Deflation

by on April 18, 2007 at 1:15 pm in Economics | Permalink

When Tata made its vow to build a $2,500 car, many Western auto executives ridiculed the project, dubbing it a four-wheel bicycle.  They aren’t laughing anymore.  Tata’s model is a real car with four doors, a 33-horsepower engine, and a top speed of around 80 mph.  The automaker claims it will even pass a crash test.

That is from Business Week, p.45, 23 April 2007, here.  Here is another analysis, the car probably won’t be sold in America.  According to one estimate, meeting safety regulations would alone cost more than $4000.

1 James Balmer April 18, 2007 at 2:47 pm

Reminds me of “Porsche’s Revenge” the 2CV

2 Paul Botts April 18, 2007 at 10:24 pm

“According to one estimate, meeting [U.S.] safety regulations would alone cost more than $4000”

Actually no — that article quotes an estimate of “up to” $4,000 to “meet U.S. safety and emissions regulations, transport it, pay tariffs, market it, pay lawyers and offer warranties.” So the cost of meeting U.S. regs might be $3,000, or $300, or something in between which we have no particular guess of.

3 Laurent GUERBY April 19, 2007 at 2:04 pm

Paul Botts, it’s probably the price to pay for government sponsored monopolies in the form of intellectual property (a massive intervention in the otherwise free markets) that’s the source of most the cost.

The car as is would probably pass all safety regulations without a single change.

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