Pile them high

Nov 20 2008, 23:04 IST
Comments 0
SummaryWhen in 1999 Renault spent $50m to acquire a controlling stake in Dacia, a sickly Romanian carmaker formerly owned by the state, it was unimaginable that it would become one of the jewels in the French car firm’s crown.

When in 1999 Renault spent $50m to acquire a controlling stake in Dacia, a sickly Romanian carmaker formerly owned by the state, it was unimaginable that it would become one of the jewels in the French car firm’s crown. This year, at its factory in Pitesti, not far from Bucharest, Dacia will churn out more than 300,000 Renault-Dacia Logan saloons and its cousins. In 2009 the number is expected to rise to 400,000, including kits exported to other Renault assembly plants. Five months ago the millionth Logan since its launch in 2004 rolled off the line.

The chances are that it was a car from Pitesti, the Logan’s “mother plant”, but it could have come from any one of seven other production sites in Russia, India, Iran (with two), Morocco, Brazil or Colombia.

Conceived as a low-cost car for emerging markets, the boxy-looking Logan has become one of Renault’s most profitable vehicles. Whereas Renault’s margins across its range are an anaemic 3%, the Logan earns at least twice as much. By 2010 Renault expects to be making more than a million Logans a year, despite its failure to find a partner in China to build them. No wonder most global manufacturers are jostling to get into the low-cost game.

But what exactly is a low-cost car? Mark Bursa, the emerging-markets commentator of Just-auto, a car-industry website, argues that the term can include anything from Fiat’s rather upmarket Linea saloon and the Logan to “legacy” cheapies such as the ancient Lada Zighuli and the Maruti 800, a five-year-old VW Golf or Tata’s innovative “one-lakh car”, the Nano. But used cars imported by poor countries from rich ones become expensive when weighed down with high duties and taxes to protect indigenous industries. And Mr Bursa acknowledges that cars such as the Lada and the Maruti, both based on 40-year-old designs, will not be rolling off the production lines for much longer. They are cheap because all the investment to make them was written off long ago, but they find it increasingly hard to comply with ever-tightening emissions laws and safety regulations. Fiat’s Mille, sold in Brazil, which evolved from the Uno of the early 1980s, has a clean flex-fuel engine, but the company accepts that there is little that can be done to make it safer in a crash and is working on a successor.

The genuinely low-cost cars of today are those,

Single Page Format
Ads by Google

More from Selections From The Economist

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...