Automakers around the globe are competing intensely to develop low-cost cars for emerging markets and Japanese manufacturers are no exception. But despite the attraction of rapidly expanding auto demand in nations such as China and India there are also some Japanese automakers that remain cautious about taking part in the competition, because of the need for drastic cuts in production costs, among other reasons. The pioneer among such low-cost cars is Logan by Renault in 2004.
The group succeeded in keeping the Logan’s price below one million yen by having it share parts with other Renault cars.
The model’s accumulated sales reached 460,000 units as of the end of June 2007.
Earlier in January this year, Tata Motors Ltd. of India surprised the world by releasing the no-frills Nano mini car priced at Rs.100,000- about 280,000 yen.
The 623cc model has no air conditioner, radio or air-bag system.
Toyota is currently developing what it calls an entry family car with an expected price tag way below one million yen. “The development of new car has come to a good level, but there is still room for improvement,” says Toyota President Katsuaki Watanabe, suggesting that the mode’s development is now in the final stage.
Nissan has announced a plan to launch a low-cost car in India in 2010 via an alliance with Bajaj, a local motorcycle maker.
Volkswagen & Hyundai are also seen planning inexpensive model releases in India. Suzuki is taking a wait-&-see stance in India.
At the same time as low-cost cars are drawing attentions, emission standards are getting tougher around the world and demand for safe cars with fuel-efficient engines or safety features such as air bags.
As if to differentiate itself from automakers engaged in the price-cutting war, Honda recently announced a plan to launch a gasoline-electric hybrid model of its Civic sedan in India this year, aiming to expand its presence in the market by selling its eco-conscious image.
Even if automakers successfully develop inexpensive cars, these will offer only narrow profit margins and how much contribution they can make to the manufacturers’ earnings is unclear.