Motor Mouth: The race for ‘cheap’ has gone too far

When did we in North America become members of the Third World? Are we not the hot bed of vehicular development, the crucible where all automotive technology is tested first before it is disseminated — cost-reduced because we the rich have paid the up-front costs — to less-affluent markets? When exactly did we become the repository for the hand-me-down and bargain basement?

I ask because The Truth About Cars is reporting that Nissan might base the planned revision of its Frontier pickup on some seriously second-hand technology. Although the report is pooh-poohed by no less than Car and Driver, the controversial website cites supplier sources that say the next “new” Frontier you buy at a North American Nissan dealership will not be based on its latest Navara pickup that the rest of the world will get, but on the D22 version of the Frontier — the platform that underpinned Nissan’s replacement for the Hardbody way back in 1997.

TTAC says the reason Nissan is abandoning the modern, fully featured mid-sized truck (typified by the current Toyota Tacoma and GM’s soon-to-be-released GMC Canyon/Chevrolet Colorado duo) is because the segment simply cannot sustain the increased prices — perilously close to the starting prices of full-sized pickups — that their increased sophistication demands. As far-fetched as the idea of recycling a decades-old platform may seem, the blogosphere seems convinced it’s a good idea, fans of the cheap and cheerful lamenting the high cost of small pickups these days.

The 2013 Nissan Frontier Pro-4X Crew Cab

The 2013 Nissan Frontier Pro-4X Crew Cab
, Justin Mastine-Frost

Nor is the Frontier Nissan’s only radical cost-cutting gambit. Japan’s second-largest automaker has created something of a tempest in a subcompact teacup with the introduction of its bargain-basement Micra, which features such retrograde technologies as a four-speed automatic transmission (the manual version has but five) and roll-up windows. Nothing about the Micra is new, but, with a starting price of $9,998, nobody shopping basic transportation cares.

And Nissan’s aggressive pricing does have the industry all atwitter. Oh, competing car companies have all come up with their “counter Micra” strategy — emphasize our warranty, point to our superior technology, etc. — but the truth of the matter is Nissan’s bold, bargain-basement pricing strategy has ruffled more than a few feathers. Mitsubishi’s Mirage has barely hit dealerships and the company is already offering special (i.e., temporary) $2,500 incentives that, hardly coincidentally, bring its subcompact’s price down to exactly, you guessed it, $9,998.

And Hyundai, long accustomed to offering the least expensive products in Canadian showrooms, has responded with incredible discounts on some of its smaller models. Dealers have been advertising a whopping $4,664 off base Accents and an even more incredible $5,614 discounted from a base Elantra’s price. The auto industry has long contended there’s little profit for dealers in small cars, the average margin in showrooms (before factory incentives and kickbacks, of course) barely more than $1,000. But we pundits have always assumed that, no matter what discount was offered, at least the manufacturer and its importer were making money, there being some cushion between landed cost (what Hyundai Canada paid for the car) and what the dealers paid for it. But $5,614 off what is only a $17,609 car seriously challenges that assumption, there seemingly being no way anyone in Hyundai’s food chain can make money with that discount.

In an effort to compete with ever-decreasing prices in the small car segment, Hyundai dealers have been advertising a whopping $4,664 off base Accents and an even more incredible $5,614 discounted from a base Elantra's price.

In an effort to compete with ever-decreasing prices in the small car segment, Hyundai dealers have been advertising a whopping $4,664 off base Accents (shown above) and an even more incredible $5,614 discounted from a base Elantra’s price.

More importantly, could these discounts be tacit, if only temporary, admissions that the industry’s entire modus operandi of ever-increasing levels of automotive sophistication — with the attendant increased sticker prices — is under threat? We’ve seen more and more of this vehicular recycling in recent years. Volkswagen made a huge splash with its City version of the 2008 Golf and Jetta, offering its subcompact at the then-unheard-of low price (for VW) of $15,300/$16,900, mainly because it was powered by a 2.0-litre engine only slightly younger than Phyllis Diller and rode on a chassis one generation older than what was being sold in Germany. Chrysler’s Crossfire was nothing more than a previous-generation Mercedes SLK in drag. Ditto for the company’s first 300 sedan, which ran on a recycled E-Class platform.

And could this be the start of some kind of bifurcation of the automotive market? Will the “haves” continue to luxuriate in their BMWs and Mercedes that are completely reinvented every five years because the top 10% can afford to indulge their whims for the latest and greatest while the rest of us see automotive development slow to a crawl, our “new” cars nothing but the same old, same old dressed up in fancier clothes, with a few air bags thrown in to keep the safety nannies quiet?

The automotive industry already struggles mightily to keep manufacturing costs under control. There’s an almost incestuous amount of co-production as manufacturers try to outsource development costs — Infiniti will soon be manufacturing Mercedes GLAs, Subaru of America makes Toyota Camrys and no less than archrivals GM and Ford are co-developing new 10-speed automatic transmissions. Modularity is another industry mantra — Volkswagen, for instance, hopes to build all the cars in its vast portfolio on just three platforms — as all try desperately to keep the price per part down to a minimum.

Old technology — like bringing back a pickup almost 20 years old — must be every bean counter’s dream. Paid-for infrastructure, platforms and powertrains make an awfully compelling argument to automakers struggling to match discounted pricing with profit-making manufacturing costs. Whether TTAC’s report is truthful or not, I suspect we have not yet seen the end of the extreme pressure on automakers’ bottom lines.

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About David Booth