TEXT OF INTERVIEW

Scott Jagow: All week, the car industry has been admiring itself in Detroit. But tomorrow, the International Auto Show opens to the public.

This year’s theme has to be green — hybrids, plug-ins, recycled cars, you name it. Plus, the one car that’s not at the show, the $2,500 Tata Nano, is getting tons of hype, too.

Let’s bring in David Welch. He covers the auto industry for Business Week magazine.

Jagow: David, let’s start with the fuel efficiency — is this all about the coming government standards or about car companies changing their business model?

Welch: It’s both, and here’s why. With gasoline selling at $3 a gallon and above, all the companies realize that CAFE increase or no CAFE increase, the market is changing. You’re going to lose buyers if you’re the one who is late to the party. And then of course long term, they have to downsize — V8s will become V6s, six-cylinders will become four-cylinders, because they simply have to meet the regulations for the law.

Jagow: Now if we’re talking about downsizing, we have to talk about the Tata Nano… What do you think of this thing?

Welch: There are a lot of really interesting things about this car. One is, the $2,500 car can’t be sold in Western markets. It simply will not meet U.S. or Western European safety and emissions regulations. But could a company like Tata, which has very cheap engineering and labor costs, could they make a $5,000 or $6,000 car and sell it in the States? Sure.

The other question is, will Americans want a car like that? Even a $5,000 or $6,000 that meets U.S. regulations, you’re talking about something that is very, very basic transportation. The Nano has, I think, a speedometer, a fuel gauge and a “check oil” light, and that’s about it. We’re a technology society now — we love our gadgets.

Jagow: So we’re probably not going to see people driving a Nano while listening to their Nano any time soon.

Welch: (Laughs) That’s a good way to put it.

Jagow: The auto show will open to the public tomorrow — if somebody’s going to go, what do you think they should try to see?

Welch: You know, it’s not a show that has a lot of big dream cars. But if that’s the sort of thing you’re into, I would check out the Lexus LSA Roadster. It’s a concept car, but it’s sort of Lexus’ answer to a Ferrari. It is a really gorgeous car. I would look at GM — they’ve got a Cadillac CTS Coupe, the two-door, that is simply stunning. And one of my favorite picks of the show is the BMW 1-series convertible. The car not only looks great, to me it’s sort of where part of the luxury market is going. Even Americans are now going to have to decouple the words “luxury” and “large.”

Jagow: All right — David Welch of Business Week magazine. Thanks for joining us.

Welch: Sure, thanks for having me on the show.