The latest edition of Business Week includes an article about car companies using ultra-efficient business models to produce super cheap cars that are affordable to the masses in the developing world. Lead by Tata Motors, an Indian company which announced a plan to build a $2,500 car by next year, other car companies including Toyata, Fiat, GM, and Chrystler are set to follow suite and build their own low-cost cars.
But in a glaring omission, the article never mentions how cheaper cars will effect the quality of life in burgeoning cities throughout the developing world. Already in places like Bangkok, Shanghai, Mexico City, and Delhi – to name a few – personal automobiles are a force to be reckoned with as they clog the streets and foul the air. It doesn’t take an economist to figure out that cheaper cars mean more cars. And more cars on the road mean more traffic and less clean air.