What India lacks in infrastructure it makes up for in engineering talent and resourceful enthusiasm. In this first of two reports on the region, AMS looks at Tata Motors and talks to Eric Vas about the manufacturing challenges of this rapidly growing market
As one drives through the streets of Mumbai, the ‘progress map’ of India’s automotive industry is almost laid out in moving sculpture on the roads. Bicycles and overloaded, motorbikes, often with a family of four aboard, wobble and dodge their way along rutted and potholed highways and tracks. Next up are the Bajaj three-wheeled taxis, then the 1950s Fiat-design Premier taxis, followed by a mix of Tatas, Maruti Suzukis, Mahindras and imported cars, as well as Indian-made and imported trucks.
These are roads lined with tiny repair shops, sometimes a single man sitting at the side of a dusty track with a tyre pump and some repair patches for the common tyre punctures caused by the rough roads and abundant debris. Look a little deeper, however, and you will discover the Indian culture of tremendous resourcefulness, of interest in machinery and equipment – something that translates into a burgeoning skilled and semi-skilled automotive workforce, keen to train and learn about modern manufacturing technology.
Together with its tremendous growth, by development and acquisition, Tata is a company that exemplifies the Indian auto industry, and as such, will be the focus of this review.
The pace of change at Tata Motors is rapid – and accelerating. The launch, in January, of the world’s lowest-cost car – the Nano – was followed less than three months later by an agreement on the acquisition of two of the world’s most upmarket brands: Jaguar and Land Rover. The company is imminently launching a world truck in Korea, together with the expansion of three existing plants, and with four new plants planned in new locations. When company Chairman Ratan Tata launched his dream low-priced car, the Nano, at the Auto Expo 2008 in New Delhi, it changed forever the rules of the auto industry. At the beginning of the 1990s it was a different story. Around the time the Indian government scrapped the licence regime and began opening up the economy, Tata Motors was in a very vulnerable position. Its only business was trucks, and the trucks it made had undergone little technological development. Foreign carmakers with deep pockets could have made inroads into Tata territory; and the Indian company did not have the funds within Tata Motors to consider moving into markets outside India. To make matters worse, the then scope for growth in India was severely limited, Tata Motors already having an overwhelming share of the commercial vehicles market, a sector notoriously more vulnerable to the turbulence and uncertainty of business cycles. The company had to break out of this trap.
When Ratan Tata suggested making cars as a way out, many analysts got all set to write off the company; a truckmaker could not and should not be making cars. Today, after the resounding success of the Indica, two other cars on the Indica platform, and the new Nano, nobody questions Tata Motors’ ability to compete in the car market.
The company’s recent successes have not been borne out of simple luck. They have been built on a foundation of engineering talent that was systematically built over decades, matched by a determination to do whatever it takes to be among the best in the global market.
The challenges of the past decade have been very different from those of the earlier years. Since the 1990s, when the Indian market was opened up for potential investment, about a dozen global automotive companies have driven into the country; most of them launching models before Tata Motors could introduce the Indica, its first passenger car, in 1999. Volvo has introduced its trucks here, and it is only a matter of time before other global truckmakers enter the attractive Indian market.
Tata’s acquisition of Jaguar Land Rover needs to be seen not merely in terms of the prospective cash it will generate over the years (which is, of course, important), but also from the point of view of the substantial intangible benefits it will bring to Tata Motors, the most important of which will be the opportunity to transform itself into an advanced automotive business with global competencies. Look at it this way and you see no contradiction in the company trying to straddle an entire industry, stretching from its inexpensive small cars, to the global brands of Jaguar and Land Rover. It would be a mistake to see the strategy as one of making products for diametrically opposed market segments; what the company is doing is building the competencies to offer products across the whole market. The high-end acquisition may be the most glamorous event yet; but the action thrust of the future will have to come in the mass markets and in new areas such as alternative fuel vehicles; it is an area where Jaguar Land Rover is ahead of the curve, with anticipated vehicles such as the LRX.