How to produce a car for the masses? Long ago, Henry Ford had it figured out and now Nissan will try it again in emerging markets.
The Nissan story fascinated me because of what it represents. A car is aspirational. It is a step into the middle class. Making more cars creates more jobs. Owning a car facilitates commerce. When cars spread across the US during the 1920s, roads were built, suburbia was created, newly built trucks transported goods. We got gas stations, roadside restaurants…you see where this is going.
At first, it was the Model T. Henry Ford designed a car that could be manufactured far more cheaply than any other that existed then. By using mass production, a moving assembly line, interchangeable parts–all new at the time–he increased productivity hugely, dropping the “man-hours” to make a car from approximately 12 to 1 1/2. Cheap manufacture meant he could charge much less.
Now, we have what Nissan is reported to be planning for countries like India. Bringing back the Datsun brand that it discontinued in 1986, they are designing a “barebones” $3,000-$5,000 car. Probably, fewer airbags, less rigorous factory quality checks, manual transmissions and a noisier car will be the result when it hits the market in 2014.
A Final (Fascinating) Fact: The 1926 cheapest Ford was $260, the equivalent of $3384.10 today–the same price as the projected Datsun!
Sources and Resources: This WSJ article (probably gated) and this Forbes article tell more about the new Nissan Datsun while here is the story of the Tata Nano, a very inexpensive car that has not been successful in India. My facts about Ford are from my book, Econ 101 1/2 and the BLS inflation calculator.