As increasing liberalisation norms transform the Indian economy, the transportation sector is set for explosive growth. The personal and public transport segments are still in an early stage of growth, but you don't need a crystal ball to see the sweeping changes waiting to happen.
The government's massive infrastructure development programme is connecting thousands of towns and villages all over the country. The building of roads where dirt tracks existed before is spurring communication and commerce. Suddenly, cars, buses and scooters are plying where only bullock carts used to. A whole new world of opportunities is opening up for our rural communities.
Rapid growth will inevitably bring problems in its wake. This doesn't mean we should curtail growth; instead, if we have to bring about an improvement in the quality of life of our people, we must remove constraints. The challenge will be to ensure there is greater discipline in the development process, more certainty.
Buses to the fore
The pace of growth in personal and public transport in urban areas is just as spectacular. Television, telecommunications and the internet have shrunk the world and expanded our aspirations. We see the choices available to consumers in developed countries and want the same goods. Rising incomes, especially among the young, are also fuelling the demand for cars and bikes.
The stage is also set for an exponential increase in the use of public transport. All-round national development is driving people's need and desire to travel. Impeding factors, such as increasing congestion in the cities, and the fact that not all have access to personal transportation, will fuel further growth in the public transportation segment.
Future modes of public transportation will vary, depending on the structure of a particular city, and could be either above- or under-ground, and could involve high capacity bus systems or monorails. As elsewhere in the world, buses are likely to come to the fore in a big way, and account for a large percentage of the total transport fleet. Russia and China are good examples of this phenomenon.
As we look at increasing growth in transportation, we will also need to address issues of safety. Because of present constraints, many people travel on two-wheelers today. It is not an uncommon sight to see entire families travelling on these vehicles, which is very unsafe. We need a more reliable platform for personal transport.
I am also looking at the public transport sector adopting certain safety and comfort standards. For instance, buses are not covered by any standards, though they should be. Bus-body making is an unorganised industry today.
If we look at the emissions aspect, and consider how things have progressed from, say, about ten years ago, clearly there has been a huge amount of reduction in emissions. The country has moved progressively through the Bharat I, II and III stages, and figures suggest an overall reduction in emissions of around 85-90 per cent.
As we move forward, I would say that India is fairly close to where Europe is. If Europe is at the Euro 4 level today, then we would be applying the same standards in 2010 — in effect, with a five-year lag, which is eminently acceptable for a developing country.
Fuelling the future
Fuels are another important issue we need to grapple with. Petrol and diesel both have their advantages and disadvantages, but despite popular perceptions, today's diesel is a much cleaner fuel — no longer the black smoke-spewing polluter of popular imagination.
If priced the same as petrol, the cost of using diesel is much less, for thermodynamically it is more efficient than petrol, at least by 25-30 per cent. As fuel prices go up, and import bills rise, it stands to reason that a diesel-based transport industry will use less fuel — and consequently pay less for its fuel bills.
Advanced countries such as Europe, US and Japan, where people are very conscious about pollution and emission norms, have been encouraging diesel. The US which predominantly uses petrol as a fuel, has now begun to drift towards diesel. In Germany, close to half the vehicles sold use diesel. Diesel is now a popular choice in India as well.
Among alternative fuels, CNG is a good medium, but it has major challenges in terms of availability and distribution across the country.
We also need to look at alternatives to hydrocarbons, as prices keep going up, and the mismatch between supply and demand continues. Many experiments and pilot projects have been initiated, including using jatropha with diesel and ethanol with petrol. We too are doing a lot of work along these lines. Over 50 staff buses in Pune are running on a jatropha-diesel mix. We have experimented with ethanol as well, but not much.
While a lot of research work is being done in this area, I think it will take a long time — at least seven to ten years — before we arrive at a workable system. All things considered, the induction of these derivative fuels is still a long way off.
Hybrids and hydrogen-based vehicles, I feel, are even further out in the future. We are doing some work in these areas; but even in advanced geographies such as the US, hybrids are yet to justify themselves as an economic solution.
Strategies for tomorrow
Looking ahead, there are strategic issues that businesses need to address. One such discussion involves moving from low-cost production to high-quality products. Frankly, in today's environment, I don't see a conflict between the two. I would argue that it's not an either/or situation at all, for I can be a low-cost producer and yet steal a march over others through innovation.
In fact that's how the strategy is unfolding for us. The equation that a good vehicle can be made at a lower cost is emerging quite clearly with advances in technology and development of appropriate business models and product packages. A case in point is Ace, our small truck, launched in 2005. As a four-wheeler, it is positioned against the big three-wheelers, and gives customers what they want, and at a competitive price, while meeting safety, emission and comfort norms. The Ace is doing pretty well.
Similarly with our low-priced car. It will have all the features essential for comfort and safety. By applying effective technologies and innovative solutions, we will try and ensure that it remains a low-priced vehicle, without compromising on its quality.
As economies liberalise, competition will only stiffen, be it in India or elsewhere. Compared to us, there is a gap in quality and performance that works in favour of foreign brands; on the other hand, there is a gap in cost that is not to their advantage.
What foreign companies would like to do is to retain that positive gap in performance and quality, and reduce the gap in cost. Companies like ours, which have an advantage in cost but an adverse gap in quality and performance, will aim to close the gap in quality and retain the gap in cost.
These will be the two key strategies for the future. I feel that companies like Tata Motors, which have the cost factor on their side, will have an advantage. Time alone will tell if I am right!
But technology and cost competitiveness are only one part of the story. It is the principles with which the Tata group does business that will be the real differentiator. Our commitment to the communities, the countries we operate in, sets us apart from other multinationals.
As the largest automobile company in India, Tata Motors has to keep at least half a step ahead in an evolving market in order to maintain its leadership position. I am confident our company will adapt to expanding opportunities in the market even as they emerge, and maintain its leadership.