Back to the future
Renault set to work designing a model with a $6,000 price tag from scratch. The key was a simple design that reduced manufacturing to basics and allowed for much of the work to be done easily by humans instead of robots.

Design engineers cut the number of welding points from 4,300 to 3,750, for example. The outfit spent $600 million upgrading the 40-year-old plant, which runs 24 hours. Compare that to the investment needed for a highly automated Western factory, which can easily run to $2 billion.

Of course, low labor costs are also crucial. In developing economies like Romania, cheap labor lets auto makers build modern models for prices that haven't been seen for 30 years.

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Human touch
The average worker gets paid $240 a month, plus some meal tickets. A June 17 Deutsche Bank report pegged production cost for the Logan at $1,089 per car, less than half the estimated $2,468 for an equivalent Western vehicle like a Volkswagen Golf.

"Humans sometimes offer an advantage when it comes to quality," says Simon Valin, a Spanish-born industrial manager at Dacia, who arrived from Renault's Argentina operations in 2002 to help ramp up the Romanian plant for the Logan. Valin insists that welding quality at Dacia is among the best at Renault. The engines and transmissions are produced on site in Pitesti, and they'll be exported to other Logan sites all over the world. Some 50% of components are produced locally, which is vital to keeping down overall costs.

Getting suppliers to move to Romania and produce in or near Pitesti was key to making the Romanian venture pay off. In the early months after Renault took over Dacia, suppliers were hesitant to come to Romania," says Renault Chairman Louis Schweitzer. But the French automaker's huge investment finally lured companies such as Continental, Valeo, and others.

World car
Valin picked up the pace in 2002, buffing engineering, quality, manufacturing, and safety processes for the Logan launch. Renault also invested heavily in technology where it was needed, especially in state-of-the-art quality-control and testing machinery.

There is one problem with the low-cost, high-quality Logan that no one anticipated. Runaway demand for the Logan in Western Europe has Renault managers scrambling to find a way to produce more of the cut-rate model quickly.

The company is now cloning its Romanian approach at low-cost Logan production sites around the world. A plant in Russia started operations in June, and Morocco and Colombia ramp up later this year, followed by Iran, India, Brazil, and China in 2006 or beyond.

Cheap rides
"You could call it 'viral manufacturing,'" says Christoph Sturmer, senior analyst at market researcher Global Insight in Frankfurt. "The cost and technology are so simple, and the car is easy to put together, you don't need robots. And the investment in manufacturing is relatively low, so you can have factories all over that don't have to produce huge volumes to finance themselves."

Renault's idea to blend ingenuity with simple manufacturing is an innovation that is already forcing rivals to change gears. Volkswagen is studying a concept to produce a small car in China for $3,600, and Indian automaker Tata Motor has said it may try to conceive a $2,400 car.

Those models are years away from hitting the market, though. When it comes to pioneering no-frill cars, Renault is setting the pace.

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