Commuters drive during rush hour in Mumbai, India. Major carmakers are turning away from well-established markets in the West and are looking toward consumers on the crowded streets of developing nations. Bloomberg News
MUMBAI: It has become a vexing, billion-dollar question for the world's automakers: How do you build small, cheap cars profitably?
More people across the world are buying small cars, and as demand in the US and Western Europe withers, carmakers are vying for consumers on the narrow, hot and crowded streets of India, China and South Africa.
Serving this burgeoning group of new car buyers requires a fundamental revision of the way cars are designed, manufactured and sold, executives say.
Ask Nissan Motor Co, Japan's third-largest automaker.
The company plans to launch a new small car platform - dubbed "V" for versatility - in Thailand, India, and China starting in March.
In the works since 2005, the cars are the first Nissan is launching in the developing world.
"Europe can wait. India cannot," Vincent Cobee, who oversees the V car platform globally, told reporters in Mumbai.
Nissan's engineers say the keys to success are keeping the car's weight down and sourcing 80 to 90 percent of parts locally. Massive global sales and cheap, globally integrated manufacturing are also crucial to profitability.
Simplifying helps too: The new V cars will have 18 percent fewer parts than Nissan's current compacts. The front seats, for example, will have 50 pieces instead of 85.
Think of it as the Nano-fication of carmaking. India's Tata Motors took these design principles to an extreme earlier this year, with the launch of the stripped-down, pint-sized Nano, which sells in India for as little as 100,000 rupees ($2,146) plus tax and transport costs.
It's unclear, however, how much money Tata is making on its ultra-cheap base model. Company executives won't say. But the low sticker price - Tata has billed the Nano as the world's cheapest car - has captured headlines, helping fuel demand, and Tata Motors has only guaranteed the 100,000 rupee price for its first batch of customers.
By 2013, Nissan hopes to be selling a million "V" cars a year. Last fiscal year, Nissan sold 3.4 million vehicles globally.
After the V hatchback hits the streets in 2010, Nissan plans to unveil a sedan in 2011 and a compact multipurpose vehicle.
Nissan said it would use its factory in Chennai, in southern India, to produce cars for export to Europe, and its factory outside Bangkok, in Thailand, for exporting cars across Asia, including Japan. Cars made in China will be sold in China.
Nissan is expanding aggressively in all three countries. It recently pledged more than 5 million Thai baht ($150,000) to expand its capacity in Thailand to 200,000 units a year.
It is spending 5 billion yuan ($733 million) to increase capacity in China from 460,000 to 700,000 units a year.
With partner Renault, Nissan is investing 45 billion rupees ($966 million) in India to build capacity of 400,000 vehicles a year.
Executives also said they plan to sell the V cars in the United States in 2011, with a manufacturing base somewhere in the Americas.
(China Daily 10/29/2009 page16)