Tata Nano

Introduction: What is the Essence of Growth?

In 2001, Jim O’Neill, Chief Economist of US Investment Bank Goldman Sachs, issued a report called “Building Better Global Economic BRICs.” This report pointed out the medium to long-term possibilities of non-G7 economies for the global economy, bringing considerable attention to the business opportunities presented by emerging economies. Indeed, the term “BRICs” (Brazil, Russia, India, and China) has become synonymous with countries that have emerged1 after the countries for which the term was coined. The original BRIC nations have entered the top 10 world economies on a scale comparable to the G7. Furthermore, while financial turmoil continues in the wake of the collapse of Lehman Brothers, with advanced economies unable to dispel concerns over the prospects of a “double dip,” expectations for these emerging markets increase even more every day.

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Figure 1: Growing new car markets of BRICs after 2000

Souse: Scotiabank Group (2011)。

The same expectations are true for emerging markets in the automotive industry as they become increasingly prominent in this industry. Figure 1 shows the transformation in the structure of global demand since 2000. In 2000, markets in Europe, North America (not including Mexico), and Japan were the three pillars of global demand, accounting for 80% of total demand. At the same time, markets in these emerging BRIC nations were only getting started in 2002; by 2007 they still had reached only half the scale of developed markets. This suggested that once they had built up their competitive advantage in developed markets, Japanese automotive manufacturers still felt that there was room for them to maintain corporate strategies that focused on developed nations. However, since 2007, the financial turmoil that had engulfed these developed nations has completely transformed the market, significantly depressing demand. Because the impact of this financial crisis on emerging nations has been...