A fascinating group of news stories discusses the goal many auto companies have of building the next generation of really cheap cars for the 3rd world mass market.
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Singing and Dancing into the Future |
Renault-Nissan Chief Executive Carlos Ghosn is betting that for autos, the magic number is under $3,000. At a plant-opening ceremony in India Apr. 4, he was already talking up the industry’s next challenge: a future model that would sport a sticker price as low as $2,500–about 40% less than the least expensive subcompact currently on the market. Renault-Nissan is the first global automaker to take up the gauntlet thrown down in 2003 by India’s Tata Motors, which plans to launch a $2,500 car next year.
India is target #1 on all fronts — design, manufacturing, marketing, and, of course, the ultimate consumer. Instead of looking outside for economic growth, this is a story of internally sourced, created, and most importantly executed growth.
One aspect of the story is a classic Innovator’s Dilemma problem — incumbent producers not just ignored but actually ridiculed the new low end market. Businessweek continues –
When Tata made its vow to build a $2,500 car, many Western auto executives ridiculed the project, dubbing it a four-wheel bicycle. They aren’t laughing anymore. Tata’s model is a real car with four doors, a 33-horsepower engine, and a top speed of around 80 mph. The automaker claims it will even pass a crash test. And while the car probably won’t win any beauty contests, it’s no ugly duckling either, according to the handful of industry insiders who have been given a glimpse. The rest is top secret, but Tata engineers are already testing a prototype as the clock ticks toward a late 2008 launch. The key is India’s low-cost engineers and their prodigious ability to trim needless spending to the bone, a skill developed by years of selling to the bottom of the pyramid. “You have to cut costs on everything–seats, materials, components–the whole package,” says Tata Group Chairman Ratan N. Tata.
Of course, in most of the cases chronicled in Innovator’s Dilemma, the new, low end market entrant eventually absorbs the upstream market through incremental features… In this case, however, there is at least 1 large hump that Tata et. al. will have to cross before their $2500 car can become a reality in the US –
Forbes quotes consultants at Roland Berger as estimating that it would cost as much as $4,000 on top of Tata’s $2,500 price to engineer the car to meet U.S. safety and emission regulations, transport, pay tariffs, market it, pay lawyers and other warranties.
As many an economist has noted, never underestimate the power of the regulatory apparatus when it comes to locking existing fat cats in their place.
Lame. Lame lame lame lame lame.
Not even witty. Just lame. But you seem to think you’re “winning,” and that’s inexcusable in my book, because you’re stupid.
No, you didn’t.
No, they weren’t.
No, I didn’t.
Nope. I won’t.
Lol. Perhaps only in your twisted world Wit trumps Reason, and its better to be witty than to be right. Of course in a world run by such witty fools my arguments would be “lame” while your witticisms such as the ones below make you the “winner”:
This is so petty and pathetic. In a rational world such “witty” outbursts identify a sore loser.
Prema, I don’t think anyone believes that but you.
The first thing I thought of is all of the people in India who are now buying motorcycles and mopeds because they cannot afford a car, will switch over to this low-budget car. That is really bad for the environment in small towns and villages across India where the roads/streets/gulleys are built for pedestrians only and rickshaws and think motorcycles at most.
It immediately brings to mind the condition of the towns where I have resided where thin, winding gulleys are overtaken and backed up with traffic on festival occasions with cars from travellers/pilgrims/temple goers from Delhi. The whole town is turned upside down and even pedestrians cannont manuever their ways safely through the brick gulleys when these cars are beeping their horns madly and emitting toxic fumes. It makes festival times unbearable, really. What to speak of all the poor roaming cows who have scars on their bodies from these cars hitting into them due to lack of space.
You end up trapped in a traffic jam of cars, motor-bikes, mopeds, bicycle rickshaws, motor rickshaws, tempos, pedestrians and cows and other assorted animals.
So now even more cars are going to be added to this mess now that they are being made available at such a low cost?
It used to be that the cars came into the town from outside areas. But this guarantees that the residents within the town will be trading in their mopeds for a cheap car. Bad, bad, bad for the environment and bad for the pedestrians and animals and bad for the roads that were made for pedestrians – not for wide vehicles like cars.
Mess. Mess. Mess.
First let their be an infrastructure in place for all this.
Nope. You’re wrong.
Ha ha!
Oh, and also? You’re wrong!
PG, are you really the same Pardesi Gori? Your posts are much better lately. Anyway, possibly the infrastructure might improve due to public demand once people actually HAVE the cars. But the bigger problem northern India (and Pakistan) face is the inevitable melting of the Himalayan glaciers (this has little directly to do with the cars, but everything to due with global warming). All the major northern rivers, including the Indus, Jhelum, Chenab, Ravi, Beas, Sutlej, Ganga, Yamuna, and (maybe) the Brahmaputra, are glacier-fed. Once they dry up, the whole region will be a desert.
Yes, the Brahmaputra too. Just checked.