Tata's One Lakh Car

A growing body of research indicates a strong relationship between mobility and household income. Throughout the high-income world, the automobile and other motorized forms of personal mobility (such as the motorcycle or the auto-rickshaw) provide the greatest mobility, making it possible for their users to travel from their residences to jobs throughout the urban area. This works best in high-income world urban areas where there motorized personal mobility are much more widely available. Non-motorized transport (such as walking and bicycles), despite its romantic appeal to some, simply cannot provide mobility throughout the modern urban area because it is too slow.

Medium-income and low-income urban areas will need much better mobility for their incomes to increase (along with the even more important issues of rule of law and property rights). It thus comes as good news that India’s Tata Motors is developing a “1 lakh” ($2,200) car. “Lakh” is an Indian term meaning 100,000. Thus a 1 lakh car is a 100,000 rupee car. This translates into approximately $2,200. Currently, Tata’s lowest price car is approximately $7,000.

Obviously the 1 lakh car will not have all of the features that would be expected of a Japanese, American or European economy car. However, it will provide the same basic need --- mobility throughout the urban area. It is expected that the 1 lakh car will be on the market by 2008. This revolutionary development has great potential to facilitate the economic advance of millions of households in India and in low-income and middle-income export markets.