Cheap Cars Seen As Way to Stimulate Slumping Indian Car Market

MUMBAI - June 25, 2007: According to a story by Salil Panchal, and reported by Agence France-Presse, India's Tata Motors, a Chinese owned Global Automobiles, and Nissan-Renault are working on plans to be able to offer new car models at $3,000 or less in order to attract a whole new strata of car buyers. In effect, it would allow those motorcycle-owning Indians who could never afford a car the opportunity to own one.

The decision by Nissan Renault, Tata Motors and Global Automobiles is partially in response to car sales in India falling in April and May. It was the first back-to-back monthly decline in three years, a period which saw annual double-digit growth.

According to Ashutosh Goel, an auto analyst with brokerage Edelweiss Capital, "Tata's small car is likely to be the first one to roll out. They have a firmed up model design and on-going plant construction." This model could be priced between 100,000 to 125,000 rupees ($2,457 to $3,017; USD equivalent). It would be manufactured in the communist-run state of West Bengal and be available for sale in 2008.

Another analyst, Ajay Shethia with Enam Securities, was quoted as saying, "The management has indicated that a prototype of the small car is ready. It could be a four-seater with an engine capacity of 630cc.

Carlos Ghosn (file photo)

Although India faces significant road condition and air quality problems, smaller cars are seen as away to help ease these issues as they would be better able to meet lower emissions' standards and their reduced weights would cause less wear-and-tear on the roads.

Nissan-Renault announced last week that it sees small car growth as attractive and wants to build a car in India with local partner Mahindra and Mahindra. Addressing the media in Yokohama, Japan, Carlos Ghosn, chief executive of Japan's Nissan Motors and France's Renault said, "We are investigating how we can make a $3,000 car. If we build a car like this, it will be in India."