Social cost of cars

After that comment on the previous post (on Tata’s car), I tried to search for linkable material on “social cost of cars” type work done by CSE. Couldn’t locate any. But thankfully, the Swaminomics column that talked about it – TOI has it online. Read – “The hidden social cost of vehicles“:

… There is little appreciation among politicians or the middle class of the huge social cost of cars. They cannot see that huge subsidies, mostly hidden, are being ladled out to car-owners. These need to be abolished and replaced with user charges or taxes that reflect the full social cost of cars …

Stuff like motoring infrastructure, pollution are obvious to many. We do pay towards these by way of taxes and direct-costs (emission norms compliance, euro-II, Bharat-I etc). But things like cost of congestions and hidden parking subsidies are neither well understood nor explained or obvious.

  • What is the cost of extra 30 minutes you spend on the road stuck in traffic jams everyday, and how exactly will you be paying it?
  • Consider the ‘rent’ you pay for 8 ft by 10 ft parking space around Jayanagar 4th block, or most places around MG Road – free? Compare that to commercial space rentals in the same area.

Letting a car sell for Rs 1 lakh could have a lot of side effects. Looking at the cost only in terms of metallurgical and automotive engineering input isn’t right. Perhaps excited by the positive light Tata’s 1-lakh car is shining in, Nissan too has talked about $3000 cars for emerging markets. As good as their intentions might be – $2300 (1 lakh) or $3000 – these car makers aren’t educating their potential markets on the true cost of their pitched-as-affordable products. And that my friend is the point.


6 Responses

  1. This new car does not account the ecological damanges and costs – some of them which are irrevarsable!!!

  2. Pranav,

    Let’s break this into two separate issues

    As long as the car makers are not breaking a law, I would find it hard to blame them. They exist to serve a demand. If there was no demand, there would be no supply. If they are able to make a decent car and able to sell it at that low a price, they are actually quite efficient. If they have compromised safety they need to be shut down. From their point of view they have bought and sold in a free market and the prices in a free market reflect the best possible equilibrium.

    Coming to the user, he or she is not paying the full usage price. Because of that the demand for cars is much higher than what it would be if they paid the market price for the total usage. The demand for cars is also determined by availability of substitutes.

    MHO is that the demand side has to be fixed on this one rather than the supply side

  3. As above i am agreed with Mr Shivathsa and As most of the Peoples i am waiting to see the magic of that steel for there car

  4. A lot of times auto manufacturers talk about the effect setting up an automobile plant can have on the economy in terms of direct and indirect employement by the plant/subsidiaries/suppliers…No one can deny that India, with its demographic time bomb ticking loud and clear needs employment opportunities. But lets say that the central and state governments decide that they by 2010 they will ensure that the growth in number of cars slows down and is replaced by mass transport systems, then wont the employment opportunities be similar? I was just thinking that the govt. instead of focusing on developing cheap, ecologically friendly mass transport systems, its incentivizing fossil fuel based individual transport system? At the end of the day it will boil down to poor planning and bad politics. And in this day and age I think its only we Indians who are to blame for poor politics. No one else but us.

  5. GMohanP, that “cost” applies to almost everything manufactured and consumed. I only borrowed the ones relevant to cars.

    Sri, agree 100%. They (car makers) aren’t breaking the law. And you cant blame them for not educating their markets. Doing that, as well as fixing the demand side is more of regulator’s (= govt’s) job than theirs.

    IM, let me guess where you are coming from. Detroit style, making cars will creates lots of manufacturing jobs. One can say that creation of those jobs may offset some of the hidden “costs” these cheap cars will have. BTW, any idea if # of jobs an MRTS would create to move 1 lakh people is the same as # of jobs making and selling 1 lakh cars creates?

  6. Pranav,

    You raise an interesting question though? How does one quantify social costs of a lot of private activity.

    In the case of cars one big social cost is the disproportionate amount of investment that goes to support car usage. Take our own flyovers and elevated roads, compensation for road widening, peripheral roads costing some Rs.1000 crores. This takes away precious money from healthcare and education both of which I can argue are bigger issues than traffic. Traffic is very visible, the others are not as visible or if they are we turn the other way.

    Even after 60 years of independence we have farmers committing suicide when the rains fail. How is this justifiable.

    Thanks to the constant bombardment from the media and big corporations infrastructure = roads and flyovers. Period.

    Schools, hospitals, pavements don’t seem to get the same share of voice and viewership. I might be wrong.

    I like the township concept that came with the big steel cities and the public sector. Have schools, hospitals, residences close to the workplace. People commute less on a regular basis and it also breeds some sort of community feeling. Maybe once the millions of cars arrive, we will have to go back to this.

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