Suzuki And VW Are In A Hurry
Freshly wedded Suzuki and Volkswagen are not losing any time in consummating the marriage. Joint work will start immediately, or rather on January 10, 2010 said Suzuki Chief Executive Osamu Suzuki to Reuters. With that date, Suzuki-San is already bowing to Wolfsburg’s ingrained culture. As of this coming Friday evening, everybody who is somebody at VW will be off skiing in Zermatt or soaking in the surf of the Maledives, not to return before January 10th. No linkup with Suzuki will change that.
And what’s so urgent to get going? Suzuki said the new partners have agreed they want to develop a competitive, small car, seen as key to taking the lead in developing countries. Pressed for more, Suzuki remained silent.
“Working together in the ultra-small segment will probably reap the biggest benefit for both companies,” said Fumikazu Kitagawa, managing director at Nomura Research Institute.”With small cars, you can’t go in half-heartedly. But hardly anyone dares because it’s so difficult to make money.”
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This is only relevant to developing nations today, but eventually the U.S. will be a competitive market for sub-$8,000 cars. Automobile prices in real dollar terms have been subject to eye-popping inflation over the past 30 years. Look at the MSRP of anything from the 50s or 60s and plug it into an inflation calculator. Don Draper's Cadillac, not the casual accoutrement of the bourgeoisie, would cost the equivalent of $37,000 in today's money. A Ferrari supercar of the same era would set you back about $95,000; a Miura went for the same as $140,000. Today a representational equivalent in almost every segment would run just around twice the price of its forebear. It's about time we see some real pressure to the other direction.
I dunno about that Mr. Criminalenterprise. In 1970, a stripped VW Beetle set you back $1874, not including destination charges. VW has gone "upscale" so the Golf is not equivalent to the Beetle. However, the stripped Nissan Versa is equivalent for the marketplace, and it's price is .... $10,710 including destination charges. So, according to the inflation calculator at Westegg...What cost $1874 in 1970 would cost $10280.50 in 2008.
The market for these vehicles in the U.S. will only become strong if people are rational enough to say: "Hey I have 2 or 3 vehicles why not have one be basic and frugal to operate? I don't need a 5,000lb SUV to get my butt to work."
One other thing: a reason one sees these ultra-cheap cars in developing markets but not so much in developed markets (aside from stronger safety and emissions regulations, etc.) is competition: it is pretty hard to compete against the 250,000,000 USED cars on the road in the USA. One can get the functional equivalent of a Nano in the form of Geo Metro on eBay for probably $2,000 (seats 4, gets 55 mpg, no AC, etc.). So I am not sure there is more downward pressure to be placed on new car prices here in the USA that has not already occurred via the vast fleet of existing new cars. Note that India pretty much bans the import of used cars... I wonder how the Nano would fare in an open market? Used cars have less impact in developing markets because let's face it, a 10-year-old old Maruti is pretty much beat to a pulp.