The Dacia Logan isn't much to look at, with an anonymous econocar exterior and a utilitarian interior with exposed screws and coarse grey fabric on the ceiling. The 90-horsepower motor pulls the Logan to more than 60 miles an hour in an unthrilling 11.5 seconds.
But one thing about the Logan is proving surprisingly exciting to consumers in a growing number of countries, and grabbing the attention of rivals: Its price tag. Starting at about $7,300 in Eastern Europe, and about $9,000 in Western Europe, the Logan has turned into a surprise hit for French car maker Renault SA.
Now rivals, including DaimlerChrysler AG and Toyota Motor Corp., are gearing up to counter Renault's apparent success at designing a conventional car that can be sold new for under $10,000. DaimlerChrysler Chairman and Chief Executive Officer Dieter Zetsche has said the company is in talks with potential Chinese partners to develop subcompacts for sale under its Dodge brand in the U.S. and elsewhere. Among possible partners is China's Chery Automobile Co.
"We have been in contact with DaimlerChrysler about this issue since March or April. The discussions are still ongoing," a Chery spokesman said.
For Western and Japanese auto makers, designing inexpensive -- but decent -- cars has once again become a critical task, as growth in richer markets such as the U.S. or Western Europe slows down. Now, the best opportunities are in fast-growing regions such as Eastern Europe, Russia, the Middle East, India and China -- all places where the average consumer has less to spend than the average resident of Germany or France.
The established auto giants also have reason to worry about upstarts that are making inroads in developing markets with their $4,000 cars. Many of these homegrown people's cars, like the Chery QQ in China and the Maruti 800 in India, often don't have the safety, performance and environmental technologies required in more developed markets.
But the Logan, launched in 2004, does offer such amenities, and some options such as power windows, air conditioning and a CD player. As a result, the car has become surprise hit for Renault, and potentially a prize should Renault and its alliance partner, Nissan Motor Co., attempt to link up with a third auto maker, such as General Motors Corp. or Ford Motor Co.
Last year, in the car's first full year of sales, Renault sold more than 145,000 Logans in 40 countries, mostly in Eastern Europe and the Middle East. Renault initially produced all of the Logans it sold in Romania, but it has since begun building them in Russia, Colombia and Morocco and plans to expand production to Iran, India and Brazil over the next few years.
As it tries to expand sales, the company also plans to add variants: a Logan station wagon called the Logan MCV that is expected to go on sale in Romania this month, possibly followed by a car-SUV crossover and a hatchback.
"It is a simple car in terms of equipment and materials," says Luc-Alexandre Menard, head of Dacia, the Renault brand that produces and markets the Logan. "But it's rock-solid and has set a new standard as an affordable new car for middle-class families in emerging markets."
Mr. Menard says that by 2010 Renault should be able to sell as many as 800,000 Logans. Renault sold 2.53 million vehicles in 2005. The Logan and its derivatives represent a significant piece in Renault CEO Carlos Ghosn's strategy to boost the company's global sales by 800,000 vehicles by 2009.
For Renault, the Logan is not just a car. It's a strategy. Mr. Ghosn says he plans by year end a complete makeover of Renault's image based on the car's success. He wants to give Renault a "new, more globalized identity" with the help of the new Logan lineup.
In designing the Logan, Renault from the get-go tried to "prevent technical people from adding features which are not considered absolutely necessary for the customer," said Renault's Mr. Menard. "We absolutely refused to put luxury in the car." This "design to cost" approach -- fixing a cost target and engineering the car to meet that target -- resulted in such decisions as using a relatively flat side window glass. Curved glass gives the car a sleeker look but costs more.
The Logan engineering team borrowed liberally from Renault-Nissan's existing parts bin. The Logan's platform, for example, is a modified version of the basic vehicle building block used in the Renault Clio and the Nissan March (called the Micra in Europe), among other subcompact vehicles.
Renault's intended audience was less affluent consumers in Eastern Europe. The company says it has been surprised by the enthusiasm for the Logan in Germany and France, where better equipped diesel-powered versions of the car can sell for about $13,000.
The Logan's success in Western Europe rattled rivals. After Renault introduced the Logan in Germany last summer, GM countered with a budget version of its Opel Corsa hatchback model without side air bags for under $13,000, compared with about $14,000 for the version with side air bags. Europe's biggest car maker, Volkswagen AG, tried to fight the Logan with the Fox-a compact model that costs under $12,000 and is assembled in low-wage Brazil, but the car has quickly turned into a money loser for VW as a result of an unexpected surge in the value of Brazil's currency relative to the euro.
The name Logan was chosen because Renault officials wanted one that "fits in any country -- a simple name, easily pronounced all over the world," a Renault spokesman says. In Europe, where the Renault and Dacia names are well established, the car is sold under the Dacia brand. In parts of the world where Dacia is less known or not very well regarded -- such as Russia, Iran and parts of Latin America -- the Logan is sold under the Renault brand. Mr. Menard says the Logan could be sold under the Nissan name in markets like Mexico, where the Japanese brand has a better image and bigger presence. There are no indications that the company has an eye on the U.S. market.
The Logan's early success is also raising eyebrows in Japan. Honda Motor Co. has said it is considering developing a highly affordable microminicar, a vehicle smaller than the Fit subcompact now sold in the U.S., for India and possibly other emerging markets.
Toyota President Katsuaki Watanabe, speaking at an investor meeting in Tokyo in September, said Toyota is exploring whether to develop a low-cost, emerging-market car of its own, inspired by the Logan's success and rapid growth expected in those markets. He declined to share a price target for the car but noted that Toyota is "aiming to come up with a ground-breaking car."
"We set up a project team last autumn and have been studying low-cost technology and manufacturing know-how," Mr. Watanabe said. "And little by little, we've made progress, and we're beginning to see light at the end of the tunnel."