The Tata Nano and Jevons Paradox

A small snippet of news to underline the comments that I have made about the Tata Nano. In a normal year automobile sales in India run about 1.5 million cars. The Tata Nano went on sale in April, and over the last two months sales have averaged 100,000 cars a month. Because production was only set to be that many this year, many customers are going to have to wait until production gets geared up next year before they can expect delivery. (And just to remind you it is taking Ford up to 6-months to deliver our Fusion Hybrid, so the Indians are not alone in having a long wait).

This is an illustration of Jevons Paradox, in that making cars cheaper and simpler and thus more efficient is resulting in more sales of cars, and thus an overall increase in gasoline demand. Interestingly most of the cars sold are not baseline (the $2.050 version) but also include air conditioning and power windows.