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Ultra Low Priced Cars: Will You Buy One?

By Hiteshbhoi

| December 7th 2011 | Views:

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North American motorists have gotten used to paying $20-$25,000 or more for their new vehicles. Long gone are the days when sub $10,000 cars ruled the highways, with few cars available for under $15,000 these days. All of that will be changing as the pending introduction of cheap cars from China as well as imports from Mexico and other third world nations will reshape the automotive landscape. Will you buy one of these bargain brands or will you stick with one of the trusted names? Let’s step forward a few years to look at a radically changed automotive market and just what it may have to offer to you, the value conscious consumer.

If you follow automotive press reports then likely you have heard talk of cheaply priced cars from China being imported to the US and Canadian markets. At prices reported to be as low as US$ 6500, these cars have created a lot of buzz and have raised concern about the entire automotive industry, domestic and foreign. One big question asked includes this: how will domestic manufacturers be able to compete price wise? Well, prices won’t be quite as low as first reported once certain safety and anti-pollution measures are added in; instead the final starting price will likely be in the neighborhood of US$ 8500.

Regardless of exactly where the final starting prices are set, an economic tsunami could hit in short order.

Two of China’s top brands, Chery and Geely, are reportedly preparing to export cars to the US in 2008. Both manufacturers produce several lines of vehicles, but current manufacturing output is limited. Expect no more than 200,000 of these vehicles for the first few years, but maybe millions more once additional capacity has been brought online.

In India, several manufacturers have been quietly expanding capacity to serve the burgeoning Indian market. One manufacturer, Tata Motors, even has pledged to build a car starting at US$ 2000. That’s no typo – two thousand dollars for a new car! The last car that sold at this price in the US was the VW Beetle. Of course, you have to go back to the late 1960s to find a new Beetle at that price.

Will Tata and other Indian automakers export their cars to the U.S.? Given the current state of the Indian auto industry, likely this will not happen for some time. Capacity is expanding, but it is barely keeping up with domestic demand. Plus, each model would have to undergo extensive upgrades in order to conform to strict U.S. emissions, safety, and quality standards. Yet, the possibility of a car that will greatly undercut Chinese models in price is intriguing.

Don’t think for a moment that leading world automakers will take these challenges lying down. Ford is proposing to build a sub-$10,000 vehicle in Mexico; GM is tapping its South Korean arm Daewoo for additional low cost models; and DaimlerChrysler is shopping around for a partner to help build it own super cheap people mover for around the same price.

Toyota, Honda, and several other Asian manufacturers will be sure to respond. With factories scattered across the globe, each company can pull a model from one factory and ship it to the U.S. to compete. Already, Honda and Toyota are offering cars at around $12,000 or less and each of these models could retail for much less if they are built in countries where wage levels are very low.

So, what does all of this mean for consumers? Well, you aren’t likely to see an across the board drop in automobile prices, but you probably will see the end to “sticker shock” the phenomenon that has stunned new car buyers for the past generation. What you may find is this: $60,000 Lexus’ and $6000 Scions being sold side by side. A huge difference in price, but something that the North American auto enthusiast may find to be commonplace.

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