THE MYTH OF THE “CHEAP CAR”

[Get the latest "Truth With Speedzzter” here]

Here we go again.

Someone in a poverty-wage second or third world country builds a stripped-down, underpowered, barely legal, tin-box, probable death-trap of a “car,” markets it for a used car price, and the automotive press starts spinning out all of the “lessons” Detroit could learn from it.

BusinessWeek has such a story on the Tata Nano.

They say Detroit could learn about engineering-up from a price point (rather than de-contenting), engaging suppliers earlier in the design process, and creating a “less capital-intensive, less integrated, more flexible model.”

They pay people to write stuff like that?

Engineering up from a price point tends to produce dangerous messes like the Ford Pinto.

Price is merely one component of developing a product.

Most certainly, product planners have to identify underserved markets and viable price points. And successful designers and engineers never lose sight of technological meta-trends of miniaturization, simplification, benchmarking, and mainstreaming as they strive to hit the chosen segment or niche with the best bang-for-the-buck. And it’s important to tune into the target niche with relentless focus.

All of the cool features, breakthrough styling, technological innovation, and aftermarket parts support in the world is virtually useless if nobody can afford that big payment book.

On the other hand, cutting performance, functionality, durability, modifiability, serviceability, parts interchangeability and the “a-ha” factor out to hit a cheap price point is a proven loser strategy.

Team Japan was initially successful in the U.S. market through balancing these factors, not just targeting a low price point. For example, instead of building the cheapest, smallest engine they could get by with, Toyota marketed its 1970s Corolla with a higher-performing hemi-head engine. The Toyota SR-5 Corolla also featured “boy racer” styling and performance upgrades, such as “riveted” fender flares, low-profile performance tires, and a five-speed transmission. Mazda’s early 1970s cars were equipped with up-market “a-ha” features unavailable in domestic competitors, such as a power retractable radio antenna. For a couple of decades, Honda has mostly focused on high power density four-valve DOHC engines (even as Ford was still trying to sell obsolete 2-valve SOHCs and Falcon 6-derived 2.3 liter HSCs)

Of course, the genius of the Ford Model T was that it blended performance, functionality, durability, modifiability, serviceability, and parts interchangeability at a price America’s farmers and ranchers could afford. And it lost marketshare when the technology, performance and “a-ha” factor of cars built by Ford-trained competitors made the T look and feel out-of-date.

Even most appliance motorists are value-price sensitive, rather than just price sensitive. Relevance, simplicity, differentiation, believability, credibility and defensiability are all intangible brand attributes which are mostly price insensitive.

Building a vehicle of off-shelf components or with heavy supplier involvement is hardly unknown to Detroit. As the white collar staffs decline, reliance on suppliers and component standardization will undoubtedly increase. (And now that some of them are going to be getting a $5 billion bailout from the Treasury, maybe some of them will still be around . . . .)

Certainly a “less capital-intensive, less integrated, more flexible model” is a hard goal in this hyper-regulated, unionized era. Unitized body construction also reduces model flexibility and increases costs.

It was easier back in the days of Henry Ford, when designs, production techniques, and labor supplies were easier to change rapidly. However, plants such as AutoAlliance’s Flat Rock, Michigan facility demonstrate that Detroit has made progress in lean production systems, quality control, and flexible assembly.

Truth With Speedzzter suspects the real harsh lessons of the Tata Nano are yet to come. But there’s little new to learn from it at present.