Is it time to say goodbye to cars that cost less than ten grand? It definitely looks as though the under-$10,000 segment of the market is fading fast, in the face of materials that are adding hundreds to sticker prices and consumers who aren't satisfied with bare-bones transportation. But this trend also represents a great chance for upstart automakers.
Building small, supercheap cars is a waste of money
USA Today's Chris Woodyard is on the case:
With the unveiling of a new Nissan Versa and the U.S. debut of a new Hyundai Accent back-to-back Wednesday morning during press days at the New York Auto Show, the U.S. could lose the last of a breed: the sub-$10,000 car.American and increasingly Japanese automakers would rather not work this absolute low-end of the market. This is the natural... um, stomping ground of the new arrival. Toyota, Honda, and others have figured out ways to make profits off relatively small, inexpensive cars, but the $10,000 ballpark in the U.S. is better left to the Koreans and, soon, the Chinese. And maybe even India, with an Americano version of its less-then-$3,000 Tata Nano (pictured above).
Nissan's bare-bones Versa SMT model has been the cheapest four-door sedan sold in America at $9,990 since it rolled out as a 2009 model. It edges in a mere 10 bucks under the magic number -- not including shipping charge. If Nissan doesn't raise the price of the new 2012 from the start, it's a good bet that the company will let it rise within a few months.
Don't mourn the end of the 10K ride
Dirt-cheap transport will always have its place, so any automaker that hopes to enter the U.S. market should be glad that Nissan and Hyundai are allowing their thrift-mobiles to drift up the payscale.
For example, a Chinese automaker that wants to follow the lead of the South Koreans and crack into North America will be able to come in at a higher price. Assuming these cars will be imports, this will enable China to leverage its low labor costs to squeeze better-then-expected profits from the rock-bottom entry level segment.
Consumers are contributing to the price rise
It's easy enough to blame inflation in commodities for the loss of the four-figure ride. However, car buyers share some responsibility. They're increasingly demanding that even cheap little vehicles have all the technological bells and whistles, safety features, and style of larger autos.
A decade ago, you could make due with no AC and even no radio. But as luxury automakers have made their vehicles more affordable -- and especially as communications and entertainment technologies have become givens -- consumers have come to expect much more.
Under $10,000, used is the new new
Of course, if you must spend less than ten grand, there's always the used-car market -- although these days, used-car supply is so tight that the offering there are selling for very close to what you'd pay new.
Still, as the no-frills car dies off, secondhand vehicles will reinforce new consumer preferences. Ironically, for a cheap car to stand out in the U.S., it may need to be extremely cheap -- cheap enough to shock consumers into believing that they can do without power windows, a six-speed automatic transmission, and two-tone leather seats. Want wheels, windows and doors? We've got that.
This may come to pass. Then we won't be talking about the end of the $10,000 car, but the dawn of the $5,000 ride.