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From ‘low-cost’ to ‘all-costs’ in automotive

From ‘low-cost’ to ‘all-costs’ in automotive

How can the automotive industry begin to take a more holistic approach to face EU slowing demand?

There has been a resurrection in low-cost vehicles in emerging markets, largely led by the Renault-Nissan Alliance, first with Dacia and now with Datsun after more than 30 years of neglect.

What started as a simple trend, producing low-cost cars has now become a well-established market strategy analysed by many OEMs. Buying a low-cost vehicle meant the beginning of being able to make a choice characterised by lower demands in technology and the prestige of the car, without sacrificing reliability. However, soon it will simply not be enough to only lower the purchase price of a vehicle, as smart consumers begin to consider the other intangible costs associated with buying a car – the so-called ‘Total Cost of Ownership’. These intangible costs can be anything from fuel and insurance, to taxes, maintenance and the resale value.

Some of the most recent attempts aiming primarily to reduce consumption through hybrid & electric technologies do not fall into the category of low-cost, so at the moment they are still not available to everyone.

The economic situation only partially explains how such change has come about and the real reasons are to be found in a deep socio-economic change, whose boundaries are far more extensive than automotive.
In the future it will be necessary to create a synergy which would require the joint efforts of manufacturers and all other stakeholders that operate along the extended supply chain of mobility.
OEMs will undoubtedly be the protagonists of this revolution. R&D centers are expected to produce vehicles that are suited to the growing demands of clients, who are increasingly aware and informed and are looking to make a smart vehicle purchase. Consumers will want to know the total monthly cost of a vehicle – what it costs to run the car, as well as simply purchase/rent the car in the first place. And how long will it retain its value for?

Some brands are already pursuing this holistic approach with the latest models.  But this approach will take time to establish and will involve stakeholders such as OEMs, tax systems, insurance companies, highway agencies, oil companies, finance companies and components manufacturers  building strong relationships and working together. It will take a strong commitment to get cheap and qualitative products from 360 ° management along the entire vehicle life-cycle.

The goal and hope is that together they manage to kick-start this holisitc approach for others to build on and adopt, driven in particular by customers’ needs during an economic recession. It is not excluded that the desirable growth of volumes for “low all-cost vehicles” can lead market prices to be overall more accessible.

 

See also: How is the development of in-car digital technology changing the cars of tomorrow for consumers?