Comments on Luka Agrapidis' articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/luka-agrapidis/articles http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-241511 241511 Fri, 29 Aug 2008 09:16:45 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-237043 237043 Sat, 23 Aug 2008 02:22:39 -0400
Well, please study History before commenting. Columbus set out to discover a new route to India because India was the biggest trading country at that point of time and no country could afford to ignore India as a Trader and as a Supplier of a lot of products used by the Europeans and the land route was blocked.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-236555 236555 Fri, 22 Aug 2008 11:56:00 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-236552 236552 Fri, 22 Aug 2008 11:55:02 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-235869 235869 Thu, 21 Aug 2008 15:39:04 -0400
Get rid of that fancy gas guzzlers here, and let all the people in the world enjoy fuel-efficient ways to commute.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-233621 233621 Mon, 18 Aug 2008 22:26:40 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-232195 232195 Sun, 17 Aug 2008 03:09:47 -0400
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.

]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-232030 232030 Sat, 16 Aug 2008 15:55:06 -0400
And don't forget, we have an unlimited supply of dollars, the currency of oil.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231944 231944 Sat, 16 Aug 2008 13:20:56 -0400 a lot more meaningful and informative is use of Purchasing Power Euivalency .]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231938 231938 Sat, 16 Aug 2008 13:15:16 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231900 231900 Sat, 16 Aug 2008 12:14:13 -0400
Stupid Move? Interesting that you say that since it just tells me that you have no idea about Brands. Do you know as to how much time it has taken for Toyota to establish a Lexus? If Tata had not gone with the take over, it would have lost a lifetime oppurtunity since such Brands never come on DISTRESS Sale. Recently read that Jaguar will soon be launching a $100K car. You can well imagine the kind of margins those cars shall have.

With regard to buying of Hummer, as far as my info is concerned, neither Tata nor any other Company has come forward for that Brand. Its unlikely to be ever sold unless given away for a pittiance.

]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231894 231894 Sat, 16 Aug 2008 12:00:47 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231833 231833 Sat, 16 Aug 2008 10:41:09 -0400 Already the Nano demand is beyond supply... and that is even before the car has launched!!!
TTM is projected to make a profit if they can sell over 45K cars / years.
This is the chance to get on board a quality company which will own the Indian market (both the low and high end of the spectrum).
My target for TTM is $18 by year end when the Nano launches.
]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231822 231822 Sat, 16 Aug 2008 10:10:01 -0400
We started all this with the Ford Model T. Some things change, economic behavior doesn't.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231578 231578 Fri, 15 Aug 2008 18:11:12 -0400 Aug 15 02:44 PM
@jduke
Doesn't matter if it's 2000 or 20000 miles no reasonable person can believe that fuel consumption will continue to rise in Chindia at over $4 a gallon when salaries are so low.

Over $4 a gallon is not that severe a problem when you are driving a 150cc scooter or motorcycle which usually give you upwards of 100 miles per gallon even with the clogged roads in India or other developing countries. When I was in India it was a pleasant surprise to see how far a tank of gas went on a motorcycle. No matter what you believe in it should be a no-brainer that with the Chindian economies on the rise we're not going to witness huge drops in gasoline consumption, although the Indians have been producing a decent all electric car called Reva for the last 3 years now. With improved electricity generation capabilities they should be able to manage just fine. ]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231539 231539 Fri, 15 Aug 2008 17:06:47 -0400 Doesn't matter if it's 2000 or 20000 miles no reasonable person can believe that fuel consumption will continue to rise in Chindia at over $4 a gallon when salaries are so low.
I visited Mumbai back when it was still Bombay."

The switch occured in 1995 (CIA Factbook, Wikipedia), before the major companies began offshoring (go look at ISP pervasiveness figures). I've gone to India once a year, every year in my life and like d_sat said, India's Middle Class (which is defined by various metrics depending on who you talk too) is very widespread. The Americanized view of the world believes that a middle class must exist under the exact same conditions that are found in America; however, in India, you can find an auto driver, a store clerk and a store owner who all will tell you they are in the middle class - yet the Auto Driver makes $2,000, the Clerk makes $10,000 and the Store Owner makes $50,000. The reason for this (I suspect) is the rather large aristocracy that India has; similar to Russia (and of late, China), India has an enormous amount of wealth poured into it's (relatively) large upper class...so much so that it severely (in an uneasily correlative way) skews any simple metrics on a continuous real probability space (i.e. the statistics you are using). You'd need some better weighted figures to account for this huge discrepancy; think of it as using modern American class standards on pre-WWI Europe...it just wouldn't work because of the cultural/class differences. Unlike America, where we have a rather uniform (and normal) distribution of income, India has a very uninterpretable income distribution due to society and cultural differences. Your analysis was a good try (I'm sure many other culturally-unaware people would easily agree with your analysis), but it disregards some of the cultural aspects of India that really make it a different economy than America. ]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231462 231462 Fri, 15 Aug 2008 15:42:50 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231402 231402 Fri, 15 Aug 2008 14:44:36 -0400 Doesn't matter if it's 2000 or 20000 miles no reasonable person can believe that fuel consumption will continue to rise in Chindia at over $4 a gallon when salaries are so low.
I visited Mumbai back when it was still Bombay.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231392 231392 Fri, 15 Aug 2008 14:33:23 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231381 231381 Fri, 15 Aug 2008 14:24:14 -0400
In a Nut Shell: We are paying more for Fuel because American Companies are outsourcing their employement to India. So the people of India are making more money and are buying things that they have always wanted but could never afford until now. And we are complaining because for the first time we are paying more for fuel while some one else is living the American Dream.

Let's just hope that India and China can one day outsource their work to us.

My Advice; Life is a cycle, you have to know when to jump on and off.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231303 231303 Fri, 15 Aug 2008 13:08:17 -0400 @d_sat... 100K is not 'middle class' in any country. These are not my numbers... the average income in India is well below $2000. Granted some people make more, maybe alot more. Some people in the US make over 1million a yr... but it's not me.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231261 231261 Fri, 15 Aug 2008 12:13:27 -0400 http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231067 231067 Fri, 15 Aug 2008 09:49:08 -0400
The whole point is that the average Indian (I don't know about the Chinese) doesn't drive 12k miles a year- that's what the average American does. The average middle class in India lives within its cities not in far flung suburbs. Also India is a far more geographically compact nation with much smaller driving distances. Therefore these numbers are completely meaningless]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-231064 231064 Fri, 15 Aug 2008 09:44:52 -0400 These vehicles will carry an entire family safe from the vicissitudes of the Indian monsoon yielding an even better fuel cost per person
Meanwhile, In the US you've got SUV fuel hogs on highways carrying all of one person and a bag of shredded carrots. Ask who's really causing fuel prices to be where they are, look in you personal vanity mirrors in your Excusions! You might as well say that US driving and the rest of the world using any power at all don't mix]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-230999 230999 Fri, 15 Aug 2008 09:02:36 -0400 After reading your article I don't see any connection between the title and the text. Furthermore there is no conclusion from the comparioson between chindia and usa.]]> http://seekingalpha.com/article/91141-cheap-chindian-cars-and-high-priced-oil-don-t-mix?source=feed#comment-230989 230989 Fri, 15 Aug 2008 08:58:13 -0400
At $2/gallon, this costs $600.
At $3/gallon, this costs $900.
At $4/gallon, this costs $1200.
At $5/gallon, this costs $1500.

Interesting numbers for a middle class making $2000 - $6300 a year.

$2 - 9-30% of annual income
$3 - 14-45% of annual income
$4 - 19-60% of annual income
$5 - 23-75% of annual income

In comparison, an American making $30k a year driving a 20 mpg SUV 15k miles per year at $3.50 per gallon consumes 750 gallons of fuel at a cost of $2625, or less than 9% of income. This is the point at which we have seen obvious demand destruction in the U.S.

As the dollar weakens over the next two decades and Chindia's enonomies improve, expect these numbers to moderate. We may someday look back in anguish at the days when we could have bought TTM at less than a $10 bill (by then, that will be what a coke machine charges) and at a single digit P/E. In that way, TTM is a highly leveraged bet on two things: the long-term economic development of China and India and the continuation of the car as an economical form of transportation.

Oh well, you have no choice but to bet on something.]]>