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Urbanomics has a rather interesting post titled, Why the 1 lakh car is not smart economics? It argues that the costs for soceity as a whole will be much greater than the benefits for the individuals.

But I have a few issues with a couple of claims that Gulzar makes in his post. He states that with a car as cheap as this customers
will be encouraged to swap their more fuel efficient two wheelers for the status conferring, but more fuel consuming cars.

Social status does depend on scarcity. If every moma and papa is going to go around with this car then it looses its social status conferring abilities. Moreover the question is between a bike which at about 60k will be fairly high and a car that is right at the bottom of the ladder. Which will be a higher denominator for status. probably the car, but there is huge room for skeptics.

One more issue that this car will face is that if they are targeting the budget conscious customer, then that individual is not just worried about the costs of the vehicle, gasoline prices will be inevitably be considered too. A car is not going to be half as economical as a bike.

I can't be sure if these factors will be enough to counter the kind of price that has been set by the company, but one can always hope.


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