4 THE FINANCIAL EXPRESS

TUESDAY, FEBRUARY 12, 2008

FIRST STOP FOR MARKETING, ADVERTISING AND MEDIA

◗ BY INVITATION | K A RTHIK RAMAMURT H Y & DEBARATI GHOSH

Hybrid cars willthey

work forIndia?
There is a need to find an alternate
source of vehicular energy
HE last few weeks has been
abuzz with a slew of launches in
the auto industry in India. Two
themes have clearly emerged as
the next wave—lower price and
eco-friendliness. The answer to
eco-friendliness has been pretty
dominated by the hybrid vehicles
displayed at the Auto Expo, New
Delhi, this year by many players.
Following this, of course, have
been a barrage of articles on why
hybrids is ‘the technology’ for In-
dia and its impact has been dis-
cussed and debated in various fo-
rums. This effort is to assess the
potential economic and environ-
mental impact of hybrids and
whether this could well be just an-
other bright spot among the nu-
merous efforts in this direction.
In its present form, with a likely
S T A T I S T I C S S P E A K
price premium of 60% over its
equivalent model in India, we can
safely assume that hybrids are go-
ing to be preferred mostly by car
owners and not by commercial
vehicle owners.
Going forward, probably the
premium could reduce to about
10% if the government offers a
favourable tax structure and in-
centives akin to the developed
countries like the US. Even this is
unlikely to cause a major shift in
commercial vehicle sales unless
fuel prices increase dramatically.
With this in perspective, we
could calculate the economic im-
pact of hybrids in the Indian con-
text. According to recent statis-
tics, there are close to 51 lakh
petrol cars on the Indian roads,
consuming around 315 crore litre
of petrol a year. This translates to
an amount of Rs 9,624 crore in
the import bill.
If we assume an optimistic sce-
nario of even 5% penetration (the
present penetration in the US is
around 3%) of hybrids in the next
few years, the savings would be of
the order of Rs 240 crore in the im-
port bill per annum (assuming a
50% reduction in petrol consump-
tion by hybrids).
We could compare this to
the one time premium
for purchasing hy-
brid cars. Assum-
ing a base model price of
Rs 10 lakh, a 60% premium would
amount to an investment of Rs 6
lakh more per car. Therefore, for
2.5 lakh (5% of petrol cars on the
road) cars the total price premium
would add up to Rs 1,500 crore.
This number is a staggering
six times more than the savings
in oil import per annum. In other
words, if the government were
to subsidise the premiums in
some form, it would wipe off the
savings of up to six years or prob-
ably a couple of years if a moder-
ate oil price rise were to be taken
into consideration.
Justice would not be done if
we do not look at the en-
vironmental impact of using hy-
brids as well. Emissions from
petrol cars alone are 22.03 mil-
lion tonne of carbon dioxide a
year. Going by the same assump-
tion of 5% hybrid vehicle penetra-
tion, there would be a reduction
of 0.55 million tonne in carbon
dioxide emissions per annum (as-
suming a 50% reduction in emis-
sions through hybrids). At 0.23%
of the mammoth figure of 244.8
million tonne of total vehicular
carbon dioxide emissions per an-
num, this impact probably is not
significant. While on the subject of
environmental impact, it is also
critical to look at the battery pack
of hybrids which is made of nickel-
metal-hydride.
Battery disposal is something
that clearly lacks regulation and it
is not uncommon to see batteries
disposed off in public dustbins.
Unlike Western countries where
there are strict rules and regula-
tions for disposals that are strictly
enforced, India has a long way to
go. These need to be addressed
before introducing new sources
of battery waste.
There need to be initiatives to
find alternate sources of vehicular
energy both from an economic as
well as environment perspective.
In this effort, hybrid technology
undoubtedly is a step in the right
direction. But, in the short term,
there’s still ground to cover to
make this workable in the Indian
context and probably there are
other easily surmountable means
to achieve the same.
If better road infra- Unlike the
structure in cities
could lead to a saving West, where
of even 10% of driving
time, we could safely the rules
assume that the sav- for battery
ings in fuel would, at
the least, be 5%. And disposal are
road infrastructure is strict, India
not something that
has been discovered in has a long
the last few years. In
countries like Singa- way to go
pore, despite similar
weather conditions as
in India, it is rare, if ever, to see pot-
holed roads. Similarly, if of the
two lanes available on a road, one
is not occupied by parked vehi-
cles or vendors, we straightaway
have 100% more capacity.
This again is more of an en-
forcement of zero tolerance ac-
cepted worldwide rather than a
concept of the future. This list can
go on with other low hanging
fruits like, improved public trans-
portation, enforcement of emis-
sion norms and strict traffic regu-
lation, which would directly
impact economics as well as envi-
ronment as compared to what
hybrids can bring in the short
term. This is something which the
policy makers should keep in
mind while planning the future of
Indian transportation.
Ramamurthy is associate director
and Ghosh is business analyst,
Synovate Business Consulting

Moving up the
value chain
“Good value for money”
the No 1 influencer of grocery
store choice in India

According to The Nielsen On a scale of 1 (low) to 5 (high), how

Co’s latest Consumer important are the following factors
Confidence Survey, an when you are deciding where to
overwhelming 91% of
Indians who were
do your grocery shopping?
surveyed voted for ‘good
value for money’ as the GOOD VALUE FOR USES RECYCLABLE
most important factor MONEY BAGS
7 12 8
while selecting a grocery

21 17
store. The second attribute
was ‘better selection of 19 18 20
high quality brands and
products‘ (79%) followed 40 18 22
by ‘location’ (54%) and 50
‘available parking space’ 57 57 24 30
65 23 34
(54%). Price, promotions
and perceptions also help 33
consumers reach a 39 17 25 24
27 35 29 25
decision about a store, 26 11 18
says the survey. 6 12 6 13 10 21 9 15 21 19
ia na an ea ng ia na an ea ng
Ind Chi Jap Kor ong Ko Ind Chi Jap Kor ong Ko
H H
1 2 3 4 5