In India, the world's cheapest car debuts to fanfare, criticism

Manufacturers take note of the $2,500 vehicle’s massive market, as environmentalists fear the effects of an automobile influx.

India's Tata Motors unveils the world's cheapest car at Thursday's New Delhi Auto Expo, drawing interest and criticism from environmentalists and automakers around the globe.

Dubbed the 'People's Car,' the small vehicle will reportedly sell for 100,000 rupees (approximately US $2,500), less than half the cost of its closest competitor. With a 600cc motor capable of 58.8 miles per gallon of fuel, the rear-engine 4-seater will create little more pollution than a motorbike. The Wall Street Journal reports:

That should cheer environmentalists who loathe SUVs and other fuel-guzzling four-wheelers, as well as help consumers who currently can't afford a set of wheels.

But as the Tata model and a slew of low-cost imitators make cars more affordable, critics say the expected sharp increase in ownership will lead to an environmental and infrastructure disaster. The Observer reports:

"There is this mad rush towards lowering the prices to achieve mass affordability," said Anumita Roychoudhury, of the Centre for Science and Environment in Delhi. "If vehicle ownership increases very rapidly, we'll have a time bomb ticking away. When you lower the price that drastically, how will you be able to meet the safety and emissions standards? There are no clear answers yet."

Citing India's economic growth, which has averaged nearly nine percent over the past four years, The Economic Times, India's leading business publication, reports that India's rapidly growing middle-class has proven to be an attractive emerging market for automotive manufacturers, where car penetration is just seven vehicles per 1,000 people. According to The Economic Times:

An Indian government "Automotive Missions Plan" aims for automotive sales to more than quadruple to 145 billion dollars by 2016, and for indirect and direct auto sector employment to grow to 25 million from 13 million today … India's automotive industry, which produces 1.5 million vehicles annually, is worth 34 billion dollars a year and contributes five percent of India's gross domestic product.

Automakers everywhere are keenly watching progress in the Tata project, while some manufacturers are actively vying for an early spot in the low-cost car market, reports The Chicago Sun-Times:

Already, French automaker Renault SA and its Japanese partner, Nissan Motor Co., are trying to determine if they can sell a compact car for less than $3,000. Japan's Toyota Motor Corp., South Korea's Hyundai Motor Co. and Chinese automaker Chery also could be looking to make ultra-cheap cars in India, analysts say.

Tata Motors has drawn criticism for producing a vehicle expected to draw an annual demand of 1 million cars, deepening India's oil dependence and pollution while further straining the country's poor infrastructure. Tata, however, has rebutted these claims, Reuters reports:

Tata Motors says a lot of these fears are unfounded. It says the car will meet emission standards and that car sales are already growing fast without the help of the People's Car … "Given the rate at which the entire industry will grow, even if we market it very heavily, it will still be a miniscule percentage of the cars entering the roads," a company spokesman said.

The People's Car model unveiled today, made largely form plastics and modern adhesives, has no radio, no power steering, and no air conditioning. In a design The New York Times called " 'Ghandian engineering,' combining irreverence for conventional ways of thinking with a frugality born of scarcity," the vehicle may fall short of India's now lax safety standards in coming years. The Times continues:

Tata officials say the car will comply with all Indian norms. But they are changing. India's major cities plan to adopt the Euro IV emissions standards in April 2010, requiring a 35-fold reduction in sulfur emissions over the current Euro III standard …[and] new safety rules mandating air bags, antilock brakes and full-body crash tests are also coming.

Some are questioning why there has been so much criticism of a company attempting to address the global demand for vehicles across class lines. Despite the environmental impacts, an emerging middle class also want the benefits that car ownership provides, reports Reuters:

"It's the same dream anywhere in the world," said Jyoti Anand, a used-car salesman in Delhi. "You want a good home, a good car, and a beautiful wife."

Tata's success or failure will help determine the company's place in "the global automotive arena, where the battle is increasingly being fought in emerging economies such as India, China, and Russia," according to a separate Reuters article.

"The product has rightfully gained a lot of attention," said Mohit Arora, managing director for the India at research firm J.D. Power Asia-Pacific… "It's a big, big deal for Tata Motors, and will be recorded in history books, whether or not it does well."