The Race To Build Really Cheap Cars

Washington DC April 13, 2007; The AIADA newsletter reported that Renault-Nissan Chief Executive Carlos Ghosn is betting that for autos, cost could eventually dip under $3,000.

Business Week reports that at a plant-opening ceremony in India last week, 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.

After years of making their mass-market cars more expensive, the world's automakers have abruptly shifted into reverse. With stagnant growth in the U.S., Europe, and Japan, they are now eyeing emerging markets for new opportunities. That means redesigning the car for buyers who might otherwise be able to afford only a motorcycle. And outdated, stripped-down models won't do.

Demand is surging for basic cars that combine modern comfort with safety at a fraction of today's cost. The rush to build a modern, no-frills car could do for autos what airlines like Southwest have done for travel, and H&M and Zara have done for fashion.

Whatever the lowest sticker price turns out to be, the discounting trend will hit cars across the board, from minis to SUVs