The car industry is to manufacturing what Madonna is to music. It is constantly having to reinvent itself to stay relevant, and has been pretty successful.
One of Madonna’s more memorable phases for me was when she was constantly stripping (well I was a teenager) and that seems to be the phase the car industry is going through now. All the big car makers seem to be coming up with stripped down versions of vehicles with none of the mod cons.
Italy’s Fiat is developing a new low-cost car. Its follows in the tracks of Renault with its Logan and Tata with its Nano. They are all betting on the fact that the no frills segment will grow significantly over the next few years.
The market for cars in the developed world is saturated so car makers are hoping to sell cars to those that haven’t got one yet in places like India, China and Brazil.
It’s a risk though. How easy will be it to get the price down far enough to tempt people to upgrade from their mopeds, rickshaws and tuks? The margins will inevitably be thin so sales will have to be large enough to bring in decent profits. Are larger vehicles the best solutions in those markets? And can you use the same model in several different markets — will the Nano work outside South Asia?
One interesting thought is there may also be demand in developed markets for low-cost cars as people tighten their belts and want to spend less on the initial outlay and running costs.
Do you think the car makers are right to bet on low-cost cars?
Posted by: Anchor and correspondent, Max Foster
Filed under: Business
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