Wednesday, 6 June 2012

Industry Practice - Global VMs (Part 5) – Down-Shift Products to Scale-Up Volume & Profitability.

Thus far, over the previous four weblogs devoted to the issue of low cost and ultra low cost cars, investment-auto-motives has sought to provide a broad canvas of description pertaining to the micro-level of industry practices and the macro-level of socio-economic realities.

The emergence of American multi-national VMs as global masters of the 'Budd' engineered motor car in the first-half of the 20th century, abutted by British, French and German colonialism, later superseded by Japanese expansion, set the product and industry template to date. Over the last century Triad financial muscle underpinned global expansion, in turn setting the high standard and high expectation of the motor car for what were then developing nations, from Willys Jeeps in SE Asia to Land Rovers & Toyotas in Africa to Volkswagens in S.America.

Yet those very emerging industrialising nations also sought to join the motor manufacturing club, as part of initiatives for national economic advancement, in turn re-manufacturing and adapting imported vehicle technologies, most acute in India with its 2 / 3 / 4 wheeled machines.

As the global economic tide turns so increasingly it is the BRIC+ and Next 11 nations that will become the new masters of motor-car, themselves now experiencing new EM wealth at commercial and personal levels, effectively re-playing the wealth creation model that served the West, Japan & S.Korea.

However, the immense populational size of many EM nations creates concerns that the 'bottom-tier' become ever more marginalised as the fortunate 'new middle-class' reaps the benefits of accessible education, training, employment and consumption, so further dividing both materially and psychologically what are often culturally sensitive regions.

Thus whilst the 'low cost car' model (LCC) (involving conventional 'recycled' platforms and/or a much amortised parts content) has become the norm for the fortunate middle-class buying new through credit, the demand curve for old but still reliable and proven vehicles still maintains pricing levels which are beyond the reach of the 'bottom-tier' population. The result is the idea of the ultra low cost car (ULCC) which can better substitute the roles of personal and family motorcycles and can replace what is the aged – but still highly effective – commercial auto-rickshaw..

Thus 2 vehicle creation paths have appeared: the well trodden path for mass manufacture of the conventional steel monocoque under the 'Budd' system, and a tentatively trodden path which promise of a new crop of products born from a 'bottom-up' perspective of financial constraint by both provider and consumer which requires 'creative pragmatism' in engineering effort and business model fettling..

For today and into the '20-year mid-term' of far horizon forecasting the conventional car will undoubtedly remain the primary vehicle and business model, it global 60m unit production output, the tentacles of the retailing system, with even greater after-sales tentacles in parts, servicing and repair. Moreover it is a key world-span industry with very strong ties to the global banking system via fixed income (rolling credit facilities and corporate bonds) and the broader equity markets. In short it is a mainstay of the global economy.

Yet a new 'light-car' / ULCC seed appears to be growing, almost invisible today with low production numbers, but which because it 'cross-fertilises' motorcycle and car engineering offers possible opportunities to other companies beyond the major VMs. These range across those very well established multi-sector recreational & utility vehicles producers that operate under a 'keretsu' or structure, EM firms which offer 2/3/4 wheelers under a conglomerate form, EM dedicated motorcycle producers, and finally a number of western companies seeking to deploy the flip-side of the eco-car equation that relates to the ULCC paradigm

The critical aspect here is that the high-minded western 'eco-car' when evolved to its fullest form reflects the same basic mobility 'satisfaction quotient' as the ULCC does for a member of the 'bottom-tier' populace.

The most forward thinking VMs already recognise that reality, and are evolving as necessary to remain in tune with the global zeitgeist..

Single Path Players, Dual Path Players & New Entrants -

The 'manufacturing space' that any singular company or conglomerate occupies is obviously crucial.

Its present competitive position sewn by the seeds of the past, and equally so, the future opportunity available to an enterprise often created by the organic construct today.

Every company sits in its own very specific strategic position, and whilst auto-makers may appears generically similar, no two are the same. Differences regards national importance, historical background, executive leadership, managerial experience & capabilities, operational demands, product and service differentiation, balance sheet, cash-flow, P&L, debt-structures, asset-base, political ties, and much else determine true 'shape'.

That physical shape also affected by its raison d'etre, with pressures to be increasingly socio-ecological, increasingly 'stake-holder' orientated as much as 'share-holder' driven. And ever onward from Deming's Principles, Lean Production, Six Sigma etc increasing emphasis is put onto a improving the marriage between the general value-chain, but especially so in an industrial sphere, the HR component of a workforce's intellectually productive capabilities and the output component of the manufacturing system.

After all, that which is manufactured today under the company, divisional and group umbrella has great affect upon strategic choices, and that which is deemed important yet outside the corporation's immediate hold is typically acquired to enable an improved competitive position in the short, medium and long term.

Having previously affirmed that the 'low cost' car will become an ever increasing staple intent , function and output of established VMs, their EM industrial partners and very probably future national champions (via technology transfer), though of much smaller ultimate global impact, it is still very much worth providing basic conjecture regards the 'ultra low cost' car.

To this end investment-auto-motives very simplistically depicts – with visual aid – the present 'competitive situation' of the primary corporations across the world which could be viewed as: immediately well placed, becoming organically re-positioned, or via 'bolt-on' acquisition are expanding their NPD and production capabilities to explore and ultimately satisfy future 'ULCC' buyers as and when they emerge en mass.

The accompanying diagram depicts three categories of manufacturer that are intrinsic to the overall debate about 'low cost' cars and 'ultra low cost' cars, with special recognition that such products are intended to be successors of (and partially born from) the present 'lowest-cost' middle-ground of 3-wheeler 'Trikes', 4-wheeler motorbike derived 'Quads' and the broad world of 'Buggy's' from golf carts to defence force reconnaissance vehicles. Furthermore given the 'bottom-tier' market dominance of motorcycles and scooters, the fact that buyers will have theoretically traded-up from the 2-wheeler sector and the fact that engineering principles and mechanical parts have thus far been adopted from that realm, companies operating in this highly pertinent sector must be included as they themselves could form the industrial basis of ULCC vehicles.

[NB In this way then, India and other low-income countries that choose the ULCC route will be following in the footsteps of post-WW2 Japan, whose own motorcycle industry formed much of the basis of its auto-sector by devising the micro and small (typically 350cc to 900cc) 'kei' class].

So the categories outlined and populated are:

1. Conventional Car Manufacturers – inc. low & ultra low cost
2. Multi-Sector Manufacturers – inc 3-wheeler, quad-bike & buggy
3. Motorcycle Manufacturers – inc moped & scooter.
4. 'Eco-Car' Explorers – seeking ultra low cost

All major VMs are listed in the first area (left side), with any relative division pertaining to a small and simple type vehicle included:

The second (middle) area contains those companies which have both VM and motorcycle production, hence called 'multi-sector', also including those with other product types that are technically closely related to the ULCC; specific divisions also mentioned:

The third (right) area contains makers of motorcycles, mopeds and scooters. As an addendum, it also includes an additional sub-list of privately held companies not shown here:
(This group also contains the names of unlisted private companies which could possibly enter the ULCC space but are only available to private equity involvement).

A fourth (bottom right) area contains lead examples of those typically private held companies which hold reputations as 'eco-car' explorers, or have the brand elasticity to boundaries, either as privately capitalised single entities or as sub-divisions of larger corporations:

The intent is to seek to better distinguish those companies which may be recognised as 'single path' (ie conventional car producers), 'dual path' (ie standard car and possible ULCC producers) or 'new entrant' (ie exploitors of motorcycle or other vehicle technologies to create a ULCC).

“Single Path” Enterprises -
1. Conventional Car Manufacturers

GM: With its stock-price still languishing far below its IPO price, though now into positive earnings, GM's prime concern is to continue to streamline its global operations whilst readying itself for individual regional and general global upturns, as seen in N. America and its apparent intentions regards Chevy and Europe via its JV with PSA. Of prime importance to continued earnings is the need to regain slipped market-share in China. Chevrolet, Buick & Cadillac brands face stiff competition from the mainstream squeeze by domestic & foreign producers (including the recent entry of Ford and the near luxury and luxury brands from Germany & Japan. Whilst still 'holding ground' in China overall this year, Chevrolet & Cadillac sales slipped heavily in April YoY; the latter off a very low base. GM then will maintain its typical modus operandi, concentration upon balancing Chinese, US, European & RoW production efficiency of its standard global platforms and whilst seeking general market-share hold across the globe, fire-fighting initiatives in China, and increasingly relying upon incentives and GM-funnelled credit availability to business and private customers to bolster sales.

However, the company seeks longer term advantage through the SAIC - GM – Wuling joint venture targeting economically 'lower-tier' markets in China, pan-Asia, Africa and Central America ambitions. Whilst SGMW offers C-segment people carriers, its volume production is that of micro-vans and micro-pick-ups in the kei-truck genre. These are now joined by an A-segment micro-car named Lechi – essentially a 'recycled' GM Daewoo Matiz (itself later adapted to 1st generation Chevy Spark) and itself previously copied in China by others. Thus Wuling should benefit from domestic sales given its reputation, durability and parts availability in more remote regions, whilst its old GM origins may be welcomed elsewhere but will be very price dependent and effectively re-runs the low-price, no quibble business model which Deawoo used successfully in Europe, albeit for a short period. As for the impact on GM, given that Wuling Motor is listed on the Hong Kong stock exchange, GM may seek to either raise of reduce its shareholding depending upon latter circumstances. But presently Wuling's own record low share-price reflects its standing, though GM could seek to use it in a low cost car manner, under Chevrolet in China and elsewhere.

Ford has sought to 'life-extend' platforms and core modules through the ongoing exploitation of what have been performance-wise sector leading underpinnings. Such an initial customer-facing competitive product advantage itself benefited by the integration of class leading in-car systems (Microsoft SYNC, self-park, etc), all the time gaining from the ongoing amortisation of primary vehicle system costs. The targeting of mass-market F-Series and Fusion, Focus & Fiesta will continue in the US, whilst Europe will obviously maintain its B to D/E segments in hatchbacks, sedans, people-carriers and SAVs. As for Em regions, Ford looks to maintain a semi-premium 'import' character in China to avoid price-wars, and could seek to introduce the Brazilian Ka (based on the 1st generation car) into India to sit below Figo to provide entry level buyer access, as a precursor to or underling to the 'global Ka' of 2015/6. It is reported to having explored the ULCC business model seen little merit in the concept, choosing to 'recycle' and 'de-cost' as opportunistic.

FIAT-Chrysler has of course had to absorb the heavy costs of the M&A, created badge-engineered market extension products and heavily integrated NPD processes to create the first shared cars, and have relied upon Chrysler's N.American income stream to off-set the collapse of European demand.
Unsurprisingly given its history FIAT Group is very EM oriented, though unfortunately having made little headway in China and India to date, previous Geely shared production and TATA linked distribution not generating the success hope, though a new Chinese JV is underway with Guangzhou and release of the Viaggio in Q3 2012. Given Far Eastern hurdles FIAT seeks to replicate its Brazilian success in Russia, backed by Sberbank, though faces tough domestic and foreign competition. Yet with probably use the production foothold from its recently bought Zastava plant in Serbia for FIAT (and possibly Zastava badged) standard and low-cost cars. With so much executive and management energy devoted to profit regeneration and market expansion in order to resuscitate stock price, the seeming only route toward a true low cost car – though no ULCC - would be for FIAT to exercise its close connection to TATA and import Nano as a FIAT badged vehicle.

Daimler [Smart] has obviously sought to maintain its broad-reach global operations across cars, vans, trucks and buses with all divisional revenues except bus climbing markedly in Q1 2012. As befits a sector leader, Mercedes-Benz maintains strict in-house control of old model tooling etc, and whilst it has on rare instance sold-off truck and engine production licences, it has made virtue of maintaining 'factory-control' of any 'recycling' platform/vehicle; typically in CKD local assembly form in previous developing nations. As for its entry level offering, after its long 'gestation' in Europe and roll-out in other countries, Daimler used the 2008 economic crisis to launch Smart in the USA, recognising the persuasion struggle that the 'micro-car in maxi-land' would initially and still encounters. Yet the much altered and conventionalised A-class indicates that Smart remains the mainstay of Daimler's city-car effort. Interestingly whilst not notionally classified as a 'low cost' or 'ultra low cost' car, its business model and uniqueness indicates that now programme break-even is well passed, the car's base technology can be indefinitely 'life extended' both up and down the price ladder relative to different markets, For example, supplanting the steel Tridon frame for that of aluminium alloy or carbon fibre in 'western premium' guise, or 'de-contenting' the vehicle for low income Asian markets. Equally production of the base standard structure can be undertaken for contract manufacturing purposes for other VMs and niche producers. Importantly, not only the Smart vehicle was designed to be configurable, so was its core business model. This puts Daimler in a possible leadership position relative to urban personal mobility, something not yet recognised.

Renault-Nissan presently experiences a 'glass half empty, half full' situation, with Renault suffering as a result of Europe's economic woes (-5.7% in 2011), yet Nissan gaining ever greater earnings traction; this thanks to the procurement restructuring necessary after Japan's earthquake, the Fukushima nuclear alert and the Thailand flooding. Thus the intended 'counter-weighting' intended by the alliance proves its worth. Renaults's low cost car strategy (deploying Dacia) appears to go from strength to strength, and whilst sales are down from previous highs across the CEE, western EU sales are reportedly maintaining volumes. Both Renault & Nissan have sought to established themselves as the EV pioneers, yet behind the PR gloss, the real effect on future earnings will come from strategic contributions made by respective technical and production JVs with Daimler and Avtovaz These are not specifically 'low cost' car initiated, though Avtovaz offers production potential. The critical aspect here is that Renault's Twizy EV micro-car presently constructed in very small numbers in Spain, may be developed from - or production engineered to - the adapted 'Tridon' structure of Daimler's SmartCar; and could be offered as both an 'eco city buggy' EV variant in Triad markets and a no-frills simple car in EM nations using small capacity conventional engine.

Toyota, like Nissan and other Japanese manufacturers expects to bounce-back after a troubling 2011. Its US presence, though somewhat tarnished by earlier consumer concerns and model recalls, looks to re-strengthen as does its domestic sales position over the remaining 3 quarters, yet its far higher Japanese manufacturing base means that the very tail-end of the Fukushima disruption and importantly the strong Yen will continue to have effect, with FY2012 earnings expected to be still only 60% or so of those pre-2008. In 2007 Toyota said it would – like so many other VMs – explore the 'ultra low cost' car space, yet little appeared. Instead the NPD and manufacturing process 're-workings' providing the philosophical approach for the IQ city-car. In recent weeks Toyota has formally stated that it will not be creating an ULCC, nor indeed a 'de-contented' 'low cost' car such as Datsun (Dacia's sister brand), instead concentrating on its key global segments and product quality. Like other VMs, Toyota's closest efforts regards entry level products has been in India with the Etios model.

So whilst Toyota states that it will not be undertaking a ULCC programme, the irony remains that it holds what is possibly the strongest industrial card in the global automotive pack. Daihatsu is renowned for its small rugged 4WDs of the past decades and its long heritage of small kei car development; Toyota ensuring that 'other owned' Subaru defer to Daihatsu. Interestingly, Daihatsu is finalising the building of a plant in Indonesia to produce a car smaller and cheaper than Etios, a plant also build in Venezuela, which then moves ever slowly closer to EM market alignment and the ULCC ideology, though not intrinsically stated by Toyota.

Mitsubishi Motors has experienced a worrisome decade, having been hit hard by the previous Asian crisis, and has realistically become a minnow player both in Japan and abroad (6th & 17th in size respectively). Its sparse but ironically global production footprint has not sustained its thin product pipeline, and so become ever more reliant upon contract manufacturing. Whilst it still retains credibility in Russia thanks to its 4WD SUV the few product hits that have been Lancer Evo series and 'i' city-car suffer from the respective inverse: lack of volume on a high margin product, and lack of unit margin on a mass scale vehicle. However, since 2006 the corporate situation has slowly yet erratically improved; the invention of its rear-engined 'i' car (and i-MiEV variant) does set the modern quality standard for a small 'people's car'. The closure of its EU manufacturing base and general sales decline in the USA (even with recent improvements) means that Mitsubishi has become once again far more Asian oriented. Unfortunately for Mitsubishi, although the Japanese kei car segment volume was boosted by government eco-car initiatives in 2011, 'i' car sales declined YoY, from their heady highs of 2006-9.Yet Mitsubishi may well seek to 'monetise' the 'i' car from contract manufacture to other VMs, as seen by its re-branding as PSA Peugeot & Citroen EV cars (iOn & C-Zero). Given that the 'i' car's central sub-structure is advanced, predominantly aluminium alloy, it could feasibly be re-produced after low level engineering adaption in much cheaper steel. Whilst aluminium was key for the 17,000 electric i-MiEVs, heavily 'de-costed' ICE powered vehicles would be steel based. Thus two versions could be manufactured depending upon the type of VM client, simplistically 'western advanced' (alloy or steel) and 'EM' (steel), with subtle cosmetic change and feature change to suit. This then if well executed could feasibly create the foundations of Mitsubishi Motor's return to consistent mid-term profitability and create the foundations for an Asian 'low' and possibly 'ultra-low' cost car.

Hyundai – Kia is presently the darling of the mainstream VM producers, showing no sign of slowing its global growth ambition, having obtained previous car and truck footholds in EM markets now with ever better products recognised as a credible alternative to the long established Triad players within their own domestic markets. The company's continued quest to build upon global mass-market achievements (Latin America targeted next) combined with a still prevalent FX advantage of an under-valued Won is the perfect combination to maintain strong and boosted repatriated earnings from conventional cars. Thus there is no immediate goal to create dedicated low cost or ultra low cost cars which would necessitate unwarranted organisational change at a time when all is well. However the continuation of the 1996 Atos model, badge engineered for 3rd parties and various EM nations, is perhaps the best example of the firm's use of its accrued cost advantage
The new 2011 Eon model was however 'designed to cost' for the Indian market.

Maruti [800] has been the iconic Indian VM for decades, known for introducing the entry level 800 model based on the 1983 Suzuki Alto. Though the company itself is the JV partner to Suzuki, the relationship bringing together Japanese technology and Indian low cost production, and offers a diverse range of Suzuki designed vehicles, the 800 – though often reputed as to be discontinued – soldiers on as the veritable low cost car to date. It ubiquitousness across India, with concomitant parts network means that it is still the preferred choice for many understandably cautious first time buyers trading up from a motorcycle. However, it is being slowly phased-out as a result of emissions laws (requiring Euro IV compliance) from sale major cities, also no doubt an economic prompt to have the metropolitan middle classes spend on more modern cars and so assist the national economy. Unlike TATA or Bajaj, Maruti has no immediate plans to create an ULCC given that it would demand self-creation with limited R&D as product continues to originate from Japan.

The remaining list of producers are involved with the strategic implications of either seeking to build domestic presence with a low cost business model, as is the case with Chinese producers or alternatively 'divest' the remaining assets of an ex-national champion VM, as is the case with Malaysia's Proton.

“Dual Path” Enterprises -
2. Multi-Sector Manufacturers – inc 3-wheeler, quad-bike & buggy

These companies have the benefit of product portfolio diversity, spanning either cars - motorcycles, cars – motorcycles – other vehicles, or motorcycles – other vehicles. Those 'other vehicles' being the likes of 3-wheelers, quad-bikes, golf-buggies, recreational buggies, snow-mobiles & jet-skis.

The broad technical reach (or specific sector knowledge) enabled by operating across (or within) this ULCC aligned sphere theoretically provides the necessary experience and resources within R&D, project development and production realms to create a ULCC vehicle type if so desired.

BMW is renowned for its cars and motorcycles (Motorrad), but whilst their has been periodic interaction between each division's R&D functions, the push for eco-engineering solutions has demanded that greater knowledge share take place between the two divisions. Though ostensibly a Car's project, the i3 EV has adopted a radical alternative technologies including of a 'battery-chassis' for electric drive and a necessary lightweight carbon fibre body sub-structure placed on-top of the chassis. Hence BMW AG's 15% stake in the composite maker SGL. A range-extended variant is being developed which houses a small ICE unit to re-charge the battery, very probably sourced from the Motorrad. Furthermore, investment-auto-motives suspects that the general i3 architecture will invariably be developed to explore the installation of a conventional ICE unit (eg Motorrad mid-capacity engine approx 750cc), so as to gain additional benchmark performance metrics for ICE, Hybrid & EV. At this stage, given an small ICE propelled standalone chassis, BMW may explore the application of a more conventional metal 'bird-cage' body structures, onto which are 'hung' lightweight plastic body panels to create a buggy-type vehicle. Such a development task could be split between the BMW Car's division and Sweden's Husqvarna, a sub-company of BMW Motorrad, itself with a distant history of (then unachieved) low cost car ambition consisting of a motorcycle engine and FIAT Topolino wheels. Sixty years on there may be a natural space for a successor.

VW [Ducati]: As conglomerates know, diversity and strength provides future options, and looking at recent events in the sector, that is precisely why Ferdinand Pieche's purchase of Ducati was so important to VW Group. It was anything but an irrelevant egotistic trophy purchase, as many have stated, but a market and technical strategic imperative bought at a near perfect time when Italian assets are suffering general under-valuation. Ducati allows VW to mimic BMW by reaching into the high margin motorcycle business which has opportunity for product and geographic (ie volume) expansion, whilst its underlying technologies of lightweight metal and composite structures and high-output small engines can be deployed elsewhere in 'light-car' ambitions. Like BMW, VW is exploring (SGL) carbon-fibre and composite structures, adding to its learning at Audi, Lamborghini & Bugatti. But if using these traditional typically expensive routes fail to balance the 'light-car' business equation (spanning input material pricing, unit BOM costs, labour assembly), Ducati could provide more conventional alloys and composites engineering solutions and/or a more cost effective assembly process.

This all the more useful if at some undetermined future date VW Group did in fact choose to create an alternative low cost car (ie not 'recycled') or a ULCC type vehicle based on motorcycle structures and powertrain technologies, much like its XL-1 concept vehicle. That is presently a far off expectation, but it seems likely that VW Group will have a cross-linked materials & manufacture R&D strategy that can deployed in a coordinated manner.

Peugeot is lesser known for its motor-scooters and bicycles, because the Peugeot family separated the 4-wheeled company from the 2-wheeled in 1926. However, there are still family and commercial ties across an empire spanning cars,vans, motorcycles & bicycles. And under the recent 'Mu' initiative seeking to offer rented multi-vehicle transport solutions, it appears that PSA once again seeks to draw the once different threads into a more cohesive 'corporate portal'. This chain of technologies – from 50cc scooter to the electric e-Vivacity scooter to RCZ coupe-convertible car to 3008 Hybrid to Boxer van - then provides PSA with a host of developmental possibilities. However its apparent desire to slowly relinquish non-core manufacturing so as to avoid heavy development & CapEx costs, and seen by the use of 're-skinned' PSA badged Toyota & Mitsubishi vehicles, demonstrates its desire to focus internal R&D upon high-value technology differentiators; most notably the 'bolt-on' electric-drive rear axle of 3008 HYBRID 4, providing both zero emission rear drive propulsion, standard diesel engined front drive propulsion, and mixed 4WD. The apparent PSA strategy to 'piggy-back' other producers vehicles in lower volume segmnets (ie non small car core) whilst adding differentiation from what it sees as high-margin value-adding technologies and both Peugeot & Citroen aesthetics

As to the 'light-car' / ULCC question and PSA's desire and ability to inter-mingle alternative vehicle technologies and packaging, as shown in the SmartCar like Peugeot BB1 concept of 2010 cross-fertilising scooter driving style inside a city car shell seating 4 people. Here then PSA appears ready to compete with progressive designs where legally possible most directly against its French counterpart, the (Piaggio owned) Ligier company (see below).

The following 5 companies share the basic traits of Japanese conglomerates, in that they have been grown from bicycle, motorcycle and small engine roots, and used that knowledge to enter and create a wide range of diversified utility and leisure vehicle segments. Spanning their origins of motorcycles, small (kei) cars, quad-bikes (small ATVs), buggies (large ATVs), snow-mobiles, jet-skis and marine engines. And of course importantly for EM nations and natural disaster zones, generator sets for domestic and industrial power, aswell as in advanced nations the provision of garden equipment. All developed from a central competence in small capacity ICE technology which bolstered Japan's monumental economic rise between the 1950-1995.

More recently exploring areas such as aerospace and single-person mobility and robotics in order to find a new high-value era for Japan and serve an ageing population. But of course it was the landmark Kyoto Treaty which underpinned Japan's eco-exploration, with best examples being progress with variously hybrid, all-electric, hydrogen, flex-fuel & LPG propelled cars.

Honda, unlike its counterparts of Toyota and Nissan, has managed to build a brad profile that spans a multitude of sectors, especially so in N. America, where it essentially created whole new sectors like the ATV in 1970 – then a trike for farm use and later adapted to leisure and 'heavy duty' utility with 4 wheels – leading to the MUV (Multi-Purpose Utility Vehicle) known as 'Big Red'. This along with other 'customer visioneering' innovations centred around low capacity but high power output engines has been the cornerstone of Honda's success to date beyond automobiles, into utility and leisure 'power products'. That bolstered in recent years by Hybrid power-trains. However, whilst it undoubtedly has the core competencies to develop a ULCC based on its MUV architecture, it has not to date shown signs of doing so. However, the fact that the MUV's transmission is essentially a scaled-down car gearbox indicates that exploration has taken place with the option to create a ULCC effectively sat on the R&D shelf.

Instead, it showcased what it named a low cost car in mid 2010, coming to market a year later in Q3 2011 in India & Thailand as the Brio, positioned below the Fit / Jazz (the Triad region entry level car). Competing against Hyundai's i10 and the Suzuki Alto / A-Star, it – like its counterparts - is not a low cost 'recycled' car, but is indirectly drawn from Fit / Jazz and does include high levels of component 'carry-over' to build to cost for EM regions.

Suzuki is known for its small and compact cars and vans, its performance motorcycles and leisure ATVs. Well known alliances with Maruti in India and Pak in Pakistan, aswell as having acted as a contract manufacturer of its own products on behalf of other VM producers, pragmatic adding a 'bought-in' small vehicle to a line up. Suzuki then as a multi-sector player has broad reach capabilities which could marry different vehicle technical sets (architectures & powertrains); this was shown in the GSX-R/4 concept car of 2001, illustrating the installation of a Hayabusa motorcycle engine into a sportscar body. However, whilst reflecting performance ideals, nothing to date has been conceptually shown regards a ULCC, though Suzuki could feasibly install its large scooter engine (650cc) which is coupled to a CVT gearbox into a small vehicle package, possibly by developing the ATV packaging of the Eiger 400 into a MUV and car-type vehicle.

Kawasaki spans a myriad of sectors including: ship-building & seaward logistics, industrial plants, industrial robots, tractors, trains & rail rolling-stock, aerospace equipment (including military aircraft) and small engines used in power generator sets. It also is increasingly involved in environmental infrastructure systems (incineration plants, gasification, sewage, water & recycling). Though best known in the consumer sphere for motorcycles, ATVs, MUV “Side x Side” and water-craft.

As with other large MUVs, the basic packaging of its Teryx & Mule products (with 2 engine sizes and 2 or 4WD) could be used as the basis of an ULCC, in either 2 seat SWB and 4 seat MWB forms. However, to date Kawasaki has not publicised any intent to create a ULCC. However, one route to do so, discounting any primary alliance with another Japanese company, would be to develop its links with India's Bajaj Auto – explorer of the ULCC – given the motorcycle distribution rights held by Bajaj for Indian retail of Kawasaki bikes. However, presently that looks a distant reality.

Yamaha is well known for its motorcycles. But its origins lay in musical instruments, today the world's largest manufacturer across: keyboards, guitars, percussion, brass, wood-wind and using that base to create a platform of electronic music and entertainment hardware.; in turn developing semi-conductors and computers. Vehicle-wise, it producers scooters, motorcycles, ATVs, golf carts snowmobiles, boats and wave-runner watercraft. It also designs and manufactures engines on behalf of third party automotive VMs, aswell as being renowned for its marine outboard motors. Furthermore it seeks to be an EV leader.

Whilst appearing to offer a lesser number of ATV & MUV variants (ie not so obviously de-lineated) the fact that it also manufactures golf carts adds to the internal design and production capabilties regards the creation of a ULCC.

Fuji Heavy Industry [Subaru] consists of 4 divisions: automobiles (Subaru), aerospace, industrial power products (engines etc), and an eco-tech section (waste trucks, wind turbines, robot sweepers).
Its bus and rail-road sections were divested in 2003. Toyota has a 16.5% sharehold, with its growing interest reflected in the joint development coupe (FT-86 / BRZ) . In turn, a commercial relationship between FHI as supplier to Polaris Industries (see below) means FHI still owns a sizeable percentage of Polaris stock.

Subaru Cars grew its reputation first amongst those in rural communities because of its 4WD USP , and latterly came to worldwide recognition via World Rally Championship success and the associated Impreza WRX and Sti models. Today its model range, is biased toward SUV and cross-over models to play to its 4WD advantage, but also includes, though retains the core 4WD sedans / hatchbacks and a small city car, all recently joined by the BRZ coupe. Nothing has been muted regards a Subaru ULCC, and furthermore its own small car is sourced from Daihatsu, so would have little influence in developing something similar. However, its now legendary boxer configuration engine – being ostensibly 'flat' – improves vehicle packaging and vehicle dynamics possibilities, and whilst current engines are over-sized for a ULCC, a small capacity boxer engine sourced from elsewhere would provide Subaru with a ULCC advantage. The 'brand-embedded' 4WD system adding another positive element. However, a ULCC does not fit the strategic market positioning intent of Subaru as semi-niche and performance orientated 'near-luxury', without small car R&D it appears to have has little technical freedom or capability to initiate such.

TATA [Nano], as well documented, has to date been the only large scale manufacturer to accomplish the necessary NPD process required for a ULCC type vehicle, even if Nano has ultimately been launched at a far higher price than originally promised. As also stated previously, it is no doubt within the business model envelope to introduce the promised 'bottom tier' car later in the product's life-cycle when set-up and overhead costs have been amortised and piece costs further reduced. The Nano has not come to market as a true ULLC, but comes closest yet to the “poor people's car” conundrum.

Bajaj Auto, the renowned maker of 3-wheeler 'tuk-tuks' recently displayed the BE60, essentially a 4-wheeled, structurally stronger and weather covered micro-vehicle; positioned philosophically half-way between car and van / people carrier. Destined for the Indian and EM taxi trade it is not as technically sophisticated as the Nano, nor as cosmetically pleasing, given its narrow track stance & tall roofline. But then it is far more a service workhorse rather than family pet. As to whether it actually becomes popular remains to be seen, since the innate payload flexibility of a tuk-tuk (passengers vs baggage vs goods load) hard to achieve without undermining all the car-like attributes the vehicle offers. The interesting aspect of BE60 is that it would split the public persons and goods carriage sector into 2 distinct sub-sectors, people & baggage vs goods; the BE60 essentially replacing the role of the old Hindustan Ambassador but without the luggage space, a roof-top luggage rack also probably creating severe instability issues raising the CofG on such a narrow tracked vehilce. However Bajaj must be congratulated for exploring the new vehicle space and for attempting a ULCC. It should continue its exploration.

Mahindra & Mahindra (conglomerate) Group spans the following sectors aerospace, agribusiness, after-market, automotive, components, construction equipment, defence, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real estate, retail, and two wheelers. The latter via acquisition of Kinetic Motor in 2008.. Vice-chairman Anand Mahindra recently spoke of his desire to see India's industrial base move away from 'make do' engineering solutions and to seek the higher ground and improved profit margins of world standard engineering and product offerings. Thus able to gain greater national competitive advantage by offering benchmark quality vehicles at a lower cost base (so improving margins and pricing flexibility). M&M recognises it must compete against TATA's own branded SUVs, themselves improved by stronger relations with the (Jaguar) Land Rover division.

Yet, like BMW and now VW it also has 2-wheeler capability since the 2008 takeover of Kinetic Motors, and has been working through the process of introducing cleaner 4-stroke engines into its scooters and motorcycles. Moreover, it owns REVA which whilst presently using EV powertrain also offers the structural platform for an ICE powered ULCC. So exploring the ULCC space may yet prove attractive in years to come even if today not immediate on the strategic radar, or admitted by Anand Mahindra.

Piaggio [Ligier – Vespa] is a company heavily endowed with the historical spirit of pragmatic low cost vehicles for passenger & commercial use. As its wikipedia entry states [it] “encompasses seven brands of scooters, motorcycles and compact commercial vehicles. As the fourth largest producer of scooters and motorcycles in the world, Piaggio produces more than 600,000 vehicles annually, with five research and development centres, more than 6,700 employees and operations in over 50 countries. Originator of the legendary Vespa scooter it also explored a low cost car in its post-WW2 years, the Vespa 400, with Agnelli family ownership in 1959 extinguishing 4-wheeled vehicle hopes to protect FIAT and create distinct separate bike & trike and car identities. Today the famous 3-wheeler Ape is still build in India, but is exported in low volumes for the 'vintage / classic' style markets in Europe and N. America it has become a low volume niche lifestyle build in Italy. Its 4-wheeled successor is the badge engineered Daihatsu micro-truck. However, Piaggio innovated with the MP3 'front track' 3-wheeler, intended to attract new riders from car driving toward motor-cycling.

But most important relative to the ULCC (ie 'light car') idea is the construction of high quality micro-cars by Piaggio's French sub-holding Ligier. Based in de Vichy en Auvergne, the factory has received 3 tranches of capital expenditure in design and process technologies since 2003, demonstrating production leadership in the 'light car' arena benchmarked against conventional VMs quality levels. The application of advanced thermo-formed body panels fixed to an aluminium & steel cage sub-structure, ever more precise with increasingly 'close tolerance' of panel fit.

KTM (Sportmotorcycles) AG has become known for its ever broadening model range. Initially recognised for its wins of motocross competition events (eg Paris-Dakar Rally) it gained popularity and entered new road-bike sub-segments of SuperMoto and SuperBike with similar competition success and high profile. Unusually it bucked the motorcycle norm by contined development of 2-stroke engines, stating the NVH refinement and emissions requirement could be met by a less complicated engine.

Radically, it created the X-Bow race-track car, shown in 2008, but instead of the project being created wholly in-house, KTM adopted Audi powertrain with Dellara chassis, limiting itself to bodywork fabrication, interior fitments etc. This appears a let-down to KTM followers, but should be recognised as an internal learning exercise whilst developing a high-bar product, albeit in very small numbers. X-Bow points to a possible avenue of later stage track cars which are increasingly developed from in-house resources. However, returning to its roots KTM would be well positioned to develop a ULCC vehicle using both motorcycle engineering principles and its 2-stroke engine. This a possible topic of debate given KTM's product distribution agreements with India's Bajaj (re-badging and Bajaj retailing of KTM bikes).

Lifan Group also had motorcycle origins, but grew under the Chinese economic miracle to now encompass compact cars (amongst which sits a Mini lookalike), and Daihatsu derived micro-trucks micro-vans. However, whilst it has access to certain micro-car, and so 'light-car' / ULCC systems, the fact that its company logo is an obvious copy of GM's Buick brand highlights its desire to pitch toward the upper strata of inland and western China's bourgeoning middle-classes. Moreover, the company demonstrates itself to be inimitably tied to the large-volume Budd production system of stamping (of metal sheet) and welding for monocoque bodies. Thus it seems unlikely that it would contemplate a ULCC requiring 'non-Budd' methods..

Kandi Technologies has as a sub-division Zhejiang Kandi Vehicles, which operates across: off-road leisure buggies, ATV “Quad-bikes”, MUV “Side x Sides”, ”Community Vehicle” (akin to golf-cart but derived from MUV), EV city car (which is a near copy of a SmartCar, and it categorises as 'Ariel') and 3-wheeled 2-seater (side-by-side) 'trike' with single wheel to rear. The company then has sought to reproduce all types of leisure vehicles previously seen across North America and Europe, and sells its products to both the newly wealthy Chinese in its home market, and as lower priced leisure vehicles in export markets. Kandi's introduction of more affordable ATVs and off road buggies boosted corporate performance in Q1, but EV sales have seen sales decline. To support its strategic focus in the EV space Kandi bought-out Konga investments which in turn had a majority stake-hold of an EV parts supplier.

Given Kandi's manufacturing prominence in ATVs, MUVs and small city-car EVs, it appears to hold the basic production capabilities which would allow the merged capabilities creation of a simple ULCC. Wheelbase extension of its 2-seater EV to seat 4 with installation of a small capacity ICE unit and required restyling, critically with a low fabrication and build cost could give Kandi an edge regards a ULCC if it so desired, naturally positioned to move into this (as yet unproven) space.

Polaris Industries has become recognised as perhaps the lead player in the utility and recreational off road space given its range of ATVs and MUVs (Side x Sides), whilst becoming more established in the premium motorcycle arena with the development of Victory Motorcycles and 'fold-in' acquisition of Indian Motorcycles, so substantiating its motorcycle interests far beyond its stake in aforementioned KTM AG. The company previously had a engine procurement relationship with Suzuki Motor, but in 2010 chose to bring engine assembly in-house at its St. Cloud Minnesota plant; simultaneously re-purchasing the clutch of B-class voting shares Suzuki owned in Polaris for $79.3m, whilst maintaining engine parts supply with Suzuki Motor Corp. In early 2011 Polaris bought GEM (Global Electric Vehicles) from Chrysler, an EV focused business which offers 'neighbourhood vehicles' to a broad spectrum of customer groups including: local and state government, industry, commercial enterprise, educational campuses, gated communities, and private clients. It also has a distribution agreement with BobCat (see below) to deploy its sales channels on what are essentially non-compete items, Late 2011 saw the acquisition of Goupil Industrie in France, a producer of EV and hybrid powered micro-trucks aimed at eco-minded owner-operators.

Thus Polaris has beyond doubt the conglomerate capabilities to create a ULCC if so desired, but its heavily US focused business (70% of sales turnover) appears the prime intent at present and into the mid-term. Its RoW business (outside USA & Canada) is about 15% of turnover, and only 15% of that pertains to Asia, where a ULCC would be naturally targeted. However, it will maintain focus on the growing trend for eco-sensitive vehicles in North America, which will in time create ever more developed car-like small vehicles.

Arctic Cat was founded by the previous founder of Polaris Industries, and offers ATVs, MUVs (Side x Sides), snowmobiles and watercraft. Its MUVs are typically classed as 'high-performance', 'leisure' and 'utility' as befits the sector, and comes with small (approx 650cc) capacity IL2 engines and larger (approx 1.0L) capacity V-Twin engines. However, its prime historical and business interest is that of snowmobiles, deploying its greatest engineering effort to progress its competitive edge.

For this reason, and with far less R&D capability than its MUV rivals, it seems unlikely that Arctic Cat would choose to strategically step into the unproven realm of the ULCC.

BRP (Can-Am)

BRP is the present incarnation of Bombardier Recreational Products, itself spun-off from Bombardier Inc, and owned by Bain Capital, the Bombardier Family and Canada's SWF 'Casse Depot'.

Can-Am is the notional 'motorcycle' subsidiary, but actually offers 3 and 4 wheeled recreational vehicles by way of the Spyder trike (single-wheel rear), ATV 'Quad-Bike' and MUV 'Side x Side' models. So essentially BRP might be regarded a light-vehicle producer already albeit not with a ULCC product. The Spyder trike includes traction control, stability control and anti-lock brakes, systems which in turn either are or could be applied to the MUVs and so to a ULCC car-like configuration.

Case IH of course operates in the Agricultural & Construction sectors, primarily manufacturers large tractors – in wheeled and tracked forms - and combine harvesters. It is part of the Case new Holland (CNH) Group, itself majority owned by FIAT Industrial SpA. Below yet complimenting its primary products, Case IH offers its Scout named MUV in diesel and petrol versions. As a producer of very large and expensive AgCon products it seems unlikely that CASE IH would independently seek to create a ULCC of its own accord. It would be too great a distraction given the present growth opportunity in the AgCon sectors. However, if FIAT Industrial – still effectively managed by FIAT SpA (Cars) representation – did decide to create a long-horizon ULCC, it would evaluate how Case IH's MUV knowledge – together with Piaggio's general knowledge – could be utilised. Yet for the present, that seems a remote exploration. (International Harvester created the American 4x4 Scout in the 1960s to seek to create its own complimentary farmers vehicle - vs Ford's Bronco – but the ULCC appears a very different proposition given the lack of global customer 'big farm' needs).

John Deere, similarly has a myriad of large equipment offerings: tractors, harvesters, seed drills, muck spreaders and sprayers all in agricultural, and bulldozers, backhoes, loaders & road graders in construction. Its MUV 'Side x Side' model is generically called Gator which spans “lawn to off-road hauling” uses: known as 'Compact', 'Traditional', 'High-Performance' & 'XUV', available in 4x2, 4x4 & 6x4 drive configurations. Unlike other automotive affiliated or conglomerate owned agricultural sector producers, John Deere has obvious advantages and disadvantages. It positively, does have far more independence to create as it wishes, but to date has been conservative seeking to 'build a better mouse-trap' in traditional equipment sectors. But negatively, it's current client base of 'Big Farm' has no need for a ULCC. However, it does have MUV capability so could adapt and experiment with its MUV to become more of a small jeep (like the 1968 Suzuki LJ10) so as to explore the needs of financially constrained EM farmers; though Maruti-Suzuki could be said to partially fill that role with its successor, its price is not that of a ULCC.

Kubota Corp from Japan spans various industrial sectors, including: water & sewage, valves & pipes & pumps, castings, vending machines etc. But is best known for its agricultural and construction equipment. Much like CNH or John Deere. It also offers an MUV available in open cab and closed cab styles with various engine sizes under the RTV model name. However, the company appears to presently seek to grow its traditional business model in new regions, a large puch in Poland for example. It has good presence across SE Asia and other EM regions, yet the previous failed effort to diversify into computing may have smothered taste for exploratory business ventures. Presently its products are bought by a mix large business and small-holder private buyers, which themselves tend to use conventional vehicles, and thus little opportunity for an ULCC. However the company does have the R&D capability to evolve its MUV..

KYMCO, the Taiwanese manufacturer of scooters, motorcycles and ATVs. It was awarded the contract to supply BMW Motorad with engines in 2008. As its own 'ULCC aligned' products, there is Maxxer & Mongoose model leisure ATVs, utility ATV named MXU and larger model 'Side x Side' MUV called UXV. Further exploration of the 4-wheeled automotive space could be a possibility, much in the same way that Indian motorcycle producers such as Bajaj have done so. However, Taiwan's Yulon Motor already seeks to own the middle-ground and entry levels of Taiwan 's domestic and Chinese export sales (with Dongfeng) using the recently created Luxgen brand for China and the older Tobe brand seeking second-tier EM export markets. So, on the grounds of national economic policy-setting it would seem likely that any KYMCO attempt at a ULCC would need to be formally or informally integrated with Yulon / Tobe attempts.

BobCat, although US originated and located is now owned by S. Korea's Doosan Group. Amongst its products it unusually offers a more sophisticated MUV. Its 'ToolCat' vehicle has both a front coupled ancillery drive to connect pneumatic and hydraulic powered equipment such as a digger, and offers front and rear axle steering to improve the turning circle.

This, unlike many other generic MUVs, highlights BobCat's willingness to find a niche space between traditional mini-equipment items (eg mini-diggers) and MUVs, so creating a new market space by overlapping two previous segments.

[A well recognised similar case study is that of Britain's JCB Fastrac, which merged the 'in-field' power/traction requirement together with the 'on-road' speed/ease requirement. Both Fastrac & BobCat examples provide positive reflections of R&D which explores product(s) cross-fertilisation to create a new category. This then capturing the necessary mindset and technological nexus of the ULCC]

“New Entrant” Enterprises -
3. Motorcycle Producers – inc moped & scooter.
4. 'Eco-Car' Explorers – seeking ultra low cost

Motorcycle Producers -

The following companies could theoretically be viewed as possible 'new entrant' enterprises to the fledgling (and not yet convincing) ULCC sector. Each holds the internal prowess to conceptualise and manufacturer a vehicle which, as shown by the Nano case study, could feasibly be drawn from the pragmatic and lightweight engineering of the motorcycle and eco-car worlds.

Harley-Davidson's roots go back to the early days of motorcycling, and thanks to government & military contracts survived the sector 'shake-out' of pre and post WW2, experiencing lean years but coming back into, indeed arguably symbolising, the American popular consciousness in the 1970s and onwards, becoming a materialist staple of the middle-aged middle-class male from the 1990s to date, yet in later years seeking to recapture its youthful spirit. (The fact that Credit Suiss advertises itself via the iconography of the pro-tennis player Roger Federer and H-D highlights its aim at wealthy customers). Thus as a premium brand which exploits a yesteryear technological heritage, H-D is hardly placed to seek business expansion in the ULCC terrain. Instead, as has been the case, understandably satisfied with rolling out the H-D legend across a newly emerging North America and across the world's new wealthy in EM regions.

Hero Motocorp is the relatively new iteration of what was Hero-Honda motorcycles and prior Honda-Hero, the best known 2-wheeler company in India by sales (57% of the market) covering scooter and motorcycle and by brand equity, noted as a much trusted brand. It is not an overstatement that Hero has been the company that mobilised the lowest tiers of Indian population (and those other export markets). The ambition today that by 2016 Hero reaches $10 bn annual income from sales of 10 m units. However, the recent domestic economic slow-down, and concerns about poor economic policy reaction might halt such hopes. In such circumstances, if ongoing, the company would exert greatest effort to maintain sales traction of its standard product line and probably be faced with cutting back R&D activities. Hero operates in a space that TATA had to discover with Nano, and so very probably does have resource intelligence to create a ULCC, even if pragmatically developed to be less than wholly beautiful - as seen with Bajaj. However, its limitations to small capacity engines of 100cc, 150cc & 250cc would mean that such a car would be woefully underpowered, and exploring the ULCC arena with a far more costly bought-in 750cc-1.0L engine goes against the grain of this self-sustaining company. Moreover, its prime engine components supplier Sunbeam Auto (India) would be heavily pressured by its other clients such as Maruti Cars not to sell car-sized engine parts (pistons, engine blocks, etc) to Hero.

TVS Motor sits at the apex of the TVS Group business divisions, furnishing India with scooters, motorcycles and auto-rickshaw trikes. Its present industrial shape derived from a 1982 JV with Suzuki Motorcycle, ending in 2001. TVS prides itself as being a notional scooter innovator: automatics, 'unisex', and couples' bikes with 'body-balance' technology. However, its sales success has notably diminished in the face of strong competition across all its segments, and whilst growth is expected across 2012 its market-share is expected to contract. As with other 'multi-sector' 2 & 3 wheeler operators, whilst a ULCC concept could very probably be generated in-house, the basic procurement barriers TVS would face vs automotive VMs, highlights an improbability of ultimate ULCC production. The only caveat to this being that the introduction of the far more modern King 3-wheeler has not stirred customer demand, yet its basic shell and package might well be adapted to a 4-wheeled model for market research purposes – much like the Bajaj BE60.

LML (Lohia Machinery Ltd) started 2-wheeler assembly in 1990 as part of a JV with Piaggio to re-manufacture the classic Vespa scooter. Its declining popularity saw LML end that agreement in 1999 in favour of a new venture with S.Korea's Daelim Motor Company with updated scooters. However, financial over-stretch scuppered growth with today the company restricted to exporting versions of the classic Vespa to western markets under the LML name. Given its financial and operational constraints and its lack of contemporary Indian, Asian or EM regional brand recognition any ULCC project is far-fetched

HMSI (Honda Motorcycle & Scooter India) was set up in 1999 in recognition of the Hero-Honda's split and to introduce more modern 2-wheelers to India. Its focus on well received class leading products in the 50cc, 100cc and 150cc segments, domestic market success and organisational shape to effectively deliver the sales of 'Japan designed' products, and its corporate remit to its Japanese parent means that there is little chance that HMSI would even explore the ULCC idea.

S&T Motor (Hyosung Group) is a S.Korean manufacturer established in 1978. It initially produced licensed versions of Suzuki machines, then moved on via an R&D centre in Japan to create proprietary designs. Recent years have seen the company's product expansion into larger capacity fashion & sporting motorcycles for domestic and export sales to select Triad markets and India. S&T. Engine sizes span 50cc, 100cc, 125cc, 150cc, 250cc, 450cc and 650cc. As part of the Hyosung cheabol sister companies operate across: textiles, industrial materials, chemicals, opticals, power systems, civil engineering & construction, electronics and IT It also acts as a Tier 2 supplier to the domestic and foreign automotive industry, but essentially in lower order specific items: tire cord, steel cord, bead wire, seat belt yarns, airbag yarns & cushions, and interior cabin material. So a broad conglomerate capability, but unlike other previous chaebols (most obvious Hyundai & Samsung) it does not have deep reach into automotive supply, yet also being a specific thin-thread of the S.Korean auto-sector. However, its R&D centre in Japan, with prime motorcycle engineering skills and possible connection to Japan's micro-car manufacturers, could theoretically develop a ULCC. However, such an initiative would need to pesumably be affirmed as part of S.Korea's national economic agenda, But since this so futuristic IT orientated, having allowed Hyundia-Kia to grow globally and Samsung Motor to go to Renault-Nissan and Ssangyong to go to Mahindra (which itself is negating the ULCC idea) it appears that for S&T to try and undertake a ULCC without government sanction or support looks highly unlikely.

Brasil & Movimento is a relative newcomer, set up in Brazil in 2000 and originally fabricating bicycles it quickly moved into affordable 2-wheelers spanning the 90cc – 250cc engine sizes and various styles from basic moped to city scooter to simple urban commuter to mixed-road moto to scrambler, thus offering a cheap product in all prime model types. Presently, B&M is the 3rd best selling brand, and as such given its combined youth and success will be undertaking normative internal value-chain efficiency seeking, with prime mid-term focus on sector re-alignment given Brazil's current industrial regeneration efforts and regional Mercosaur export markets. Ideas of producing a ULCC in a vehicle dominated by entrenched players (VW, FIAT, GM, Ford), a political policy of generated 'value-added', examples of previously failed low cost cars and political rebuttal of cheap Chinese cars, means that for B&M the ULCC is hardly credible.

Tomos originated in the former Yugoslavia (Slovakia) in 1955, licensing Puch products from Austria, adapting those machines into increasingly stand-alone models. The 1991 fragmentation of Yugoslavia saw Tomos acquired by Hidria. Later a US facility was purchased in Spartenburg South Carolina for assembly, and the Slovak HQ factory served BMW with parts. Slovakia's 2004 admittance to the EU assisted general trade and trading, with a raft of new 2-wheeler products introduced. Whilst the company has historically assembled other goods including cars and out-board motors, motorcycles have been core. These a range of low cc mopeds, scooters and motorcycles with styling character adaptions over standard skeleton frames. Aside form the standard range it offers a utility bike for delivery tasks, and an electric powered scooter. Outside Slovenia prime assembly and sales site for a small range of mopeds, scooter and entry sport-bike.
As regards capabilities and interests in developing a ULCC, the prospect appears remote given the low cc engines used, the depletion of a once large engineering function (decades ago) and the likelihood of a re-grown Zastava (and similar others) developing low cost cars for CEE, CIS and elsewhere.

Other privately held motorcycle companies exist, which could feasibly attempt to engineer and produce a ULCC, are listed. But for those singular or amalgamated reasons previously given, it appears unlikely that any large successful volume company, or indeed premium niche company, would seek to explore outside its comfort zone:

India's Royal Enfield, Korea's KYMCO & SYM, the UK's Triumph & Norton, Italy's Cageva & MV Augusta, Brazil's ITALIKA & AJP Motos and China's Chongquing Hi-Bird.

The only remotely plausible firm of these that could be possibly associated with a ULCC would be Royal Enfield for reasons of national location and rugged brand persona.

Indeed, the engine from the company's long-lived and so widely available Bullet model has become a power unit of choice amongst 'bottom-tier' Indians when building their own 'home-made' (Heath Robinson-like) powered transport.

But the company was effectively re-launched only a few years ago and presently seeks to recapture past glories with military links by positioning itself as the true 'Indian Legend' of the Asian sub-continent; so as to try and stave-off America's Harley-Davidson. Very probably then trying to disassociate itself from the rural poor.

'Eco-Cars' -

Another separate lightly populated group of progressive companies are those which seek to deliver new types of vehicles under the general banner of 'eco-cars'.

In this instance, it is not the 'green credentials' of this group that draws major interest, though an environmental plus, but the fact that the core philosophies of their business models is to be radically alternative, Re-inventing the process to ensure a much reduced assembly cost of the proprietary vehicle.

[NB though some variants may install high-cost technologies].

So, generically low (ex-factory) cost vehicles (possibly of the ULCC genre) are sought to be attainable via a pragmatic business approach – which whilst typically with greater western resources available. Such an approach necessary amongst both those established active or dormant 'alternative car' developers, those young companies still maturing or any new start-up. In the niche production eco-car space, all players face the same current to mid-term squeezed funding environment.

TH!NK Global perhaps best exemplifies a once active but presently dormant 'alternative car' developer, very much in the micro-car genre (and akin to France's Ligier but less well appointed), but specifically offering itself as a distinct EV provider. TH!NK Global at first appears an odd entity, its fortunes much reliant upon external eco-vehicle funding from international governments and or VMs. This EV fascination evolving through decades of phased 'risk-on, risk off' investment relative to the financing and political climate. The most recent perfect storm being the decade-long, pre-2008 simultaneous inflation of the credit-bubble and eco-consciousness.

THINK Global is now owned by Electric Mobility Systems SA based in France, and investment-auto-motives suspects is awaiting the newly seated President Hollande to ensure that a portion of a new round of ECB-IMF QE liquidity is appropriated for new era eco-development, funding via a mix of central government and re-capitalised banks going to 'best-fit' companies; amongst which EMS SA hopes to gain. Thus the company will no doubt be be resuscitated once again in the mid-term to re-offer its two 2-seater models 'City' and 'Open' (ie open-top) from Valmet (if new terms can be agreed) or another new assembler. And no doubt TH!NK will re-publicise its efforts to expand into the 4-seater market with a successor to the Ox concept. Various sources state that French registration of the City car were 11 units in 2010 and 110 units in 2011, so pre-cursing what shouldb be stronger French sales demand in 2012/13 onward.

TH!NK Global then has been, and continues to be a useful ecologically directed business vehicle in its own right, adopted by different parents relative to national macro-funding conditions; TH!NK's phased 'up and down' commercial fortunes ironically mimicking the AC-DC graph.

Gordon Murray Design was created in recognition of a changing socio-economic and geo-economic world, the prime agenda to deconstruct and reconstruct the vehicle industry norm, to extend the micro-car intellectual envelope; in its design, production and retailing formats. For those outside of auto-circles, parallels to Murray as the the 'automotive Dyson' have been drawn. The national agenda hope is that with such initiatives the UK may take to a pre-eminent intellectual role in the auto-arena of the 21st century. Whilst Britain already holds 'pole position' regards vehicle development within Formula 1 and other 'high-value' motor-sport categories – thanks to Murray and his counterparts - it was also recognised that there had been an increasing disconnect regards the far broader picture of global urban mobility. With small car interests Murray was urged to set-up a company to help deliver the UK's trade and industrial ambition, both in the domestic domain and upon foreign shores.

To an even greater extent than the much acclaimed TATA Nano, GMD (and its financial backers) have sought to 'reverse engineer' the standard business model and stretch the norms of niche vehicle practice. Its core product the T-series (T25 ICE & T27 EV variants) provides an unorthodox 3-seater usage and travelling experience, which whilst primarily seeking to solve the central challenge of Triad and Megacity eco-personal transport, may be adapted to provide a ULCC product with a closer 'bottom-tier' correlate than shown thus far by TATA Nano.

The GMD website presents the rational of the vehicle, stating that it... “represents a major breakthrough...optimised through design for strength, performance, weight, cost, safety, usability, tooling, quality, energy efficiency, recyclable and ease of assembly”. Hence not a step-forward but a leap-forward. Yet its radical occupant packaging also creates 'usage anomolies' when compared to the norm; most evident the opening of a front windscreen-canopy structure for entry/egress, and a central driving position which negates the sociable and so standard 'side by side' seating arrangement. Yet the car is intendedly different for very good reasons of its own, suited as is as either a suburban families 2nd family 'runabout' vehicle, or for inner-city dwellers, suitable for a 1-child family, or typically lower income single parents with 1 or 2 children. The key is that in a different ULCC guise needing bigger cabin space, thanks to the low CapEx 'i-stream' business model*, the present 3-seat layout could be re-engineered and produced as a 4-seat model. GMD brilliantly illustrates the UK's auto-intelligentsia.

{NB 'i-stream' micro-factory model created by the combined capabilities of its technical partners, Hennecke and IPE].

To this end it prescribes a different kind of 21st century Triad region auto-company, one which is as much IPR 'value-added' focused as the mass-market producer is APR 'credit-terms' driven.

To End -

Although finite statistics are still hard to obtain using varying sources, it appears that the worldwide production of all vehicle types has rallied strongly since the global ripples of the 2008 financial crisis. 2010 seeing a 20% increase in production from approximately 61.7m units to 77.8m units in 2011. Within these figures passenger carrying cars (and similar class types) represented saw 57m units produced in 2010, 59m in 2011 and an expected 62m units in 2012.

In 2010. with the Triad region at its low ebb, it is estimated that 51% of all vehicles sold (Cars, X-Overs, SUVs, LCVs, MCVs and HGVs) were done so in EM regions.

General expert opinion is that by 2014 approximately one-third of that consumer and enterprise demand will stem from BRIC countries, with secondary growth in the CIVETS nations and others such as Iran.

The changing face of the auto-industry is now apparent, perhaps the most telling previous watersheds when India's TATA bought JLR and China's Geely acquired Volvo (though the Youngman interest in SAAB seemingly less credible), with the likes of SAIC, FAW and Avtovaz capturing ever greater industrial learning from their JV partners to in turn create ever better vehicles under their own mid-line and entry-level brands.

These major firms then represent the towering monolithic trees in the well established forest that is standard vehicle production; but as shown a few new green shoots also have become established, with promise of others where the light of pre-emptive forecasting and enterprise will reaches on the forest floor.

The 1990s and early 2000s births of the once many EV companies provide the ULCC backdrop, where it is not so much the over-hyped battery & e-motor set which provided the 'alternative car' advancement as the 'light-car' structural engineering that quietly took place simultaneously.

These years heralded still ongoing exploration which seek to effectively construct from first principles the core eco-car / ULCC business models. Those re-jigged 'business platforms' ranging from a change in basic manufacturing location and vehicle systems through to creation of a near virtual car company – a commercialised extension of the old-fashioned engineering consultant.

Between these two physical and ethereal extremes, is the middle-ground of creating the 'business bud' consisting of near finalised business template solutions to be offered to external parties. Whether to VM manufacturers, niche players, automotive orientated holding companies, possible new entrants and national governments. Seeking to effectively license the IPR of the whole or parts thereof, across: developmental R&D, vehicle solution, manufacturing solution, general or tailored general business case solution, retailing solutions, and essentially sitting at the hub of the spokes as a 3rd party client integrator:

That small leading edge of the automotive sector is a small but crucial part of the general revitalisation of broader geo-economic systems, including: wholesale financing systems, consumer financing systems and through-life support systems. Seeking to both re-invent and evolve the automotive business much as Henry Ford and Alfred P Sloane did a century ago.

Standard & Poor's recently reported that 2015 may see a corporate financing crisis, which follows the previous banking crisis and present EU sovereign debt crisis. Over the next 4 years global industry faces a $43-46 trillion re-financing requirement sought from presently under-capitalised credit markets; the present funding gap being approximately $13-16 trillion. If avoided through injected capital (ie QE) and staggering of CapEx projects, then all good.

If however the Cassandra predictions evolve to be true, only those with sizeable balance sheets will survive and prosper; effectively a re-run of 2008/9.

Thus those vehicle producers possibly unable to raise required finance for business as usual activities may be forced to seek alternative business models, manufacturing processes and typically vehicle types.

The structural macro-economic changes that have and continue to take place between 2008 to 2012 and beyond will undoubtedly affect the micro-level auto-sector practices for all producers, big and small. Those that can grasp the challenges and form their own opportunities will forge a new path in the conventional low cost car and the emergent ultra low cost car when feasible.

Post Script -

The apparent Hindi / Indian word “jugaad” has been promoted in the western press and around conference of late, deployed to try and capture the spirit of the low cost car philosophy. But the word derives from the corrupt 'political fixing of things', and the ULCC ideology no doubt a big issue ripe for political corruption in itself. So one should be “on-guard” regards “jugaad”.

India should instead create its own new word, with positive connotation for the ULCC ideal.