U.S. support for Detroit would buy 50 million Tata Nanos

G.M. and Chrysler are asking the politburo in Washington for more rubles (nytimes). Between the 25 percent tariff on imported light trucks (SUVs) and direct cash infusions, it seems likely that the U.S. taxpayer is being bled to the tune of $100 billion over a 2-3 year period. What does the taxpayer get in return for this money? The right to continue to purchase GM and Chrysler vehicles for $20,000-60,000 each.

What else might we do with $100 billion in this industry? Assuming that we could get a wholesale price of $2000 per car, that’s enough to buy 50 million four-passenger 54 mpg Tata Nanos. The fuel savings from driving Nanos to the 7-11 instead of monster SUVs would save taxpayers $100 billion every year (i.e., the initial investment in the Nanos would be paid back with one year of fuel savings). Current predictions are that the U.S. car/light truck market may shrink to 10 million vehicles per year. Thus with a $100 billion federal expenditure we could give everyone who had intended to buy a car or SUV a free Nano for the next five years. Fifty million American households that had expected to go into debt and make monthly car payments would now have $400 extra every month to buy other things ($240 billion per year). The total amount free for investment in the U.S. economy would be $340 billion per year.

[Note: fuel savings are based on 12,000 miles per year driven. The Nano uses approximately 1000 gallons less than a 10 mpg SUV. With gasoline at $2/gallon, that’s $2000 per Nano per year.]

14 thoughts on “U.S. support for Detroit would buy 50 million Tata Nanos

  1. Are you serious? What percentage of people panning to buy a new car, do you honestly expect to be happy with a Tata Nano? A car without power steering, air conditioning, power windows, radio, antilock brakes or airbags! A car that doesn’t meet US safety standards.

    Besides the obvious absurdity of your proposal, the numbers are wrong too. The Nano that is planned to go on sale in the US is expected to start at $4000 and will likely still lack many of the features that you flat can’t sell a car without in America. And features like being able to fit a family of 4 with all their luggage without Jimmy hitting Jill all day will never be available in the car.

    Someone buying a $25,000 Accord already has cheaper alternatives, adding another even cheaper, even crappier alternative is not going to change their buying decision one whit.

    And while I agree that the truck tax should be abolished, we should get our facts straight. The tax applies only to pickups, not SUVs. “Foreign” trucks available in the US are built in the US, in order to get around the tariff. But even if we should abolish the tariff, Toyota would probably still build Tacomas here, because this is where most of them are sold. The pickup market in US is by far the largest in the world.

  2. David: I agree that it would be horrifying to have to roll down a car window myself. My goal is to attain a weight of 350 lbs., not be able to see my toes, and certainly not have to exert myself to get some fresh air. No power steering? My arms are aching already. Do they seriously suppose that Americans still have the kind of strength that they did in the 1940s? (Chrysler introduced power steering to the public in 1951 with its high-end Imperial model.) No radio? I’m going to have to listen to an MP3 player instead of NPR fund-raising and commercials disguised as sponsorship? What about my rights as an American citizen to listen to the station for which I paid tens of millions in taxes?

    As for the price, it is true that they are planning to retail the Nano here, meeting all current U.S. regulatory standards, for about $4000. When purchasing in a quantity of 50 million, however, I think that the U.S. government could insist on a wholesale price.

    Is a Chevy Malibu a nicer car than a Nano? Sure, but the U.S. taxpayer will have to bleed $100 billion in subsidies to Detroit for that Malibu and then another $21,000 for the car itself. A lot of folks, having already paid the $100 billion, might prefer to get a Nano for free rather than pony up $21,000 plus an extra $2000 per year in gasoline for the Malibu.

    Do we need airbags? Statistically they haven’t been shown to make a big difference compared to seat belts. As the U.S. grows to 500 million people, mostly living on the coasts, the average traffic speed will probably come down to less than 10 mph (already far below that for crosstown traffic in Manhattan). You don’t need to drive around in an M1 tank to survive a crash at a typical speed for a Sunday afternoon bicycle rider.

  3. $100 billion could capitalize several new car companies that could no be run by the idiots that drove the current ones into the ground, yet eventually hire the competent 70%* of the people currently working for the big 3.

    * number entirely made up based on observations of software companies

  4. At first I was going to comment that your figures didn’t figure in the extra medical / legal costs incurred by those in accidents in safety-deficient Nanos. But that’s probably balanced out by the lower amount of damage incurred when a Nano hits something vs. the impact of an American SUV.

  5. J. Peterson: How do you know that the Nano is safety-deficient? Because it was designed and built by Indians? There are plenty of Americans who have designed unsafe products, notably the rollover-prone SUV. Because it is light? There are light space-frame racing cars that protect drivers in the event of crashes at very high speeds. We were once convinced that the Japanese couldn’t build a decent car because… they were Japanese.

    Before we throw rocks at Tata for designing a deficient product, let’s look at the cars that we drive. The Toyota Camry, one of the most popular cars in the U.S., weighs in at 3300 lbs. empty, heavier than a six-seat 1985 Piper Malibu, which is capable of pressurized flight at 25,000′ and has a range of more than 1000 miles going 200 mph. The Nano weighs about 1300 lbs., a much more reasonable engineering solution to the challenge of carrying a couple of adult humans around on the ground at moderate speeds.

    For a person who is able to get out of his apartment without the aid of a crane and whale sling, 1300 lbs. of vehicle ought to be sufficient for most transportation.

  6. Kudos to Tata for designing and developing the Nano. As an ethnic Indian, I have some small measure of pride in their achievement (my country of origin was considered a basket case in the ’60s).

    With that said, there is no way in heck I would sit in one of those, at American speeds. Just the laws of physics ensures that a moderate collision with a Ford Expedition or similar will send the darn thing flying…

    In India, the situation is different. In traffic clogged highways, the speed is no more than 20 km/h at best. Kinda difficult to have a collision at those speeds. Furthermore, with cycle rickshaws, and three wheeled auto rickshaws on the road, and with four people piling on to a Vespa scooter, the Nano is actually an improvement on their safety. Not so here.

    I don’t think you can take something designed for a different set of requirements and just plop it in here, no matter how well designed or made. Just as you wouldn’t start exporting Hummers en masse to India.

  7. Have you factored in the potential costs of traffic congestion or highway construction that will be incurred if cheaper cars lead to more cars on the road?

  8. Joel: Trafffic congestion is a major drag on the U.S. economy, which is why http://philip.greenspun.com/politics/economic-recovery proposes a congestion pricing system. The substitution of the Tata Nano for the 50 million heavier and more expensive cars that Americans are likely to buy over the next 5 years would not affect congestion.

    Jagadeesh: I’m not sure where in the U.S. you’re living, but 20 km/h on a lot of roads in Boston would be a very good pace during commuting hours.

  9. philg – you are onto something here.

    The Miata has been a cult sensation for years – a triumph of small and light equating to a lot of driving fun rather than heavy with horsepower.

    The Mini-Cooper was an instant sensation and also great fun to drive.

    The Smart Car is something of a fashion statement out here in Los Angeles.

    And you have all the newly released wanna-bes: Toyota Yaris, Honda Fit, Nissan Versa. It’s definitely a growing market, which is good.

    The benefits of smaller and lighter would go a long, long way for society as a whole – reduced gas usage and emissions, increased safety, reduced road maintenance costs, more volume capacity on the roads, etc etc

  10. @mike woods:

    Yes, but the ice age never came, global warming isn’t happening, climate change is a natural part of Earth’s processes, and there are good reasons for larger vehicles. While I do agree that smaller, lighter, simpler is quite often a good choice, what do any of you “coasters” know about life the rest (read: most) of us Americans live? I have 4 kids, a wife whom I love (meaning she’s counted as part of our family for good), and a need for larger transportation. Just because we drive an SUV (Chevy Tahoe) and love it, doesn’t mean we are evil. In fact, we’re planning to upgrade to a larger vehicle as our family will quite likely continue to grow, and traveling in a smaller vehicle is not possible, or desirable.

    I don’t mean to be rude, but I hear so many folks today that talk like life in NY or LA is the only lifestyle in America. In reality, there are so many more of “us” than there are of “you” that it’s quite comical when you think about it. Then again, it’s sad, because so much of what happens here in our country is dictated by the vast minority, and the ignorant thinking that the coastal lifestyle is the only one that really matters.

    My other 2 cents? I prefer government leave the money that isn’t theirs alone. I don’t need a government to help bleed me so that it can give me a token treat for being part of the country. I need government to put a little faith and responsibility in me, allowing me to make mistakes, allowing me to succeed, and allowing me to learn from all of my decisions so that I can be a better, more experienced contributor to society.

    Giving cars, giving subsidies, and giving “life-saving” billion dollar handouts does nothing but make for a bunch of lazy slobs that believe that they are entitled to something they haven’t worked for. The government doesn’t owe me a “guarantee of fairness”, and I prefer that they not try to give it to me. On that same note, I don’t owe you any guarantees either, so don’t ask.

    I do believe I owe my country – and all her citizens – the willingness to work hard, think smart, and do everything I can to be self-sufficient. I owe my country the desire to be law abiding, civil, and humane. I owe a certain reasonable portion of what I earn to the state to manage the affairs of safety and maintenance. I owe, most of all, everyone in the world my commitment to make the most of the opportunities which I have, those opportunities which others would sacrifice even life for.

    Is there any guarantee that I’ll give these things? Nope. And that’s what has made America so great for hundreds of years. Let’s not spoil it now by forgetting that we are all free to succeed or fail as we see fit.

  11. Ron: Unless each member of your family weighs 500 lbs., I don’t think that we can regard the Chevy Tahoe as an engineering requirement or example of American engineering prowess. An empty Tahoe weighs 5300 lbs., the same as a 6-seat Cessna Mustang. The Mustang can carry a non-obese family of 6 at 400 mph for more than 1000 miles at 41,000′ in pressurized comfort. I can’t figure out why it is not worth $100 billion taxpayer dollars to ensure the continued availability of the Chevy Tahoe (if one wants a 5300 lb. 6-seat car, can’t it be bought from a company other than GM or Chrysler?).

    [It is not relevant to the discussion, but your assertion that more people live in the heartland than the coasts seems not be to supported by http://oceanservice.noaa.gov/programs/mb/supp_cstl_population.html (says that 53 percent of Americans live in “coastal counties”; presumably a much higher percentage live in “coastal states”).]

  12. So people think that they are safer in an iron clad SUV. Okay, if you are colliding against a Tata Nano, maybe, but what if you run into a delivery truck or an 18-wheeler. And do any of these SUV’s ever leave the road? The Tata Nano makes perfect sense to me and I would buy one in a heartbeat. And FYI the Nano just recently passed the European Safety Tests with flying colors and they do drive a lot faster over there, on the autobahn.

  13. This is my dream car!!
    I want it, I would buy it for 2,000 and have it shipped here. or buy it here!
    Still loking for a way and a consumer choice!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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