Today the Wall Street Journal published a great piece on efforts by leading automakers such as Honda, Nissan, and General Motors to develop cheap cars for China’s millions. These auto industry leaders are all collaborating with local, often state-owned Chinese companies to develop and produce cheap, small cars costing anywhere from $4,000 to $14,000. While pessimists point to the risk of losing intellectual property and manufacturing best practices, pragmatists will recognize that delaying entry will dampen market share which will be both costlier and difficult to recover from.
Cheap cars for the masses in the emerging economies of Brazil, Russia, India, and China is a key signpost we must watch to paint and comprehend energy futures. Infrastructure — or the lack thereof — has never diminished car sales in emerging economies because a car is no longer a tool of personal mobility. Instead, it is evidence of “having arrived” for the teeming middle-class millions of the world’s emerging economies. Rapid development and penetration of cheap cars will significantly impact fuel demand, trade flows, emissions, and product quality.
