• The Wall Street Journal, Monday, October 22, 2007 11:30 AM

As gas prices rise, small, low-cost cars have abruptly become the next frontier for the global auto industry after almost 20 years in which major carmakers dismissed such vehicles as a low-profit afterthought. Demand for small cars is expected to grow by 30% by 2013, mostly from developing markets, according to auto research firm CSM Worldwide. Demand for SUVs is expected to drop 4%.

Tokyo-based Nissan has embarked on a particularly aggressive strategy. Nissan--whose fortunes surged on its big SUVs and high-performance sports cars--is trying to reinvent itself as a maker of low-priced "entry cars" aimed at the developing world's hordes of first-time drivers. Nissan says it plans to offer a stylish car for $7,000 to $10,000 as early as 2010, then will try to get its starter price down to $5,000.

Carlos Tavares, the 49-year-old Portuguese executive who is leading the charge for Nissan, insists that a new low-cost car retain what he calls the "emotive" design of more upscale vehicles. It's important that an entry car not be seen as the "emerging market car," Tavares says, but something that makes owners feel like they've entered the middle class.

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