Deepak Shenoy

Cheap Chindian Cars and High Priced Oil Don't Mix

Btw, India pays more than the US per "gallon" of petrol, despite what people think of as huge subsidies, because gas is taxed to hell and back. A liter of petrol costs Rs. 55 in Mumbai, and a gallon is what, 3.5 liters? That, at Rs. 43 to a dollar, gives you the $4 petrol we are ALREADY paying. And guess what, this has always been the case - on a comparison we have always paid more than the US for petrol (okay, we do pay lesser for diesel, but the small car you talk about is petrol for the $2500 price)

Now let's take this $2000 income person. Will probably not drive more than 4000 km. a year. With the fuel efficiency of the small car, they'll pay some Rs. 2.2 per kilometer (25 km/lt). Say Rs. 3 including maintenance.

I think by $2,000 you actually mean someone earning more than Rs. 1 lakh (Rs. 100,000) per year which is $2500 per year. At least that's what I think (we don't think in dollar terms, so a lakh is like the lower minimum) And this is post tax because tax doesn't hit you till you earn at least Rs. 150,000 a year.

On a Rs. 100,000 salary, the cost of getting the car, at $4 per barrel gas, is 12%. That's not much more than the 11.5% that the US spends on gas:
blogs.wsj.com/economic.../

Note then that Rs. 100,000 is the absolute lower end of middle class. If you take tax payers (of which there are officially only 33 million, or 3.3 "crore" in our terminology) who earn a minimum of Rs 150,000 that percentage will diminish. At say 300,000 a year, 8000 kms and 18 km/lt cars, we are speaking of about Rs. 26,000 in [only] gas expenses, which is 9%. I would imagine that people with less than 300,000 a year would only buy two-wheelers which give some 60 km per lt (that's about 130mpg) and the corresponding fuel cost as a % of income is considerably lower.

Of course all this is set to change dramatically. With the highway upgrades nearly done, you can drive the length of the country easier and with power, water and phone/data spreading out people will be willing to drive, to work and for pleasure. Then, the $4 per barrel gas won't make sense - but by that time - a year or so from now - gas may not be at that level. Plus, in a few years, $4 at todays rates is likely to mean Rs. 30 or Rs. 25 with India's growth reflecting in the drop of the dollar against the rupee. (The rate is Rs. 43 now)

Note that government employees form the base of the "middle class" - i.e. they are lower paid that the equivalents in the private sector. The government just raised their minimums to Rs. 10,000 per month and that does not include typical perks like conveyance, phone bills and allowances.

And finally, consider that cars can run on compressed natural gas, which is cheaper, burns better, and is less polluting. India has large reserves of CNG as well, and there are pipelines being built to distribute it across the country. If it becomes a fuel of the small car, then the entire equation can change - where, coupled with a falling dollar, even 2x or 3x growth in car ownership, miles driven or cost of gas may not impact spending power.

What you might not have accounted for is that Chindia can use more efficient fuels before they become a "standard". Kinda like cellular phones.

And kunst: when you make the supply of dollars unlimited, the dollar will not be the currency of oil.

Seeking Alpha in Indian Real Estate

Prices are already going down in India (though urban real estate and condos are hugely valued and people tend to pay huge premiums as compared to the US, even in a slump). Specifically, in Bangalore panic pricing is setting in. Even in Delhi and Mumbai prices have slowed down and there aren't too many transactions happening - both in commercial and residential real estate.

I'm in India and I can short them all - but I just don't think it's right to do it now. The national budget, usually a big important thing here, is up on the 29th and could contain sops for the sagging real estate sector, or for real estate investments in general. 29h is also the first day after the current month's futures expiry so if I had to short, I'd choose the end-of-day of the 29th to start.

Tata Motors' March Sales Growth is Disappointing

There's one other reason for this: Depreciation. Indian law allows assets bought between April and September the FULL depreciation for the year (financial year April - March) and those bought from October to March only half of it. Even individuals who are professionals or file taxes for business income can claim depreciation.

March sales are always going to be lower for tata because its largest sales are commercial vehicles, and among passenger sales too, cabs are significant (they even have a special vehicle branded for taxis - called the Indicab). Depreciation effect is perhaps the worst in March and October, reflecting accordingly in Tata Motors sales. Also Ashok Leyland, another commercial auto manufacturer, has 3% lower sales (YoY)in march.

And your quote of 33% decline in exports is a misprint.
<blockquote>
Exports in the month, however, declined 33 per cent at 6,299 units as against 6,508 units in the same month of previous year, it said.
</blockquote>

That, according to my rudimentary math, is a 3.2% decline. Nothing that requires a bold font, really.