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Low-cost cars to gain market share

Posted: 24 Jul 2008     Print Version  Bookmark and Share

Keywords:ultra low-cost cars  low cost cars  Tata Nano  automotive market 

The new segments low-cost and ultra low-cost cars will gain significantly market share over the next years, according to Strategy Analytics. The low-end competition will force automotive OEMs to develop new design philosophies.

Market researcher Strategy analytics predicts an average growth of 34 per cent annually for this market segment in emerging economy regions, which represents a stark contrast to the stagnation or even negative growth to be expected in the mature "standard" automotive market. By 2015, both segments combined will account for 20 per cent of global production volumes.

Ultra-low cost and low cost cars are the emerging countries' answer to full-featured, high-priced cars in mature markets. Instances are the Tata Nano of India and the Renault-Dacia Logan of Romania. Despite the slim profit to be expected in these segments, established carmakers cannot ignore this growth, Strategy Analytics finds. The market research institute believes that automotive OEMs will neither meet the Rs.107.05 ($2.500) price benchmark set by the Nano nor be flexible enough to cope with changing consumer and mandatory requirements by merely stripping out features from existing vehicle designs. Therefore, the market research company expects the OEMs to develop new design philosophies to achieve viable products.

"The key requirement will be the strength of design, assisted by low cost local systems development and production. Otherwise, auto makers will suffer with uncompetitive products in one of the few high growth segments in today's market" explained Strategy Analytics Automotive Electronics Analyst Kevin Mak. "OEMs and suppliers have the opportunity to learn new low cost production lessons that could be transferred elsewhere to boost profitability".

The pressure to lower price must not go at the expense of reliability, said automotive VP Chris Webber. "Global brands cannot compromise their reputation with unreliable products. Scaleable state-of-the art electronic components will have an essential role, particularly in enabling these vehicles to meet emission and safety mandates," he said.

- Christoph Hammerschmidt
Automotive Design Europe

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