There was an interesting article posted over on BusinessWeek Online a couple of days ago, highlighting the need to develop ultra low cost cars for the emerging markets. Renault – Nissan have just announced that they want to manufacture a small car in India with a retail price of $2500.  According to the Monitor Group, the production of low cost cars is now the single most important trend in the automotive industry today. 

So this begs the question, how do you go about making a profit on a car with such a low selling price? More likely, the automotive manufacturers will be selling them at a loss initially in order to gain traction in a new and potentially lucrative market such as China or India.  To make any sort of profit on a low cost vehicle at this pricing level will mean that operational costs will have to reduced still further and the use of IT and B2B solutions to help drive down costs will become more important. 

The emerging markets have huge infrastructure related issues at the moment, unreliable power supplies, and inferior telecommunications links to the outside world.   In order to reduce associated IT costs, the use of hosted applications will become very important for these low cost manufacturers.  There is a danger that by producing cars at $2500 then the quality of the product will deteriorate and the quality of the resulting information flowing across the supply chain will be poor quality as well.   

My previous blog entry eluded to the fact that outsourcing a B2B environment can help to reduce costs and improve efficiencies etc, and I think in the case of low cost car production, this has to be the way to go in terms of setting up a reliable, low cost B2B infrastructure.  The car manufacturer doesn’t have to worry about managing the B2B infrastructure and more importantly the hosted environment can be managed outside of the region where the cars are being manufactured. In addition to hosting B2B environments, low cost manufacturing projects such as this could see the growth in the use of Software as a Service (SAAS) environments as well.  Well I guess it is OK for me to speculate what could happen, but if this Renault – Nissan vehicle and other low cost car projects are successful in the emerging markets then it could help to rapidly increase the adoption of more hosted B2B environments within the automotive industry.