Ultra Cheap Cars: “The Next Big Thing?”
March 07, 2007

Much of the buzz at the Geneva auto show was centered on small and ultra-cheap cars, particularly for emerging markets.

The talk was prompted by Renault’s unveiling of the station wagon version of its Romanian-built Dacia Logan. In addition, Renault recently announced it would build a large assembly plant in India with its partner there, Mahindra & Mahindra.

Word is Toyota has some big breakthrough regarding an ultra-small, ultra-cheap car it plans to introduce, though details are very sketchy.

Don’t count on it, says General Motors Vice Chairman Bob Lutz. Lutz believes much of the talk around ultra-cheap cars is a lot of hype, with the media dubbing them as "the next big thing." Toyota has promised other supposed breakthroughs in the past, he pointed out, but not delivered.

Yes, small, ultra-cheap cars represent significant volume opportunities for auto manufacturers in emerging markets. But, as Lutz points out, there’s no magic to making them. Indeed, GM is studying lots of options regarding how to bring to market an ultra-cheap car.

First, he noted, emerging markets, particularly China, don’t simply want the West’s hand-me-downs. They want the newest technology as well. He recalled to reporters a concept car developed by Chrysler when he was its vice chairman that was ultra minimalistic and its body made with molded, unpainted plastic. The Chinese scoffed and were insulted when Chrysler presented it, he said. Plus, he added, governments of emerging markets are requiring modern safety equipment and emissions controls.

Lutz said the trick is to take older vehicle architecture that has been paid for and make it new again, much as GM is doing with older platforms created by Korea’s Daewoo before GM bought it. A range of vehicles from a bare-bones model that could be sold very inexpensively (under $7,000 U.S. is the target), but to which added equipment, safety features and the like could be added as the market matures or the government sets requirements.

A long-term solution for GM could be China’s Wuling. GM is in a three-way cooperative with Wuling and Shanghai Automotive Industry Corp. (SAIC), its giant China partner with which it produces most of its cars. The Wuling venture produces a low-priced truck, some of which are called the Sunshine.

“We have no plan whatsoever to export vehicles from China,” emphasized Lutz. But he said long term, if Wuling ever produces cars, it could be an answer to the ultra-low cost vehicle question. It is one of many potential answers GM is exploring, Lutz confirmed.

Lutz further shared he has a Wuling pickup truck at his farm outside of Detroit. It was shipped from China to show GM’s board of directors, and the cost of shipping it back to China was more than the car cost there -- $2,800. So Lutz kept it.

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