One of the primary challenges to my venture concept is that there is an increasingly large presence of new and used car dealers throughout Asia and other areas in the developing world. Large auto manufacturers are also building cheaper, smaller cars that are specifically targeted for these markets. Horizontal strategies which once targeted only the economic elite with offerings similar to those available in Europe and North America have transitioned to vertical strategies which extend to models positioned below those in American markets. An Indian carmaker Tata has developed a cheap car called the Nano which has been a sales success. According to the Indian based used car marketing site I found, a five year old Tata passenger car can be purchased for as little as $5k in equivalent US dollars.
Interestingly, Tata’s business model has become such an enormous success that it recently took ownership of Jaguar and Land Rover, a group of luxury British car brands. Although the association is only financial at this time, it’s clear that makers of small cars targeted towards the developing world are morphing into serious businesses. Similarly, the Chinese government is requiring foreign automakers to partner with Chinese auto companies if they wish to have an engineering and sales presence in China. This has created a number of partnerships which may leverage historic engineering knowledge with China’s enormous manufacturing capabilities. They are also beginning to produce commercial vehicles.
My original cost estimates would allow a wrecked compact American market car to be rebuilt for $2.5k or less. While this model is still very competitive the economics may become more sensitive over time. As a possible alternative, I want to begin researching how the model of rebuilding damaged cars might benefit from focusing on locally produced vehicles. As the number of cars on the developing world’s roads increases, presumably accidents and secondary parts markets will follow suit.
One advantage in targeting small businesses is that they require more space and a larger payload not offered by cars such as the Nano. The educational aspect is also a key element which I need to further develop. Although it may be possible to get government support for training mechanics, these governments are increasingly funded by the burgeoning local auto makers. At this time my venture concept would only be indirect competition, however the discussion of developing a competitive business model and market strategy in this week’s readings made me consider some of the potential risks and considerations that significantly alter the course of my venture concept.
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