GM follows Tata Motors into discount auto market
GM (NYSE: GM) does not like to be trumped. Last week, India's Tata
Motors (NYSE: TTM) launched a car that costs about $2,500. It is geared
to consumers who only have money to drive motorcycles now. The vehicle
may sell well in India, but Tata understands that it could be exported
to other emerging markets like Russia and China.
GM does not need any more competition in emerging countries. With its
sales flat to down in the U.S. market, the company says its goal is to
have 75% of its sales from outside America in just a few years. To do
that, GM will need cars to fit the markets, not just versions of GM cars
that it can build and sell abroad.
According to The Wall Street Journal, "GM's Asia-Pacific chief is
working on developing a car for emerging markets that could play in the
sub-$4,000 price range, as the company looks to compete with auto makers
that are already building cheaper cars."
The plan may look good, but only if GM can find facilities and a
workforce that is cheap enough to build a super-low-cost vehicle at a
profit. With wages rising in China and India due to increased demand for
products from these countries, the job may be difficult.
GM may want to be in the $4,000 car business, but it is not clear that
it is a business which GM can afford.