February 12, 2012

RE60 - Need you More than we care to Admit

Firstly, get your head around the fact that the RE60 is not a "car", it is not a personal vehicle. It is meant as a replacement of the auto-rickshaw (auto).

The modern auto on Indian roads is a derivative of the Piaggio Ape C, which began production in late 1950s. Bajaj had obtained a license to manufacture Piaggios in India and brought us the Vespa scooter and the Ape three-wheeler.

Piaggio Ape C (grab from a 1960 Italian movie)
If you compare the modern Indian auto and the Ape C, the only difference is that the engine has been moved under the passenger from the driver (a design change that was done in the 70s). Apart from that, the basic auto design has remained unchanged for the past half-century.

Why do we need to replace the auto? Let's look at a typical auto ride (if you're in a hurry, skip to scene 3).
(I'll try hard to ignore the idiosyncracies of the auto drivers and concentrate on the vehicle)
Scene 1: You get into the auto.
  • Typically, seats are those that are used in prison cells.
  • An average Indian's knees are touching the metal partition (God help you if you're a six-footer).
  • And you sit at the rightmost portion of the seat. Why? Because if the driver applies brakes, then you don't intend to bang into the meter or the driver himself.

Scene 2: Your ride begins.
  • The auto is so loud, you can't even hear yourself think. This is because the drivers punch holes into the exhaust system to get better fuel efficiency, but the noise levels go above permissible limits (Who gives a damn!).
  • You hope that the roads are smooth as a baby's bottom. Else, you will be paying for a visit to the orthopaedic with a slip disk.
  • If a speed breaker is taken in a hurry, you end up hitting the metal frame above.
  • You ask your self again, "Why can't these things have a suspension?" (I think it's because they don't have a strong chassis to attach the suspension to)
  • If it is raining, the only thing protecting you is a loosely tied sheet of resin that keeps flapping and gives you with your own private rain shower.

Scene 3: Assume you meet an accident (God forbid).
  • Seatbelts? You wish...
  • The auto is crumpled like a ball of paper.
  • The passenger is thrown onto the driver or vice versa.
  • The fuel-tank and engine is right below the passenger, without any firewall separating them. You're lucky if they don't blow-up.
  • Also, you're lucky if the frame holding up the resin top, does not end up spiking you.

If such a thing happens, the chances of survival are close to zero. All this, while the ride costs you somewhere between what a personal two-wheeler and a four-wheeler would cost.

Once you get your head around the fact that the RE60 is not a car but a replacement for the auto, it seems quite revolutionary.
  • It would cost as much as an auto.
  • It is as fuel-efficient (probably mode, with a CNG kit attached). 
  • Can be had in 2+2 or 1+3 seat configurations.
  • A complete body protects you from the weather elements, with much better comfort and ergonomics.
  • Lastly, although it might not have airbags, it would come with seat-belts.

Just look at the interior space in the RE60!!
If the RE60 replaced the auto fleet in India, short-distance commercial passenger travel would surely become much safer and comfortable. Heck, it would even make some marginal two-wheeler customers rethink their purchase.

We feel that the autos in India are due for a change since a long time. For the RE60 to replace autos, auto unions and the government will have to be convinced. Not an easy task, even for a Bajaj.

In the end, we wish the RE60 all the best. And hope it frees us from these death traps/autos.

Disclaimer: The author, his family or this blog has no commercial or personal affiliation to Bajaj Auto and views expressed are personal.

January 07, 2012

Indian Bike Market is at an Inflection Point

Last time the Indian two-wheeler market took a step towards maturity was when Hero Honda introduced the 150cc CBZ. That's when we graduated from being a commuter bike market to a sporty-commuter one.This was a bike which every college-going kid and his dad lusted after. The CBZ sparked the growth of a 150+cc segment and the rest, as they say, is history.

If there was anything that the 2012 Auto Expo showed us, it was that our two-wheeler market is taking another step towards maturity. And the global bike majors can't wait to get a piece of the action.
Global bike majors have come to realise that China, India and other South-East Asian markets have a huge population riding underpowered bikes. And even if a few of them decide to upgrade to higher-capacity bikes, it represents a massive swell of potential customers. They want to establish themselves early to be able to catch the rising tide.

Ducati already has a factory in Thailand (taking advantage of the India-ASEAN FTA), while Harley Davidson has set up their production facility here. Probably, the recent Thai floods prompted Triumph to choose India as their manufacturing base. Bajaj already assembles some KTM and Kawasaki bikes here while the other Japanese majors already have manufacturing facilities here for their smaller bikes. Most of these facilities are built with the intention of exporting the bikes to other Asian markets.

Bikes assembled here (and the ones imported from ASEAN) get to avoid our horrendous +100% CBU import duty. This means we get (relatively) cheaper high-powered bikes. Also, local manufacturing would mean cheaper and better availability of spares. By the end of 2012, we will have more than 5 bikes competing in the 600cc class alone! 

Also, don't be surprised when bike majors start announcing cheaper Asian-spec bikes in the 300-600cc range. KTM has already confirmed that they are working on one while Ducati and Triumph are rumoured to be doing the same.

The single thing that would lead to the creation of the high-powered bike segment is lust. To give you an example, a few years back whenever a college kid saw the newly launched CBZ on the road he promised himself that he would buy one with his first salary. The more CBZs on the road, the more people wanted it. Till finally it became a segment in itself. Similarly, the sights of Ducati Monsters, KTM Dukes and Triumph Speed Triples on our roads will simply entice the fence-sitters to save up and get them some day. 5-10 years from now we would definitely have a sizeable high-powered bike segment.

I would be lying if I said I'm not smacking my lips in anticipation.

PS: This could also lead to the birth of an aftermarket parts and accessories market, but that's for another article.

December 18, 2011

Private diesel vehicle sales should be taxed

The crux of my argument is that the diesel used for private purposes is not meant to be subsidized and such usage should be charged/taxed appropriately. 

The diesel price in India can be broken up into simple components. The retail diesel price = (actual cost of diesel) + (Central & State Govt. taxes) - (Subsidy by Central Govt.)

Economists would call it inefficient because the taxes and subsidy provided by the government neutralize each other a bit. The benefit is that the government does not let the local diesel price reflect the volatility of international prices.

The beneficiaries of subsidized diesel include farmers using tractors for agriculture, truckers who transport foodgrains and materials all over the country, public transport buses that transport millions across the country, and many others. But, the list also includes the owner of a diesel car/SUV for private use.
Make no mistake, a private vehicle is an item of convenience. In other words, a person owns a private vehicle (petrol or diesel) to avoid travelling by public transport. Absolutely nothing wrong with that, until the diesel vehicle owner expects the government to subsidize him for it.

It is quite shocking to see how many private diesel vehicle owners believe that subsidized diesel is their birth-right. Clearly, the subsidy is not meant for this category of diesel users. Since they pay the tax component of the diesel price, they claim that it is the government's obligation to subsidize them for their diesel joyride. But, they forget that the tax is paid even by the intended user of the subsidized diesel. On the other hand, there should be a mechanism to charge the private diesel vehicle owners for using subsidized diesel. 

Ideally, local diesel prices should be deregulated and reflect the international oil prices. This would even promote conservatism among the citizens and more efficient use of the fuel. But doing so in one sweeping move could prove catastrophic for the national economy. 

So, if diesel subsidy has to be maintained (and reduced gradually) it has to co-exist with a mechanism of charging the unintended benfactors of subsidized diesel. Possible approaches could include differential pricing of diesel (which could lead to black-marketeering), an annual tax on private diesel vehicle owners (which would be tough to implement efficiently) or a one-time tax on private diesel vehicle sales (could result in a dramatic reduction in sales of private diesel vehicles). A one-time tax on private diesel vehicle sales seems to be the easiest to implement efficiently. Such a tax could increase the revenues of our government which could be in-turn used to subsidize the fuel. Hopefully, this would also lead to the government reducing some of the taxes on diesel and in-turn its retail price.

The flip-side is that private diesel vehicle sales could drop dramatically from current levels. And people would go back to choosing a petrol or diesel vehicle based on parameters like performance, fuel-efficiency and the average kilometres they would clock in a week. Till we move to an ideal solution (which arguably might never happen), taxing private diesel vehicle sales seems to be the only way charge them for using subsidized diesel.

Do you see any other mechanism to implement such a charge? Then I would love to hear it.

Disclaimer: I maintain this opinion in spite of having a diesel vehicle in the family.