INDIAN AUTOMOBILE INDUSTRY

In the post globalized era where India is looking at growth rates of more than 8%, one of the main
beneficiaries of Indias growth story is Automobile Industry. Termed as Industry of Industries by
management guru Peter Drucker, Automobile industry has been one of the indicators of a countrys
economic prosperity. Prior to the 1991 liberalization, auto industry in India was controlled and
licensed by the government. Post 1991, the industry has grown at an average rate of 17%. Currently
contributing to around 5% of the GDP, this is expected to rise to 10% of GDP.

Company profile
Headquarters - Mumbai.
TML is currently headed by Ratan Tata.
Tata Motors manufactures HCV, LCV,

Passenger cars, MUV and Military Vehicles.

Global operations - UK, South Korea, Thailand and Spain.

TML - world's fourth largest truck manufacturer. worlds second largest bus manufacturer.
SEEDS OF DREAM
I observed families riding on two-wheeler the father driving the scooter, his young kids standing in
front of him, his wife seated behind him holding little baby. It led me to wonder for such a car which
is safe & affordable to any middle class family.
Competitors

1. Maruti Alto 800

Price: 2.44 - 3.56 lakh
Mileage: 22.74 Kmpl

2. Hyundai i10

Price: 3.69 6.15 lakh

Mileage: 20.36 kmpl

3. Hyundai EON

Price: 2.73 - 3.76 lakh

Mileage: 21.1 kmpl

What makes it so cheap?

Uses plastics and adhesives rather than welding

Introduced the car with an artificially low price through govt-subsidies and tax-breaks

Uses vertical-integration, or partially inexpensive polymers or biodegradable plastics instead

of a full metal-body

No AC, no power steering, no power windows, no power bells and whistles

Single windscreen wiper instead of the usual pair

3 lug-nuts on the wheels instead of the statutory 4 nuts, 1 wing mirror

Why Not West Bengal?

Tata was given 997 acres of land, acquired by the state government under the Land
Acquisition Act of 1894

645 acres is for the mother plant

290 acres for a vendor park which will host various ancillary units for the Nano

60 acres are with some state government agencies

ISSUE: Vendor park to be moved elsewhere and the land returned to the farmers

PROBLEM: Economics of the project won't work if the ancillary units are moved out

Why Gujarat?

Gujarat State Government

Soft loan: Rs 9,500 crore @ 0.1% rate of interest for 20 years

Existing policy: 85 per cent recruitment of locals not applicable

Strategic location advantage Rajkot, Pipavav, Mundra

Stamp duty waiver granted

Facilities for solid-waste disposal and effluent treatment plants to be developed by the
state government

100-acre land near Ahmedabad to build the township

Uninterrupted power connection of 200-KW

14,000 cubic meter water per day

DMIC passing 2/3 through Gujarat & proposed SIR

Committee headed by the Chief Secretary to monitor the proper implementation of

the project

Tata Motors

Tatas promise to invest Rs 4,000 crore in Gujarat.

Vendor development

Divided components into 2 types

Proprietary designs - Designed by established suppliers like Bosch

Tata motor designs - Chose suppliers with strong process capability that
contributed with valuable suggestions to improve on design

> 97% local sourcing, and 90% of the total car is outsourced

Consolidated suppliers from 600 to 100 - 75% single sourced components

Vendors were co - located with Tata in the same vendor park

Instead of annual contracts, Tata signed long term volume contract with vendors to
reduce cost

Supply Chain Model

Tata simply "focused on the supply chain" to meet the price expectations

Setting the price and working backwards required a fundamental shift in the way a
car was designed

many parts rather than technical specs

This approach tapped the ingenuity of the supply chain, where vendors delivered
parts that met the functional requirements and at extremely low prices

Another cost cutting strategy was their distribution channel: Hub & Spoke

City Dealers act as hubs

Reach to semi-urban and rural areas spokes

600 retail outlets

Supplier cluster around the plant in the same vendor park

Open Distribution Mobilize large no. of 3PL to reach rural areas

Increased modularity in products and processes

Built long term personal relationships with vendors

Innovation in manufacturing processes done locally to avoid extra costs

The Strategy

Tata divided the components into two types proprietary designs and Tata Motors
design. For proprietary design components. Tata went with established suppliers such
as Bosch which supplies the engine management system and has significantly
contributed to the future diesel engine.

For components and systems designed in-house, Tata Motors chose suppliers with
strong process capabilities who could give valuable suggestions and improve on the
designs. Nearly everything has been sourced locally and the Nano will have 97% local
content from day one. Tatas suppliers were an integral part of not only the design and
development process, but also purchasing.

SUPPLIERS TO TATA NANO

1. Bosch

8. Freudenburg

2. Caparo

9. GKN

3. Continental

10. Itw Deltar

4. Delphi

11. INA

5. Denso

12. Johnson Controls

6. Fag

13. Mahle

7. Ficosa

14. Saint gobain

8. 15. TRW
9. 16. Ceekay
10. 17. Vibracoustic
11. 18. Visteon
12. 19. Z.f (friedrichshafen) A.G
13. 20. Behr

BOSCH: A German based automotive company.

It supplies Gasoline injection system, starter, alternator, brake system.

Caparo Vehicle Technologies (CVT) : A Europe based company.

it supplies Inner structural panels.

Continental motors: it is a Europe based company.

It supplies fuel level sensor, gasoline fuel supply system.

Delphi: an automotive parts company headquartered in Troy, Michigan, USA.

It supplies instrument clusters.

Denso: a global automotive components manufacturer headquartered in the city of Kariya,

Japan.

It supplies Windshield wiper system.

FAG: A German based company manufacturing ball bearings.

It supplies rear wheel bearings.

Ficosa: It supplies Rear-view mirrors, interior mirrors, manual and CVT shifters, washer
system .

Freudenberg: a town in the, in North Rhine-Westphalia, Germany.

It supplies Engine sealing.

BEHR GmbH & Co: German corporation

It supplies engine cooling systems and HVAC for the luxury version.

ZF Friedrichshafen: a town on the northern side of Lake Constance in southern Germany,

leading worldwide supplier of driveline and chassis technology.

It supplies Chassis components, including tie rods

Vistoen: a U.S based company.

It supplies air induction system.

Vibracoustic: it supplies Engine mounts.

TRW: an American corporation.

It supplies break systems.

Saint-Gobain: a French multinational corporation, headquartered on the outskirts of Paris .

Originally a mirror manufacturer, it now also produces a variety of construction and highperformance materials.

It supplies glazing.

Mahle GmbH: a german based company headquartered in Stuttgart.

it supplies Camshafts, spin-on oil filters, fuel filters and air cleaners .

Illinois Tool Works (Itw): a U.S based company.

It supplies Outside and inside door handles .

Johnson Controls: a U.S based company.

It supplies seating systems.