal that is under siege by Luddites led by Ms Mamata Banerjee. When will the Bengalis come to their senses and stop fighting the last century's battles (which they lost repeatedly)?

[jayakris]

puneets:  we had  some discussion on the Mahindra tractors a while back in one of the threads here.  need to find it.  There is almost a cult-type following for Mahindra's tractors like there was when Toyota and Datsun (now Nissan) cars started competing with the GM and Ford behemoths in the US some 30 yrs back .. Actually Mahindra exports Mitsubishi-designed tractors to the US, I believe - though manufactured in India if I am not mistaken.

PKB:  Funny that when I read that article what came to my mind is also Mamta Banerjee's mug!  I have not followed in deppth what happens(ed) in WB though.  I assume what you said about last century's fight is correct - because that is all our politicians seem to know.

Jay

[jayakris]

Speak of the Devil (pun intended) ...

Mamata: Tatas can stay if…

Mamata leaves a slight opening in the door ..

Jay

[puneets]

Tata Nano Could Be Too Cheap to Succeed
http://wheels.blogs.nytimes.com/2008/08 ... index.html

[prasen9]

Why should the farmers of Singur be forced to sell their land at dirt cheap prices?  Why could the Tatas not simply pay market prices and buy land?  Or does the so-called capitalists not want the free market to work in this case?  I am all for industrialization but you just cannot grab someone's land.  I am for eminent domain, but, I also believe there should be just compensation.  If the cheap price of land is what will bring the Tatas to WB, so be it.  But then the government should shell out the difference and not let the farmers be the losers.  Mamata Banerjee is an idiot and what she is doing will not get the farmers anything but result in more bloodshed etc., but, the courts should step in and ensure that the farmers get their just renumeration and/or equivalent land elsewhere.  And do you think that if the farmers were paid enough such that they could buy equal quality land elsewhere, they would commit suicide?  Mamata should not agitate to stop the factory but try to get everyone just compensation. 

By some reports 150,000 farmers are being displaced and about 1000-10000 jobs are being created depending upon whom you believe and most of the jobs will most possibly go to outsiders; farmers are not mechanics.  Singur is very close to where I grew up and is one of the most fertile lands in the area.  It just does not seem right that that area should be the one where the factory should be setup.  The issue was that there are no roads to other areas where the factory could be built.  Why can the government not build a road to somewhere else?  This has been going for quite a while, so lack of time should not be an excuse.  There are huge funds from the center to build roads.  If the farmers were justly treated nobody would complain.

There are some very pertinent questions that are at least unanswered in my mind and the matter is not that cut and dry.

[BSharma]

Why should the farmers of Singur be forced to sell their land at dirt cheap prices?  Why could the Tatas not simply pay market prices and buy land?  . . . .

By some reports 150,000 farmers are being displaced and about 1000-10000 jobs are being created depending upon whom you believe and most of the jobs will most possibly go to outsiders; farmers are not mechanics.  . . . .

There are some very pertinent questions that are at least unanswered in my mind and the matter is not that cut and dry.

I have not followed this controversy very closely, at least the minute details about land transfer; price of land; type of land, etc.  Can Tatas not set up their factory using land where farming is not being done?

[prasen9]

Bhusan, as far as I understand, the Tatas wanted land that has good road connections.  Almost anywhere except the Sunderbans in WB is fertile agricultural land.  Perhaps, the worst among the farmlands could be chosen, but, those remote areas have no road connections.  They were given a choice of four areas to build their factory and they chose Singur. 

Perhaps because I have seen the poverty of the farmers and the happiness of the harvest in those lands, I am biased.  But, at the minimum they should have been paid good prices.  When a company buys another company, they pay a premium --- above the market share price usually.  The developed countries in the west and Europe have eminent domain and use it, but, they have protections for the landowners to ensure that they get a reasonable shake.  If the farmer could get enough money to go and buy land elsewhere that would produce even a slightly bigger crop than what they were producing at Singur, would they go hungry and agitate and commit suicide?  No, they would sell and move.  There may be some resistance due to sentimental reasons, but not this much.  Only the goons of Mamata's party and the CPI(M) would be fighting some stupid fight then.  From what I heard, they were not paid enough compensation and that is the major issue in my mind.

At some point, we need to think about what ails Bengal and what is the right way to fix it.  Industrialization is badly needed but if the work culture does not change, then even if a few industries come in, nothing will change.  Buddha should visit the sarkari offices and fire those that do not come in time and do not get work done.  That would get Bengal going.  With the lackadaisical work culture, bandhs, etc., the companies will lose money soon and wrap up.  Like PKB was saying, cut corruption down and that should get Bengal going.  Improve law enforcement.  But, stealing from poor farmers and building industries is somewhat morally bankrupt.  Pay them enough for relocation and I am with you.

The disclaimer here is that I have not seen the real amount of money they were being given and all this is from what I have heard and read.  I do not know the real land prices, but, given that a substantial number of farmers did not want to sell and were coerced, I think the issue has to be the prices.  You increase the prices and the resistance would lose its steam.

[Atithee]

Prasen, rarely have I heard that anyone anywhere felt that they got what they deserved for their piece of land.  In my experience, people get a just amount but they feel cheated because they feel they deserved a premium because they start feeling the real worth of the land is based on the intended project rather than without the project.

I think a better scheme would be to provide the displaced farmers (especially the youth) job training and reserve some per cent of jobs for them.  Even if they didn't get a direct job, the plant should generate indirect job opportunities.  For sure any farmer can work in the catering, docks, transportation, etc. type of jobs.  Heck -- I think anyone can be an Indian "babu" given a chance.

[prasen9]

Prasen, rarely have I heard that anyone anywhere felt that they got what they deserved for their piece of land.  In my experience, people get a just amount but they feel cheated because they feel they deserved a premium because they start feeling the real worth of the land is based on the intended project rather than without the project.

There is a difference between thinking that they did not get what they deserved and refusing to move.  I repeat my question, if they were given enough money such that they could buy a similar plot elsewhere, would they have gone hungry, agitated and committed suicide?  People are not that insane.

Some of these guys do not want to be menial workers in an industry.  Why should they be forced to change their vocation?  They were poor but they were happy.  You are uprooting their lives altogether.  The cost of industrialization is being forced onto one village.  Why should that happen?  Would you like it if I said that we need to raise money for some project and I want to tax only your town selectively because I damn well can do it? You have no choice.  What would you do?  Would you not protest?

There were several things wrong in my opinion.

First, the government has no business grabbing land for private industry.  Let the private industry buy land at market prices.  The landowners know that if they ask for too much then the company will go elsewhere.  Would the company have to pay a premium?  Sure, a little bit.  But, why should the farmers be paid much less instead?  If you want the land, you should bend over backwards, not I who owns the land.  The price should be decided by mutual agreement between the seller and the buyer and not by an intermediary behemoth with guns.  Isn't that what your capitalist system teaches you?

I am all for a free-market system and not for a blatantly pro-corporate system.  There is a difference.

Here, the government should have tried to setup a free market.  Even if they used eminent domain, which imho tampers with a free market, they should have said that this is land for an industrial project.  Then, asked several companies to bid in a free and transparent manner on what they want to pay (i.e., introduce competition among the buyers) and not only got Tata in for a sweetheart deal.  Then, ask the  village (as a whole, because there will be dissenters in every village and you cannot get any industrial land if you have to convince each and every farmer in a village) to accept the bid or reject it.  That is how the price should have been set, not fixed by the government at a low price.  If the companies want the land, they should have paid (a fair price).  In a single bidder with guns system, it is almost guaranteed that the farmers did not get fair market price.

[Atithee]

Prasen, I am semi-involved in this type of transactions as part of my job.  Even in the US, in spite of paying a premium, I can guarantee you that an owner will never feel justified because it is like "buyer's remorse."  I am not aware of any place where land is auctioned to set a "fair" price in such cases.  Furthermore, given that 150,000 farmers are being displaced for a plant that would generate only 1-10 K jobs, I suspect that these farmers are not making a whole lot of money farming (especially per capita assuming an average size Indian rural family).  That they should be given enough money to purchase a like fertile land somewhere else will likely fail anyway because wherever they go, the land price would go higher than what the prescribed amount was.

In my opinion, these farmers (and others like them) would be better served to form a cooperative.  Not only would they have more negotiating power and professional management (ahem!), but also better crops and profits.

Anyway, let's discuss via email offline if you are interested.  Neither of us know the facts, and speculating is all we are doing anyway.

[prasen9]

I am semi-involved in this type of transactions as part of my job.  Even in the US, in spite of paying a premium, I can guarantee you that an owner will never feel justified because it is like "buyer's remorse."

True, but, will they agitate till death?

I am not aware of any place where land is auctioned to set a "fair" price in such cases.

That does not mean that it is not the right idea.

We may be speculating about the right price, but, I am certain that the right process was not followed and nobody really knows what the right price should be because of that.  We do not know what the fair price was because a mechanism was not set up to determine the fair price via a free market.  That is the fault of the government.  And, given the mechanism of pricing, I am pretty near certain that a low price was chosen because if you have the guns to grab the land why would you pay more?  The government has not behaved as an impartial broker but sided with industry right from the word go.  I have seen them price land at ridiculous rates to build the Second Hooghly Bridge, which is a 15 minute walk from my house.  The people there could not buy a house in town with the money they got.  That is not seller's remorse.  Society gains from this bridge and a few thousand families pay for that; why should they?  I would not expect anything different from basically the same government.  If the prices go up because of an action that reduces available land, the perpetrator of the action should be responsible for the larger price and pay the larger price.  If the farmer accepts the larger price (without guns pointed to his head, figuratively speaking) and then the price goes up higher than that, that is the farmer's problem then.

I decided to post all this here because it is pertinent to the discussion.

I agree with your ideas about forming a cooperative, etc.  But, that is orthogonal to the immediate issue.  Wrt the immediate issue, a cooperative would have very little power against a big government with hordes of murderous cadres.  Perhaps the only way to oppose a big government to offset an imbalance of power is guerilla warfare.

[Kumar]

There is growing concern about food shortage (allegedly worsened by corn for ethanol subsidies). In such a scenario,  can india afford a fertile land to be replaced with factories?

[jayakris]

I see both sides of athe argument, but tend to think, based on the serious type of agitation that resuted in WB, that this may not have been just politics, but actually the prices were not sufficiently fair to the farmers.  Again, I am speaking fro just an impression rather than hard facts.

As for Kumar's comment on fertile land being used for this, I think something as important as the Tata Nano factory should be allowed to be in a place that makes the best business sense in terms of road connection etc, if that was a big reason for the slectns of the location.  India has enough other fertile lands being misused.  That argument should not come into this. 

The farmer's real concerns should be handled - and I do not buy arguments like "why can't the farmers just turn into factory workers?" .. That is not the way to do it.  That does not mean that nothing short of being farmers on the same land they farmed should be taken as fair to the farmers.

But money can ultimately talk.  I do not understand why some sort of a financial arrangement cannot be worked out, even though the farmers will still claim they didn't get enough (that is a given!).  I think that is how this will get solved in the end - just that as usual in India, we would go though all these confusing roundabout steps before people would take care of the issue somehow! ..

Jay