How can a new car cost only $3,000?
The automotive world has been abuzz since Japanese automaker Nissan announced it would join the likes of India's Tata Motors in producing an ultra-inexpensive car of its own. The car's rumored asking price? Around $3,000.
But wait -- is it even possible to make a $3,000 car and turn any notion of a profit? Building a car isn't like building a simpler machine ... like say, a bicycle. There are, quite literally, tons of materials in a typical car, thousands of individual parts and a heck of a lot of labor required for assembly.
Well, let's first take a look at the physical construction of a cheap "city car" like the Indian-made Tata Nano, which weighs about 1,322 pounds (600 kilograms) and costs a little more than 141,000 rupees, or a mere $2,700 or so in United States currency, when purchased brand-new. It's able to weigh so little not because of advanced carbon-fiber body panels or lightweight titanium framing. Nope, it does it the old-fashioned way -- by providing less car. For comparison, the average weight of an American-built car was a hulking 4,142 pounds (1,879 kilograms) in 2006, according to the Environmental Protection Agency [source: Jones].
Smaller size means less steel that has to be made from metal ore dug out of the ground. Fewer components for amenities extend the weight savings.
In addition to being smaller, the Nano does without lots of creature comforts and safety features found in higher-priced, modern automobiles. Airbags all around? Nope. Trunk hatch accessible from outside the car? Not a chance -- you get to the cargo area from inside the car. Radio and air conditioner? (Come on, it's India, surely AC comes standard, right?) Negative. To be fair, the "premium" LX trim does include AC, power windows and gives the front passenger a sliding and reclining seat to match the driver's.
Just keep in mind that options mean more material and therefore greater cost.
Then there's the actual "people" and "doing business" parts of the equation. It's no secret that robots have assumed many of the factory tasks once performed by human automotive workers. But the machines haven't completely taken over, yet -- not even on the factory floor. Quite a few jobs still require the Homo sapiens touch. In many of the established auto-producing countries, workers have a history of earning pretty comfortable wages by rest-of-the-world standards. India, while modernizing fast, is still known as a low-cost source of labor.
By 2010, Indian auto workers were making an average $3.30 per hour -- which is actually on the high end of the scale for Indian manufacturing jobs. Contrast that with auto workers at the "Big Three" in the United States, who were paid an average of close to $30 an hour [sources: IHS Global Insight; Cohn].