Small Car Battle Heats Up

Phil LeBeau | @Lebeaucarnews

Published 9:29 AM ET Mon, 4 Jan 2010 Updated 10:39 PM ET Wed, 17 March 2010 CNBC.com

It may be halfway around the world from Detroit, but the auto expo this week in New Delhi, India is in many ways a far more important than the one we'll see next week in Detroit. Perhaps that's the reason so much of the world's press is focused on the slew of small and electric cars that will be unveiled in India. Reporters are handicapping who has the best shot to win over the hearts and minds of an Indian auto market primed for a major expansion.

For those of you dismissing the rising importance of India or who fail to see why we should care about the small cars being introduced in New Delhi, it's time to wake up and realize this is the next great battle ground for auto makers. Ten years ago people shrugged their shoulders about the China auto market. No more. It's now #1 and continuing to grow quickly. India is on the same trajectory and well over two thirds of the cars sold will be small models.

Source: autoblog.com

Tata Nano

It's the reason almost every major car company will be showing a new compact car, some will even be entry level models designed to fight Tata's $2,500 Nano.

India's middle class is increasingly getting the family off the scooter or motorbike and piling into a compact car. Ford hopes they'll climb into a new Figo. GM is betting on the Spark to do the same.

So why should the people in Detroit, or anywhere else in the U.S., care about the "small car" boom in India? Mainly because the winner, or winners, will be the companies that learn to make a profit off the razor thin margins that go with these cars. If GM, Ford, and Chrysler are going to thrive in the future, they'll have to do it in part through small cars.

So while many of us will get worked up about the new models being shown in Detroit next week, remember this: the real battle to watch is halfway around the world. Profiting on pint size models is the new goal.