How can a new car cost only $3,000?

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Author's Note: How can a new car cost only $3,000?

If early sales figures of the Tata Nano tell us anything, it's that even lower-income people judge a car by more than its price. Tata had to change its marketing approach when it became clear that potential buyers were turned off by the Nano's "poor man's car" reputation. I was a bit surprised to learn how status-conscious Indian car shoppers were in their initial snubbing of the Nano. But the thinking goes, if you can afford a new, cheap car, you can probably also afford a much nicer used car -- at a similar price. Call it "The Yugo Dilemma": how do you make a cheap car that non-affluent people won't be embarrassed to be seen in? So that's one equation for inexpensive automakers to balance out. (Personally, I don't care what bystanders think -- one of these would be great for zipping around my gridlocked, parking-constrained city.)

Another important bit of calculus will be to get public policy right in the places these cars proliferate. For instance, if you make driving more convenient than walking, your populace will put on weight, over time. Air quality might suffer and asthma rates could go up without proper emissions requirements. The West has lots of lessons to offer on how to (and how not to) build a prosperous society helped along by a car-owning citizenry. I hope developing countries are smart enough to look at the successes and problems stemming from developed countries' long-running love affair with autos, and that they take good notes.

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