In Eastern Europe and India automakers are already selling cars for $7,000, which is far below the lowest priced car in the U.S. Cars such as the Renault Logan and Hyundai Santro are selling very well. The plant that produces the Logan is running 24 hours a day just to keep up with demand.
The next hurdle is to be able to sell cars that start at $3,000 in these countries. Carlos Ghosn, the Renault-Nissan Chief Executive has announced his goal of being able to sell a car for $2,500.
What has caused this change from the current ever increasing auto prices? Well automakers are trying to seek out new markets, since large markets such as the US and Europe have had stagnant sales growth. Automakers are trying to gain market share in the lower income countries, such as India. Most people in these countries can only afford a motorcycle, so in order to be able to afford a car, means that it has to be inexpensive. But inexpensive does not mean an unsafe car or a stripped-down version of a model that is sold in other parts of the world.
Low-cost cars are "the single most important trend in the automotive industry today," says Vikas Tibrewala, the Paris-based executive director of the Monitor Group consultancy.
Renault launched the Logan in Europe in 2004 for $7,200 and it was an immediate success, selling 450,000 cars in 51 countries. This has caused the other major automakers to develop their own line of inexpensive cars. It is expected that this trend of lower-priced cars will affect all cars from subcompacts to SUVs.
Many people may remember the Yugo or early Hyundai's, which were cheap alternatives to higher priced autos. Those early cars were plagued with quality problems, so much that Yugo eventually fled the US market. Well the main difference this time is that these new "cheap" cars are built well and will actually last. Although the profit margins are extremely small on these cars, the method for making a profit on them is to sell them in large volumes. Which is what many of the automakers are hoping to be able to do when their models are released.
If these cars are successful they could forever change the current auto industry, much like the Model T did in the early 1900's. As cars becoming increasingly more expensive each year, this could be the change that could once again make cars more attainable for the average citizen. Think of these cars as the H&M or Jetblue of the auto industry. H&M has forever changed the fashion industry, just as Jetblue and Southwest have changed what we expect from the travel industry.
So the next question is, if these cars did one day reach it to the U.S. would anyone here actually buy them? China's Geely currently sells a car for $3,900 and plans to begin selling them in the U.S. by 2010.
Full Story: Business Week
Comments (19)
The name is not Chosen, but Ghosn
Posted by Alexandros V. | April 20, 2007 5:53 AM
Posted on April 20, 2007 05:53
Judging by my employer's record of employee compensation and benifits vs. the cost of living.
I'll be in the market for a cheap car soon. So will a lot of other people, but they just won't admit it.
Posted by Steve | April 20, 2007 8:00 AM
Posted on April 20, 2007 08:00
Buying a new car for $4,000 seems a lot better than buying a 10-year-old car for the same price, which is what I usually do.
Posted by Bob Hobb | April 20, 2007 8:50 AM
Posted on April 20, 2007 08:50
if you have as many POS 1000$ cars with 5000$ stereo systems and 2000$ rims as i do around your town you would no full well that this car would sell like hotcakes. we will see a bunch of euro cars with Fins, 20" rims and a huge fart cans driving around. then you will see the oil company's bitching about profits going down because people stop driving gas guzzling 15 year old cars so they will tell everyone that the cost of gas is going to go up. well seams like a lose lose situation to me.
Posted by dave | April 20, 2007 9:23 AM
Posted on April 20, 2007 09:23
BusinessWeek needs to get their facts right. The Logan is a joint venture between Renault and Dacia. That is why it is sold as Dacia Logan in many countries. Even though Renault purchased Dacia in 1998 the X90 project (code name of the Logan) was already well on its way. The majority of the work on X90 was done by the Romanian Dacia car company before it was purchased by Renault. The Renault French style attitude shows how snobby they really are. I wonder how many Renault Logans they would sell. In most Eastern European countries and some countries in middle east (the markets where this car is aimed) everyone knows the name of Dacia since the older cars have been sold there for a long time. Countries like Ukraine, Hungary, Poland, Czech Republic, Croatia, Slovenia, Morocco, Lebanon, Syria and many others will really balk at the Renault name because of its implication of treating customers badly and being snobby. Another point is that the Germans are really scared of this car cause they can compete. The German ADAC (large automobile club) rigged a test and said that the Logan will roll over because it did not have ESP. It was later found out that the ADAC rigged the test by wearing down the tires and they finally had to admit that it was that which caused the rollover and not the car’s design or safety. Considering ADAC it members of DMSB or Deutscher Motor Sport Bund and other organizations I’m not surprised. DMSB has long ties with BMW, VW and MB. It really shows how scared is BMW, Mercedes and VW/Audi group to lean on ADAC to rig some tests. If MB, BMW and Audi/VW want to roll then they should produce cars at the same price level. Of course they won’t since that will cut into their image and profit. They are a bunch of hypocrites. When you buy a Bentley you get to a boat load of VW gear. Bentley being a VW owned company dips heavily into the VW parts bin (engine, transmission). What about buying a Rolls-Royce, gain you get another companies hardware. You get BMW parts. The 3 mighty Germans need to step up to the plate and make some cheaper cars. They are already making “cheaper” luxury cars like RR and Bentley using parts from a lower brand (such as BMW and VW).
Posted by Alex | April 20, 2007 10:42 AM
Posted on April 20, 2007 10:42
A car like that would cost $20000 in South Africa....rediculous...
Posted by McCloud | April 20, 2007 11:50 AM
Posted on April 20, 2007 11:50
Lose Lose huh? I disagree, think of all the people that can't afford cars to which this could seriously benefit. Modding cars is a lifestyle, just like being gay, or a sports junky. This could really help to balance the US economy so that the rest of us may actually live...without having to move to either North or South Dakota.
Posted by Greg | April 20, 2007 12:20 PM
Posted on April 20, 2007 12:20
What are the performance and gas mileage specs? What are the engineering specs?
We (the entire world and especially dense population centers) need to get away from gas-burning cars, and should probably move towards less car dependence all together. If a cheap car increased car ownership and emissions we would have increased traffic congestion and respiratory problems.
Now, if these cars got better-than-average gas mileage (they probably do considering all the people driving poorly engineered full-sized sedans, pickup trucks, and SUVs for no reason) and better than average emissions (I'm not so sure about that) AND displaced/replaced crappy low-gas-mileage and high-emissions cars that would be a winning proposition for the american consumer, our economy, and our local (and possibly global if you buy the global warming theories) environment.
But what will we do with all the old used cars that no one will want anymore (will the sink in price to below that of a new budget car?)? And people probably won't buy these instead of SUVs either. And it doesn't get us away from the pollution and oil-dependency problems we have with our current fleets. At least high gas prices should prevent anything too drastic from happening too quickly.
Cheap is good but I want a fuel cell car (no emissions and powerful electric motor with gobs of available torque). I hope this doesn't delay the necessary changes that need to take place for high-performance low-emission electric cars to become practical an available. Spending $3000 on a crappy gas-powered car is certainly better than spending $30000 but we should set our sights a bit higher.
Posted by Flasher702 | April 20, 2007 12:55 PM
Posted on April 20, 2007 12:55
we need less cars, not more.
Posted by Ed | April 20, 2007 4:16 PM
Posted on April 20, 2007 16:16
We need less people, not cars.
Posted by Plazmic | April 20, 2007 9:52 PM
Posted on April 20, 2007 21:52
faq andreas san grand theft auto
Posted by 2 andreas san grand theft auto | April 22, 2007 11:39 AM
Posted on April 22, 2007 11:39
chasing patrol snow cars lyris
Posted by cars patrol dj snow chasing | April 22, 2007 10:23 PM
Posted on April 22, 2007 22:23
The key questions will be driveability, safety, and reliability. Is this car capable of passing U.S. safety standards?
You note the reliability question, noting that it killed the last car to take this route in the U.S., the Yugo. A thoroughly awful car.
Perhaps I can find a way to get a few dozen of these into my panel at truedelta.com. If so, I'll be able to report whether the Logan truly is reliabiable enough for the American market.
Posted by Michael Karesh | April 22, 2007 11:44 PM
Posted on April 22, 2007 23:44
mouse pics trap cars
Posted by cars ultimate mouse trap | April 25, 2007 7:44 AM
Posted on April 25, 2007 07:44
Maybe if the US started selling new $3000 cars, just maybe, the garden variety of politicians would finally realize they should focus on traffic congestion relief. It would also bring some much needed competition to public transportation...ah, wait, public transportation sounds too environmentally friendly, no politician in the US would let a $3000 car compete! (Of course, given the cars prove to be reliable and safe.) Never mind that most people using public transportation would prefer owning their car. So now the $3000 car becomes a $4000 car for expenses like lobbying and whathaveyou. Good luck...it's an uphill battle to intro something like this in the US, even though the market could really use it.
Posted by Nick | May 13, 2007 10:14 AM
Posted on May 13, 2007 10:14
What are the performance and gas mileage specs? What are the engineering specs?
around 700 cc engine..approx 35 bhp top speed of arnd 100 kph..
mileage of around 20 km per litre....
Posted by rox | August 25, 2007 11:59 PM
Posted on August 25, 2007 23:59
Yes, I would, where and when?
I need one in Kremenchug Ukraine!
Posted by pieter | December 27, 2007 10:01 AM
Posted on December 27, 2007 10:01
we really and truly need a cheaper new car in the U.S. Just tell me when and where I purchase a new car for $3,000? I'll wait in a very long line for one of those cars.
Posted by juanita gooden | February 14, 2008 11:33 AM
Posted on February 14, 2008 11:33
I would like to know if Wal-Mart will be marketing the new $3,000 cars? I think that will be a great idea! It would be a huge demand for those cars in the U.S. "Now, all we need is the ability to buy a cheap new house for between $!0,000 to $15,000 in the U.S. If we could buy cheaper houses that would cut back on Governement spending on low-income housing.
Posted by ernest gooden | February 15, 2008 11:08 AM
Posted on February 15, 2008 11:08