Top automakers are working on ultra-cheap cars

"There is a huge market for low-cost/price vehicles," Toyota president Katsuaki Watanabe told reporters last week.

By TOM KRISHER, AP
Tata Nano 88 224 (photo credit: AP)
Tata Nano 88 224
(photo credit: AP)
The world's two largest automakers are working on ultra-cheap cars to sell in emerging markets and possibly compete with the $2,500 subcompact unveiled on January 10 by India's Tata Motors. But whether they can match the price remains in question. During the North American International Auto Show in Detroit, top executives from General Motors Corp. and Toyota Motor Corp. said their companies' engineers were working on low-cost vehicles similar to Tata's Nano. "There is a huge market for low-cost/price vehicles," Toyota president Katsuaki Watanabe told reporters last week. Such a vehicle would have to meet Toyota quality standards, Watanabe said, and building a car to sell for $2,500 might be difficult. "To do that properly is very important," he said. GM has bolstered its engineering staff in India to around 1,000 and also has been working on a low-cost car in other parts of the world, Jim Queen, group vice president of global engineering, told The Associated Press in an interview. GM's Chinese mini-vehicle joint venture, SAIC-GM-Wuling Automobile Co., already is building a car that sells for around $3,500, Queen said, calling the Tata vehicle an impressive way of meeting demand in emerging countries. "I want to keep learning more about it," Queen said. "We've got a lot of, I'll call it technical work, that's been under way for some time in order to achieve a vehicle in that class." Queen said GM could match the Tata vehicle, but it needs to better understand the business case for it before rolling one out. "We are working on our lower-cost architecture to try to see if we can come up with lower-cost versions," GM chairman and chief executive Rick Wagoner told reporters. GM engineers in the US and Europe have difficulty understanding the market for such a car, said Queen, who has visited India several times. Functional transportation, he said, is important in India, where parents often travel clogged roads, taking several children with them on bicycles or scooters. "It's just so different than what you would see in mature markets," he said. "So you begin to appreciate such a bare bones - and not that $2,500 is completely bare bones. But air conditioning? Who cares? Power windows? Who cares? I've got a little bit of structure around me, I'm shielded from the elements a little bit, and it gets me from point A to point B." Such a small car could bridge the gap in an emerging country such as India from its current transportation system to more expensive cars as wealth increases, Queen said. Watanabe said that last year he drove an early prototype of Toyota's low-cost vehicle, but said it wasn't at a stage where he could give the go-ahead for production. The cheapest new car currently sold in the US is a version of the 2007 Chevrolet Aveo at $9,995, according to the Edmunds.com automotive Web site. The basic Nano, the world's cheapest car, is expected to roll off assembly lines later this year. It will sell for 100,000 rupees, or about $2,500, but analysts estimate customers could pay 20 percent to 30% more to cover taxes, delivery and other charges. Company chairman Ratan Tata, who introduced the car at India's main auto show, long has promised a $2,500 "People's Car" for India - a country of 1.1 billion where only seven of every 1,000 people own a car. That vow has been derided by a global industry that said it would be impossible without sacrificing safety and quality. The basic version has no radio, passenger-side mirror, central locking or power steering, and only one windshield wiper. Air conditioning is available only in deluxe models. The Nano has a two-cylinder 0.6-liter gasoline engine with 33 horsepower, giving it a top speed of about 100 kph, (60 mph), according to Tata. It gets 4.7 liters per 100 kilometers, 50 miles per gallon. For now the car will be sold only in India, but Tata said it hopes to export it to developing nations across Asia, Latin America and Africa in two or three years. The emergence of the Nano has fueled a host of concerns, including that more drivers on the roads will cause greater pollution and increase the demand for fuel.