It seems that the recently rolled out Tata Nano, the world’s cheapest car, has not necessarily attracted buyers to the ”poverty model” with nearly half the customers so far opting to buy the higher specified version which is considerably more expensive! Even though cost will always be a vital factor in the car buyers decision making process, as we have long thought price is not the be all and end all. For instance even though the sun is rarely out in the UK, air conditioning is seen more as a must have rather than a want, indeed most cars seem to have it as standard today along with electric windows and smaller things like height adjustable seats and adjustable steering wheels. It is not necessarily that surprising therefore that although buyers will be attracted to a low cost, low maintenance, fairly basic car they will pay more for specification.
Though in some developing countries there will undoubtedly be buyers who perhaps do not yet know the experience of car ownership, it will be interesting when Toyota, Nissan et al bring their low cost examples to the market whether they will now have room to price their models a little higher! The one definite in the coming years is that competition globally will become much tougher and with China set to become the biggest producers of cars in the world, volume over profitability will certainly mean that margins will not be the same as they are today.
The changing face of the auto industry will also probably see many more car makers working together to develop new models and cut costs by using similar designs and engines.
Bloomberg: ‘Luxury’ Tata Nano’s Success Helps Avoid Price War
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