Losing Out
January 13, 2008
According to a study by German car expert Ferdinand Dudenhöffer, some 3.5 million cars priced at 1,360 euros 3,400 euros will be sold each year. German carmakers, however, are far from being prepared for the demand, which is expected to come mainly from developing countries.
The Tata Nano, the world's cheapest car at 1,700 euros, was just unveiled in New Delhi on Thursday, Jan. 10. It's bound to steal the limelight from the luxury limousines that will be presented at the Detroit Motor Show next week, Dudenhöffer said.
European, US contenders
French carmaker Renault already proved that discount cars can be successful in Europe as well: By 2010, the company wants to sell one million Dacia Logans, which is produced by the firm's Romanian subsidiary.
US carmaker Ford also plans to begin building a discount car priced at around 5,000 euros in India in the next couple of years. Ford is currently investing about half a billion dollars in its plant in Chennai, where it plans to build 200,000 cars and 250,000 engines per year. Ford also has similar plans for Thailand and China.
Dudenhöffer said he expects Fiat, Toyota and Chinese carmakers such as Cherry and Geely to join Tata, Renault and Ford in producing for the discount sector.
Proud Germans
German firms such as Volkswagen have turned their backs on the low-end market so far.
"Maybe that's because these are not cars that German engineers can be proud," Dudenhöffer said.
Willi Diez, the head of the Institute for Automotive Business (IFA), said that producing discount cars could seriously harm the image of German companies as producers of high-quality cars that are equipped with leading technologies.
But the Tata Nano, for example, performs quite well as far as climate protection is concerned -- despite its simple design and rudimentary technology. It runs on less than four liters (about one gallon) per 100 kilometers (62 miles). Its CO2 emissions are below EU limits and well below those of German carmakers.
Shifting markets
According to Dudenhöffer, some 74.6 million cars will be sold globally by 2020 -- half of them in developing countries.
"While the established car markets are stagnating, the growth is happening elsewhere," he said, adding that this will lead to a shift in focus for European carmakers towards Asia and eastern Europe.