Flint: the $2500 Indian Car…Not

One thing we've all heard or been reading about is the $2500 car to be built inIndia. Not only are Indian manufacturers about to create it, but foreigners from Europe and Asia are rushing in and getting super-cheap cars ready, too.

Why, just last Friday (Oct. 12), the New York Times said, “Next fall, the Indian automaker Tata Motors is scheduled to introduce its long-awaited People's Car with a sticker price of about $2500.”


And others are supposed to be rushing in and talking about new cheap cars, too: Renault, Volkswagen, Hyundai, and Fiat.

Here's my prediction: There isn't any $2500 car and there won't be. If some company announces one, just remember the “Indian rope trick.” You remember — the magician throws a rope into the air, it stiffens and he climbs up the rope, which is attached to nothing, and he disappears into the sky.

Here's why I don't believe it.

—No one builds cheaper than the Chinese, and if anyone could build one, they would. They have dozens of independent carmakers in China plus more manufacturing experience and auto technology than the Indians. And the Chinese can't do it.


—The only way to make a successful low-priced car, from the Model T to the VW Beetle, has with huge volume, and that means huge capital spending on factory and machinery. There's no such market in India and the Indian carmakers, Tata and Mahindra, are small. Frankly they have yet to catch up with the foreigners when it comes to building modern cars.


—The Indians are said to be developing new ways to build cars to bring abut this miracle. But there are no new ways of building cars. We've been building them for 100 years now and tried about everything, and as noted, the Indian companies are small and behind the curve technically even now.


—The cheapest motor scooters and motorcycles made in these countries can cost $1000 and they are really small low-powered things. What are they going to leave out when building a $2500 car? Brakes? Seats? Doors? Forget air conditioning, and in that hot country, too. Forget air bags yet safety is a serious issue. The million who buy a car this year didn't know how to drive last year. In China more than 100,000 are being killed annually in auto accidents.


India is a poor nation although the economy has been improving. Still about 30 percent of its 1.1 billion people live in abject poverty. It's still a world of motor scooters, bicycles and oxen and bare feet. And people moving up in the world, thinking of a car, usually want something “nice,” not just something cheap.

—The last cheap-car successes have been the VW Beetle and the Toyota Corolla, and in the end they succeeded not because they were cheap but because they were very good cars. And they didn't come close to $2500 in today's dollars. Even the original Beetle was $1500-$1700 in the late 1950s.

I do understand that the Indian market, while small, is growing. Annual sales are running near only 1.4 million. And who is the sales leader? Suzuki, believe it or not. The company is called Maruti Udyou but it's Suzuki cars. The small Japanese company controls 43 percent of the Indian car market and you can buy a new model for $5000-$6000.

Next is Hyundai, which has made a major push in India the past few years and has grabbed nearly 21 percent of the market. Next is an Indian operation, the Mahindra group, which is allied with Renault, with 8.4 percent of the market. Then comes Tata, with just over six percent market share, Toyota (as in Toyota Kirloskar) with 5.7 percent and then General Motors with 3.4 percent of market share.

Compare this with China. In just eight months, 3.4 million cars have been sold in China, and 5.7 million sold including buses and trucks. The leading manufacturers, all with Chinese partners by law, have been Volkswagen, General Motors, Toyota, and Honda.

A few yeas ago there was another rush to India with carmaker after carmaker announcing plans there. There were plenty of startups, but the explosion didn't come.


As far as I can tell, there's a huge need for more roads. And they need not just highways connecting the country but even city streets empty enough for driving, let alone gas stations and parking spots. India has been traditionally weak in public works of all kinds. If there were a huge boom in cars, I'm not sure where people would go in them.

This isn't to put down India or its drive into the 21st century. The economy and the automobile sector are growing. But I believe the idea of a $2500 car is a fantasy.

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