Ultra Low Cost Car Market

Introduction

Ultra low cost cars are those costing between USD 2,500-USD 5,000 which are designed for the low income population of a country. The demand for ultra low cost cars can be seen mostly in the developing countries such as India, China, Malaysia and Vietnam.

The volume sales are high in case of ultra low cost cars; however the profit margin per unit to the manufacturer is very low. The easy availability of vehicle finance is one of the key reasons for the growth of ultra low cost car market as the low income class families in the developing countries finds it affordable to pay easy monthly instalments instead of paying the whole amount at the time of purchase.

TATA is the first company to evolve with the concept of ultra low cost cars which was followed by the other passenger car manufacturing companies. After, its success in Asia, TATA is planning to launch its Nano ultra low cost cars in Europe by 2015. India is the highest growth market for the ultra low cost cars where TATA Nano is the market leader.

China is showing low growth as people there prefer to buy medium cost cars due to their demand for certain features which are absent in an ultra low cost car. The most popular low cost cars include TATA Nano, Chery QQ, Suzuki Maruti 800, Geeky MR, Geely HQ SRV, Chery A-1, TATA Indica, Hyundai i10, Fiat Palio and Renault/Dacia Logan.

Several cost reduction factors are taken into consideration while designing an ultra low cost car to make the final price low. For instance, TATA Nano include two-cylinder engine, rear mounted engine layout (to eliminate drive-shaft for space and weight saving), absence of radio, air conditioner and passenger side mirror, seats with integrated head rest, plastic panels designed to eliminate the need for screws, single wind-shield wiper, instrument cluster with analog display and extensive use of hydroforming and roll forming.

Apart from these to minimize transportation cost, the ultra low cost car manufacturers usually set up their manufacturing facility near the regions where the raw material availability as well demand for such cars is high. Moreover, the ultra low cost car manufacturers maintain low dealer network as high degree of customer relationship is not required due to low competition in this segment of passenger cars.

Online sales of the ultra low cost car sales is one of the sales distribution channels in certain regions wherein the customer can pick up the standardized finished vehicle from the distribution center after purchasing it online. It saves a great amount of costs of the company related to dealership and distribution. The Ultra low cost cars are designed in a fashion that they can be repaired by the local mechanics or by the owner himself which alleviates the requirement for a large number of service centers.

The safety factor comes to be the first in line amongst the key challenges for ultra low cost cars. It becomes extremely tough for the manufacturers to include the components with higher safety levels under a specified budget. The low cost car manufacturers are also required to abide by the emission standards wherein they should use engine which comply with the prevalent emission regulations such as EURO III and EURO IV.

Among the regions, Asia Pacific dominated global sales for ultra low cost cars and is expected to retain its leadership by 2020. China dominated the global sales of ultra low cost cars in 2013; however India is expected to surpass it by 2020. The key companies operating in ultra low cost car market include TATA, Chery, Maruti Suzuki, Geely, Hyundai, Fiat and Renault.

Key points covered in the report

• Report segments the market on the basis of types, application, products, technology, etc (as applicable)

• The report covers geographic segmentation

  • North America
  • Europe
  • Asia
  • RoW
• The report provides the market size and forecast for the different segments and geographies for the period of 2010 to 2020
• The report provides company profiles of some of the leading companies operating in the market
• The report also provides porters five forces analysis of the market.