Chrysler wasn’t the only one upstaged. The entire Detroit Auto Show feels
upstaged this year by the New Delhi Auto show, where Indian automaker Tata last
week introduced the world’s cheapest car, the $2,500 Nano. The loudest buzz in
Detroit this year is about what the Nano will mean for the world’s auto markets.
Will it create an entirely new category of ultra-cheap cars that will open
mobility to the underprivileged masses? Perhaps, but most of the auto execs here
think the Nano will work best in emerging markets, where customers don’t expect
the create comforts we’ve come to take for granted in the U.S. “To Gen Y kids,
something without power windows or door locks is not a real car,” says Jim
Lentz, president of Toyota’s U.S. sales arm. “Most wouldn’t know what this crank
thing in the door does. It’s like a rotary phone.”
Still, every executive we spoke with admits they are studying the Nano
closely. “Anyone who would discount a new entrant like that, does so at their
peril. I remember when people laughed off Honda and said we’d be lucky to get 2
or 3 percent of the market,” said John Mendel, a senior VP for Honda, which now
controls 8 percent of the U.S. market. “When somebody first said some one could
build a $2,500 car, it was like ‘Yeah, right.’ But we’d certainly sell a lot
more Civics if they were $2,500.”
Don’t look for that $2,500 Civic coming to a Honda dealer near you any
time soon. But Honda CEO Takeo Fukui did reveal that his company is looking at
developing a car that’s cheaper and smaller than the littlest car in its
American lineup, the $13,850 Honda Fit. “We are challenging ourselves to develop
something that would appeal to customers and be even lower (priced) than the
Fit,” Fukui said through a translator. “It’s going to be smaller and cheaper,
but with the Honda badge on it, you’ve got to comply with what people expect for
the environment and safety.” If Honda can come up with such a smart small car,
Fukui said it could sell 500,000 to 700,000 around the world.
Sadly, that cheap little Honda probably wouldn’t show up in America,
where the big rigs on the highway would overwhelm it. “So far,” said Fukui, “we
haven’t thought about it for the U.S. market.” Still, he expects cars in the
U.S. to get smaller as all automakers work to meet tough new federal regulations
requiring all their models average 35 mpg by 2020, up from 25 mpg today. “In the
past, bigger was better,” Fukui said. “This will probably change.”
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