Detroit caught sucking its thumb...

Discussion in 'Economics' started by ShoeshineBoy, Oct 17, 2007.

  1. The rumors are true: Tata Motors is going to produce a new $2,500 car.

    It's interesting because the Japanese are right behind them: both Nissan and Toyota are doing the same and thus will enjoy seeling millions and millions of vehicles for decades to come. Skoda, a Volkswagen subsidiary, will also start selling a competitive, low cost vehicle.

    What is Detroit doing? Well, according to the article, Ford is "studying the situation"? A lot of good that's going to do them. Maybe they should form a "Irretreviably Lost Market Share and Sales Committee" to study the situation?
  2. Mind paraphrasing artice, if there is more, as I don't want to register to read it. Is this the TATA car to be sold in India I have heard about before or to be sold in the US?
  3. NEW DELHI, Oct. 11 — A revolution is taking place in India that could change what most of the world drives.

    Jacob Silberberg for The New York Times
    Rush hour in New Delhi. Analysts expect more cars to join or replace the 65 million scooters on India’s roads, with new ultra-affordable cars leading the boom.
    Next fall, the Indian automaker Tata Motors is scheduled to introduce its long-awaited People’s Car, with a sticker price of about $2,500. Hot on its tail may be as many as half a dozen new ultra-affordable vehicles — some from the world’s leading carmakers, including Toyota and Renault-Nissan.

    With a median age of just under 25 and a rapidly expanding middle class, India will overtake China next year as the fastest-growing car market, according to estimates by CSM Worldwide, an auto industry forecasting service.

    To tap that emerging market, automakers are starting to respond to Indians’ desire for small and cheap cars. As a result, car companies are coming up with new ways to develop and build automobiles worldwide.

    “Ask one billion people, and 99 percent of them are going to say they want a car,” said Jagdish Khattar, managing director of Maruti Suzuki India, the country’s largest car manufacturer. “The problem is, How many can afford it?”

    For a long time, only a few carmakers in India concerned themselves with that question. The small-car market in this country is dominated by Hyundai Motors India, Tata and Maruti Suzuki, which is a joint venture between Maruti of India and Suzuki of Japan. Maruti Suzuki has more than 50 percent of the car market, thanks to models already as low as 195,000 rupees (about $5,000).

    Now, foreign carmakers are entering the competition, increasing pressure to make cheaper yet appealing cars. From June to September alone, Skoda, a subsidiary of Volkswagen, said it would start making and selling the Fabia, its small car, in India; Toyota’s chairman, Fujio Cho, said his company might introduce a new small car to India; Ford Motor executives said they were studying the situation; and Renault-Nissan announced it would set up an engineering and design center, adding to previous plans to build a plant in India.

    Renault-Nissan — a car-building alliance between Renault of France and Nissan of Japan — has been talking with local scooter maker Bajaj Auto about building a cheap car that analysts say could cost as little as $3,000. Hyundai is adding a new small car model to its existing line and doubling its local production, and Honda is planning a small car tailored to the Indian market. On Thursday, Fiat stepped up a partnership with Tata, announcing a 50-50 joint venture to make cars, engines and transmissions in India for the domestic and overseas markets.

    India differs from giant slow-growth and no-growth auto markets like the United States and Western Europe, and even from fast-growing markets like China, in that the emphasis is on small, low-cost cars — but with four doors, not two, and room for the extended family.

    While the Indian upper classes are snapping up roomier models and even imports like Mercedes-Benz, first-time buyers will provide a big chunk of growth for years to come.

    By 2013, CSM predicts, India’s market will expand an average of 14.5 percent a year, compared with just over 8 percent for China. CSM estimates that in 2013, the Chinese will buy 10.8 million cars, compared with 3.8 million in India, but says there is already a glut of local and foreign manufacturers in China, making India a more attractive long-term market.

    If global manufacturers can figure out how to make small, cheap cars in India, they are expected to start exporting them to other fast-growing markets where the proportion of car ownership remains small — places like Southeast Asia, Africa and the Middle East.

    But first they have to conquer this market. A. T. Kearney, an international management consulting firm, estimates that a car with a $3,000 list price could attract 300 million buyers in India by 2020. Of course, forecasters were bullish on China for decades before its growth finally took off. And economic upheaval or political change could stall India’s expected growth, too.

    But the millions of Indians who will buy cars are likely to agree with Shuchita Bagga, who bought her first auto in July. “Budget was the most important thing,” said Ms. Bagga, 26, a trainee in human resources who earns about 375,000 rupees a year (about $9,500) and paid a little more than 235,000 rupees ($6,000) for it. “I’m not in a position to buy a big or an expensive car.”

    In addition to new economy types like Ms. Bagga, car manufacturers are looking at India’s approximately 65 million scooter owners, mostly men. Currently, entire families commute on scooters, with the man of the house driving, his wife sitting side-saddle on the rear, and as many as three children wedged in between.

    The People’s Car will create a situation where “someone who never even dreamed of a car finds it within reach,” said Ravi Kant, the managing director of Tata Motors. “Imagine what excitement there is.”

    Environmentalists and safety advocates are less enthusiastic.

    Anumita Roychowdhury, the associate director for the Center for Science and Environment in New Delhi, said the ultra-affordable vehicles would worsen India’s pollution and traffic congestion. Already, nearly 60 percent of India’s cities have pollution levels that are considered critical, she said.
  4. On the safety front, auto executives insist the cars will comply with the safety standards of the markets they are sold in. But in India those standards do not currently include full-body crash testing, airbags or antilock braking systems.

    Developing Markets Critics worry that thousands more cars on the roads will increase an already high accident and fatality rate in India, and those traveling in cheap cars are most likely to be injured or killed.

    Given their need for speed and bulk, the car demands of North America are “almost diametrically opposite” those of India, said Craig Cather, the president and chief executive of CSM. That might limit the expansion of the ultra-cheap cars into mature markets like the United States and Western Europe.

    But that does not mean much. The automotive supplier Robert Bosch estimates that vehicles priced under 7,000 euros (about $9,870) will make up 13 percent of the world’s market by 2010, or 10 million cars a year. And by then, sales of low-price cars will grow twice as fast as the rest of the market, according to Bosch.

    To satisfy that market, manufacturers and suppliers will need “exceptional creativity and inventiveness,” Wolf-Henning Scheider, president of Robert Bosch’s gasoline services division, said in a speech in June. “Slimmed down versions of existing components and systems are not sufficient.”

    Daryl T. Rolley, general manager for international operations at Ariba, a sourcing and procurement company working closely with Tata, agreed. “There are so many legacy costs built into a design, and trying to engineer those out is difficult,” he said. “It’s better to start with a clean sheet of paper and engineer low costs in.”

    The competition to make cars less expensive could finally help make India an automotive research and development hotspot — after years of false starts and complications from bureaucracy, poor infrastructure and labor unrest.

    Maruti’s factory in Gurgaon, south of New Delhi, for instance, is reached by a potholed road filled with cows and fringed with stands selling juices and snacks amid crumbling concrete storefronts. On a recent visit, parts of the garbage-strewn road were washed out in a sudden shower. Blaring traffic backed up in the early afternoon.

    But inside Maruti’s gates, the company has created a self-sufficient, streamlined island: 4,700 Maruti employees work inside the gray buildings, as do at least as many employees of suppliers, whose warehouses and production plants ring Maruti’s main factories.

    The site generates its own electricity and recycles its own water. Inside the main factory are all the materials the company needs for two hours of production at the current rate of one car built every 21 seconds. The nearby suppliers’ warehouses stock materials for hours more.

    Maruti, which is still majority owned by Suzuki, has plans to increase its already highly automated process, with the goal of cutting its production time in half and trimming costs. Already, giant swiveling robots do much of the welding. Manpower is employed mostly to check for errors.

    “We have made the entry for our competitors smoother,” Mr. Khattar of Maruti said.

    While he acknowledged that India would never be a global manufacturing hub for all automobiles, Mr. Khattar said the country did have a major role to play in the manufacture of compacts. What India can offer, he said, is “frugal engineering.”
  5. Thanks, yeah I read that before. For $2500 for a new car, you can't expect much safety. I live the self sustained mfg, great idea.
  6. Yes, although there is a certain amount of threat to the US as well. The estimates that I have read is that a Tata-esque car could probably be produced, with safety and emissions, at about $6,000-$7,000 for the US consumer. I think a huge number of people would go to that for their 2nd commuter car assuming it was of reasonable quality. It creates almost a disposable car: you can drive it for 6 years for about a grand a year...
  7. 2500$? Thats how much US car union mechanic gets in 2 days ( 160 an hour )
  8. piezoe


    On major purchases i have one rule: Buy Japanese or buy German. I want quality not junk. I understand that there are still a few high quality products, mainly tools that heavy industry uses or high tech., made in the USA, but damn few and becoming fewer. US companies seem to have subscribed to the idea that the American consumer is there to exploit. So why buy American when for a few more bucks you can get something that works and will last? Sure there are still some things made here that are worth buying, but they are, unfortunately, mostly the products of foreign owned companies. I have a Carrier home heating and cooling system. It's had nothing but problems since the day it was installed (they can't even make a squirrel cage blower for god's sake). Do you think my next heating/cooling system will be American made. Think again.
  9. I thought I'd read that $2800 per car is medical insurance/legacy costs per car.
  10. Yeah, but the SUV and Minivans aren't going away anytime in the short term. Gases prices will have to double imo before that happens. That will keep Detroit hanging on for quite awhile.

    But I"m sure this has a few execs scrtaching the heads...
    #10     Oct 17, 2007