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

Why would anyone buy a $3,000 car?

OK, so you build the car with cheap labor and minimal frills, and all-in, your expenses are still less than $3,000. But remember, as the manufacturer, you don't make money unless people buy enough cars to pay back your investments: in tooling, the training of workers, marketing and all that other good business stuff. Which brings up the question, who would buy such a stripped-down, perhaps even punishing form of transportation?

If you have to ask that question, you obviously aren't the demographic the car is aimed toward. If, on the other hand, you're tired of slogging it out with thousands of bicycling commuters, large domesticated animals and motorcyclists on your way to work every day, something like this might be your vehicle. Similarly, if you're tired of transporting your entire family on a single motorcycle any time you have to go someplace -- and can't afford a Maruti Alto -- then one of the sub-$3,000 to $3,000-plus range competitors might be a step up for you.

Nissan was aware that producing an ultra-cheap car could rub off in an unintended, unwanted way on existing Nissan-branded and upmarket Infiniti cars. People might think all the company's products are no-frills and not worth paying lots of money for. In marketing, the polite term for this effect is "brand dilution," and generally it's considered a bad thing. So instead Nissan decided to revive a name from the past -- Datsun -- to represent the budget line of automobiles. Old-time auto enthusiasts will recognize the irony of the move. Before the Datsun name's retirement between 1981 and 1986, Datsun was a well-regarded brand to U.S. customers. During Datsun's North American heyday in the 1960s and throughout the 1970s, some even compared it to Germany's BMW [source: Hirsch].

To be sure, making a new car for $3,000 is a very tall proposition. Even Nissan has edged away from the $3,000 number, lest production realities make it impossible to hit that target. But when you put all the above-mentioned variables of design, labor, and materials together in the right combination, it becomes clear that yes, it is possible to build a car for $3,000 -- or even significantly less.

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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