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.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-14-2008 @ 2:41PM
jpdr1100 said...
"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."
The next story over is about a pending layoff of GM's US workers. Does it matter that GM succeeds if it only does so with foreign workers?