Will the car become an appliance?
Carlos Ghosn, the boss at both Nissan and Renault, gave a few choice words to the press attending the Tokyo Auto Show, words designed to prove that he’s in command: He said that he believed Nissan was performing below it’s potential, and ditto Renault. He ought to know. He’s the guy that has been in charge for over five years. "I consider that at Nissan, below 8 percent it is badly managed, above 8 percent it is well-managed. It is as simple as that," he told the press at a news conference held in conjunction with the Tokyo Auto Show.
By that measure, he’s done a very bad job at Nissan and he should probably consider firing himself.
But Ghosn did say something which was actually interesting, insightful even. He suggested that there is an enormous market in Europe for electric cars, that there is a large market throughout the world for very inexpensive cars, but that car makers must also build cars of “passion.”
To some extent, Ghosn’s remarks are glib. While Ghosn spoke of the potential for electric car sales in Europe, neither Renault nor Nissan have done much to develop new technology in any of their product lines. Nissan has no equivalent to the Smart car, nor has it independently pursued hybrid technology, relying instead on an agreement reached with Toyota over a decade ago to purchase Toyota’s technology under license. With Toyota’s lithium ion battery technology stalled, Nissan and Renault are in serious danger of being technologically leapfrogged by other carmakers, particularly General Motors, Daimler, and BMW.
But he raises an interesting point.
Is the nature of the automobile in the process of being redefined?
At some level, cars are about transportation. All car companies, of course, are in the transportation business. Every car has the ability to take its occupants from point A to point B. But some of them are more clearly devoted to that task than others. A Prius and a Porsche can both transport the occupants, but they do it with very different objectives. At the edges, moreover, they do it with very different capabilities. The Prius can do some things the Porsche cannot do, and vice-versa.
The car that put America on wheels, the Model T Ford, was an appliance. It was designed to be utilitarian and to be inexpensive. As the automobile became more than that, and became both a symbol of status and a means to possessing luxury, the utilitarian aspect of the automobile became far less important.
But, is it now reemerging?
In the so-called “emerging markets,” the emphasis is on building a car cheaply, so that it can be purchased by the consumers in those markets. Hence, Tata says they want to build a car that can sell in India for about $3,000. Some may doubt that it can be done, but what if it could be done for about $5,000? There are actually cars being produced that retail at that price level in India. (Suzuki, to be precise.)
What would be the impact of a $5,000 car sold in the United States?
You could charge it to your American Express card. It could be, literally, an impulse purchase for many. You wouldn’t have to take the Cayenne to drive to Target, and for a measly five grand you could afford to split another grand off to personalize the thing. Fashion is, of course, short-term. But, it’s also fun. It could be the next cute concept.
This is, of course, the basic business plan for the Smart car, and it didn’t work out to well for Daimler. The thing turned out to be way more expensive to produce than intended, and ultimately was priced not much less than a real car, such as the A Class. But, the idea is still intriguing. There was never any problem with the idea. The only problem was with the price.