Can a $4,000 Car Help to Cure GM? (TTM)

General Motors may be closer to getting into cars as cheap as some go-carts.   A report over the weekend in the WSJ noted that GM plans to produce one of the compact cars for $4,000.00 in Asia.  While few details are known, this follows a similar move back in early 2008.  Tata Motors (NYSE: TTM) began a sub-$3,000.00 car via the Tata Nano for close to $2,500.00, and this looks to be a continuation of that move.

This car probably won’t be on US highways.  It sounds a lot like the car for many of the congested Asian markets that don’t need to worry how bad the driver and passengers fare in a 40 mile per hour head-on collision.

There is also the notion of emissions coming into play that would keep these cheap cars.  If you pay $2,500.00 to $4,000.00 for a new car, regardless of which market you are in, how much is going to be spent on the emissions systems?

But there is a real question on these cars for auto makers to consider.  How high are the margins on dirt cheap products?  Even if these cars are made of recycled beer cans and plastic, there is only so much profit that can be nabbed per unit and the “make it up on volume” has to consider the size of able-bodies adult workers that actually have the need and space for a car regardless of price. For a comparison of just how cheap this really is compared to the US market, this is cheaper than most ATV’s and motorcycles.

There is a market for these cars in many of these emerging economies.  They are called Tuk Tuks…..

Jon C. Ogg
August 17, 2009