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Cheap Cars Expected To Flood Emerging Markets

After years of making their mass-market cars more expensive, the world's automakers are suddenly designing cars for buyers who might otherwise be able to afford only a motorcycle. The trend is driven by a quest for new opportunities in emerging markets, as growth stagnates in the U.S., Europe and Japan.

Renault-Nissan is the first global automaker to take up the gauntlet thrown down in 2003 by India's Tata Motors, which plans to launch a $2,500 car next year. The automaker began offering the roomy Logan in Europe for just $7,200 in 2004--some 40% less than rival sedans. A $3,000 car for Asian markets, built in low-cost India with a local partner, is the next logical step.

The majority of low-cost cars will range from $5,000 to $10,000, depending on size and features, analysts say. There's no lack of potential customers: Hundreds of millions of Chinese, Indians, Brazilians, Russians and others will likely join the middle class in the coming decade.

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