Volume 04, Number 14
Business
Paying Too Much For Your Car?
In this article we look at how India is capitalizing on the making of affordable cars for the masses. It worked in postwar UK with the introduction of the Mini and in Italy with the Fiat 500, which was relaunched in early July this year.
No gas guzzlers here, just economic vehicles and a commodity that will be affordable for the many. Already the major car manufacturers are taking notice, as the potential market for affordable driving is enormous. Tata Motors is set to unveil the world's cheapest car as early as January 2008 as it takes the growing interest in low-cost vehicles to a new extreme. The Indian automaker will launch its $2,467 vehicle by the third quarter of 2008 and may unveil it at January's Auto Expo in New Delhi.
Separately, Tata Motors is developing a line of small hatchbacks and midsize sedans to be introduced next year. India produces 1.3 million cars a year. With the market growing at ten percent to twelve percent per year, this could reach three million within a decade.
The four-door car—a pet project of Tata Group Chairman Ratan Tata—would be the cheapest by far in its class. The current cheapest, the Maruti 800 produced by Suzuki Motor, sells for more than $4,000.
Tata's progress is being watched by automakers including Toyota Motor, General Motors, and Ford Motor that are developing, or have launched, cheap cars in India, Russia, China, and other emerging markets.
Carlos Ghosn, Renault/Nissan's chief executive, said the group was working on an even cheaper variant of the Logan, the global no-frills sedan it launched in April in India, where it sells for under $10,000.
Tata's car will not conform to European safety and emissions norms. However, Tata, which also sells cars in South Africa and a few European markets, said it could be upgraded should it choose to export.
Competitors are skeptical about the price and quality of the car, which the group says will have a 600-cubic- centimeter engine and come in a range of models.
The 33-horsepower engine will be capable of 80 mph. Tata developed the car using lower-cost Indian engineers and “out-of-the-box solutions” to slash development and production costs.
Rising prices of steel, aluminum, copper, and other commodities raised the car's costs in the four years since Tata announced it, prompting the group to make design changes for the car.
Construction on the plant in West Bengal, where the car will be made, was delayed by a land dispute. However, Tata is on track to launch the vehicle in the second to third quarter of 2008.
The plant will have a capacity of 250,000 units per year, which Tata aims to reach within two to three years. Large sales volume will be crucial for the car's viability, given its low price target.
So, even if you are not interested in a small car, you should be investing in this emerging market to benefit from its undoubted growth potential.
Provided by MAGELLAN JAPAN:
THE FINANCIAL PLANNING COMPANY
Email mtt@magellantt.com
Tel. 03-3769-5511