WardsAuto.com's John McElroy recently posted an editorial about the coming rush of manufacturers to build dirt cheap cars for the third world countries and it was fascinating. McElroy is no slouch. He knows the industry and his words are worth a read.

Some folks don't recall (or didn't hear about it) when Indian car maker Tata rolled out its Nano car with the new car price of only $2,500. You can bet Detroit did. Tata is the company that bought Jaguar out of the Ford stable, so they are no one to be ignored.

McElroy wisely points out that when Detroit tries to cut the price on a new model they do it by removing the bells and whistles that so many consumers have come to expect. But Tata took a different approach. Since they were used to building motorbikes and scooters, to them building a car just meant adding features and equipment and a couple of wheels too.

The Nano didn't have airbags or antilock brakes, but for consumers in India it was a huge step up from the bicycles and mopeds they had been overloading and living with.

Detroit took notice. Now Detroit suppliers are aiming their target lower too and designing subassemblies that are targeted for cars that are less in the first place. In the process, their units got smaller and cheaper and lighter too. All of which is great if you are trying to get to a lower price car in the process.

While third world consumers will benefit, there may be a trickle down effect to US consumers in the future. Honda is working on a low cost car and Nissan and others also want their own $2,500 "or less" new car too. Chinese automaker Geely claims it is working on a plug in hybrid electric car that will price out at only $1,500.

As McElroy says, "The companies that can figure out ho to provide those customers with the vehicles they want, at a price they can afford, are going to be the winners."

Soungs like something Henry Ford may have said nearly a hundred years ago. Too bad Detroit had to lose huge chunks of market share to come full circle to Henry's reality.

Detroit car makers may never get to a $2,500 car for America, but just maybe they have realized that they can still build a good cheap car that can sell well if they just build it right in the first place, and price it cheaply too.

Burdge Law Office

Helping consumers protect themselves, since 1978.