Some of the most famous cars in the history of the auto industry were some of the cheapest ones. The Ford Model T, the Volkswagen Beetle, the Citroen 2CV and the BMC Mini were so successful mainly because they were so affordable.
Now the industry is trying to replicate that success by designing low cost cars for booming developing markets, like India. But they're discovering that building cheap cars is not nearly as easy as it sounds. And it all has to do with customer expectations.

In the past it was easy to build a cheap car for developing markets. All you had to do was take the tooling for an entry-level car that was being phased out of the market in a modern country and ship it to some backwater in the third world. Since the car was already developed and the tooling was already paid for, an automaker could build it cheaply with local labor. That's how it was done for the better part of the 20th Century.

But then came the internet. All of a sudden, car buyers in developing nations became fully aware of the outdated designs being foisted upon them. They could easily Google up the latest American, European and Japanese models, pore through the technical specifications, download the photographs and watch videos of them all in action. With their rising standards of living, they were no longer content to buy the clunky cars available in their home markets. They wanted what we have.

John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.

Of course, the big car companies were slow to catch on because they couldn't figure out how to satisfy this demand. They just figured they'd have to wait until income levels rose to the point where people could finally afford the latest technology. That's why, when Tata unveiled the Nano, it stunned the automotive establishment. No one expected to see a car that could be sold for $2,500. And they were even more surprised to see how Tata had gone about designing the car.

The key to lower-cost designs is integrating electronic functions and using fewer components.
Whereas the old-line automakers always tried to take cost out of a car by removing features and using cheaper materials, Tata's engineers approached it the opposite way. They were used to designing motor bikes and scooters. So for them the Nano was all about adding features and using better materials. But because they approached it with their low-cost-motorbike mentality, they came up with a clever design that almost anyone could afford.

And yet, they didn't go far enough. Even though the Nano was a big step up for the people buying it, it didn't have creature comforts like air conditioning, or safety features like airbags, anti-lock brakes or stability control.

This is when the light bulb came one and the big automotive suppliers saw their opportunity. They began working feverishly to redesign components to dramatically cut the cost of their technology, but doing it in a way that still met customer expectations. In fact this is one of the greatest engineering challenges going on in the industry today.

A good example of this is the anti-lock brake control module that the German supplier Continental developed for low-cost cars. It is nearly half the size, one third the weight and substantially cheaper than the version it sells in developed countries.

Conti's engineers found that the key to coming up with lower-cost designs was integrating electronic functions and using fewer components. The motherboard in Continental's ABS controller for emerging markets is considerably smaller thanks to this approach.

It will all come down to clever design.
In some cases they found that the key to lowering cost is to simply offer a lower-level of performance that is perfectly acceptable in third world countries. For example, Continental sells a 77 GHz radar camera that automakers use for adaptive cruise control and blind spot detection that is good for speeds up to 200 kilometers an hour (128 mph). But since these low-cost cars are never going to be driven at speeds like that, Continental came up with a 24 GHz radar camera that doesn't offer quite the same capability but is far more affordable.

This same approach is now being used by many suppliers who are designing airbag modules, electronic stability control, automatic transmissions, miniature turbochargers, power steering and creature comforts like air conditioning.

The point is, developing countries like China, India, Brazil and Russia are going to drive growth in the auto industry for decades to come. Whichever companies can figure out how to provide those customers with the vehicles and features they want at a price they can afford are going to come out the winners. It will all come down to clever design, because coming up with low-cost cars is not as easy as it sounds.

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