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China dominates in list of world’s cheapest cars

In the market for a brand-new, no-frills ride for less than $4,000? No problem — at least, not if you live in China.
The Daihatsu Sirion and it's 1 liter engine will set you back $12,315 plus the charges to import it -- you can buy them in New Zealand.
The Daihatsu Sirion and it's 1 liter engine will set you back $12,315 plus the charges to import it — you can buy them in New Zealand.Daihatsu
/ Source: Forbes

In the market for a brand-new, no-frills ride for less than $4,000? No problem — at least, not if you live in China. The country is home to the cheapest car in the world, the very basic Jiangnan Alto, powered by a 0.8-liter, three-cylinder engine and selling for a mere $3,785.32 (25,800 yuan).

If China is a bit far from where you'd planned to purchase a car, not to worry. There is a plethora of cheap cars available around the world, especially in developing countries. The cars aren't particularly flashy but should serve the purpose of easy transportation from Point A to Point B. How do we know? We've seen many of these cars before, it turns out.

The Jiangnan Alto is roughly the same car that's the cheapest in other parts of the world, including India (Maruti 800) and Chile ( Suzuki Maruti). All these cars are, "essentially, a 1980s Suzuki Alto," says David DiGirolamo, head of JATO Consult at JATO Dynamics, a U.K.-based research and analysis company that provides a broad range of data on the global auto market.

"This car paid back its design and development costs many years ago, allowing it to now be sold at a lower cost than a more recently developed car," DiGirolamo explains. "It usually takes a few years for revenue from sales to repay the development costs of a new car."

Not all the cheapest cars in the world are Suzuki Altos, of course, but most of the world's cheapest rides are found in the developing or economically weaker countries in their respective regions. In Asia the cheapest cars are all found in China; in North America, they're in Mexico; in South America the cheapest cars are in Chile; between Australia and New Zealand, the cheapest cars are in the latter; and in Europe the cheapest cars are in Russia.

Behind the numbers
To develop our list of cheapest cars, we divided the world into the five aforementioned regions and used prices for new cars supplied by JATO, which tracks auto data in 43 different countries.

Just because a car is cheap doesn't mean it's bad, as there are many factors that can push down vehicle prices. In nearly 50 percent of the regions with cheap cars, the vehicles are produced in the same market in which they're sold, which reduces shipping costs and eliminates import duties.

This is the case in China, Russia and India, says JATO's DiGirolamo. Also, many of the vehicles on the list have smaller, three-cylinder engines, which are generally less expensive to produce because of fewer components and less raw materials.

There's also less of a used-car market competing for sales.

"In developing markets, the availability of used cars is much lower, creating the market opportunity for low-cost new cars," says DiGirolamo. "The U.S. has a ready supply of cheap cars, but they are used cars, not small, low-powered and poorly equipped new cars."

So while buyers in Western Europe, Australia, New Zealand and the U.S. with $5,000 to $10,000 to spend can buy a used car relatively easily due to plentiful supply, that's not the case in developing markets like China, says DiGirolamo.

"The market five years ago was much smaller than it is today, but there are still buyers with between $5,000 and $10,000 to spend on a car," he says. "That demand is being met by new small cars with small engines and limited equipment, because there isn't an alternative."

"Cheap" is relative
In markets with strong used-car markets, like the U.S. and New Zealand, it is impossible to find new cars priced below $10,000. That's why the region with the highest-priced cheap cars is Australia/New Zealand — and in New Zealand, prices run even higher, since cars aren't manufactured there. They're shipped in.

The Japanese-made Daihatsu Sirion hatchback sells for $12,315 (15,990 New Zealand dollars), or about $1,800 more than the cheapest car available in the U.S., the $10,890 Kia Rio. The modern, well-equipped Holden Barina ranks No. 2 at $13,085.70 (16,990 NZD). The car also sells as the Chevrolet Aveo in the U.S. ($11,460), as Holden is a General Motors company.

But the Rio and Aveo aren't the cheapest rides in North America. To find those, car shoppers will have to cross the border into Mexico for the Faw F1, a 1.0-liter hatchback made by China automaker FAW Group, which sells for $7,300.91 (74,900 pesos). While none of Mexico's cheapest cars are Mexican brands, the cars are manufactured there by foreign auto companies, including GM and Ford Motor (nyse: F - news - people ), which helps keep prices low.

The cheapest cars available in Europe are found in the Russian Federation. The Seaz Oka hatchback, which sells for $6,446.90 (149,900 rubles), is made by the Russian manufacturing plant OAO SeAZ (Serpukhov Motor-car Factory). From there, the prices leap a couple thousand dollars to imports — the Korean-made Daewoo Matiz (No. 4), which sells for $8,257.53 (192,000 rubles), which is also available in Mexico as the Pontiac Matiz.

But the cheapest car in the world has yet to be built. Earlier this year, Tata Motors announced plans to roll out the four-door Nano. Price tag? About $2,500. The car is basically a set of wheels and a steering wheel, enough to get a huge segment of the Indian population into a motor vehicle. The air-conditioned version will likely cost $4,000, auto analysts say.

And therein lies the challenge with cheap cars. Once you start adding on comfort and conveniences, safety features and more powerful engines, the price goes up considerably.