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.
India has begun an ambitious development programme for its automotive industry, which it hopes will make it a global production hub by 2016. The initiative, which is backed by both the government and by the existing automotive industry, relies on heavy investment both by domestic operators and non-Indian car companies. Many foreign fi rms are eager to participate in the likely profi ts to be derived both from the growth of the Indian market and from the development of India as a major producer and exporter of cars, motorcycles, commercial vehicles and automotive components. Here is an overview of the relatively slow, albeit increasingly rapid, emergence of India’s automotive industry:
1940s
An embryonic automotive industry emerges in India.
1953
Efforts to create a manufacturing industry to supply the automotive industry with components get underway, spearheaded by the Indian government and leading entrepreneurs.
1970-1980
India’s automotive industry begins to grow relatively fast, fuelled by six automotive companies: Telco (now Tata Motors) Ashok Leyland Mahindra & Mahindra Hindustan Motors Premier Automobiles Bajaj Auto However, having a car is still seen as a luxury. This is at least partly because the sector’s growth is held back by requirements for production licences and restrictions on both production within India and on imports.
1980-1985
Japanese manufacturers begin to build motorcycle, car and commercial vehicle factories in India, often in partnership with Indian firms. Component manufacturers also enter into joint-venture agreements, with European and US firms. Exports start to grow.
1985-1990
The auto component sector, which had been protected by high import tariffs, squares up to competitors as the rules are changed. Maruti Udyog enters the passenger car segment. During the following years, Japanese manufacturers started selling motorcycles and light commercial vehicles.
1990-1995
Economic liberalisation gets underway, allowing passenger car production without licences, though import restrictions remained in place. Hero Honda emerges as a major operator in the motorcycle market, while Maruti Udyog becomes the leading passenger carmaker.
1995 to 2000
International carmakers enter the Indian market, a trend that accelerates. Advanced technology is introduced to meet competitive pressures, and environmental and safety imperatives. Automobile companies start investing in service network to support maintenance of on-road vehicles. Auto financing starts emerging as an important driver for demand.
2000-present
Liberalisation of the automotive industry gets underway, with the removal of many trade and investment restrictions. Cars developed and produced entirely in India for both the domestic and exports markets emerge. Financial services firms begin to offer car loans, in cooperation with the car industry. Efficiency, capacity and environmental issues are identified, along with initiatives aimed at encouraging research and development to address such issues.
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.
Turning Tata around
Tata Motors’ transformation from an Indiacentric truckmaker to a global auto company is a remarkable story that exemplifies the can-do attitude of India.
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.
New challenges
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.
AMS spoke to Eric Vas, Head of Corporate Planning at Tata Motors about many of the areas concerning carmakers, Tier suppliers and machinery suppliers in making cars in India.
AMS: Tell us a little about the carmaking landscape in India from Tata’s point of view?
Eric Vas: Typically, you need to be close to the customer to handle the complexity of differing lead times as production schedules keep changing – driven by the demands of an immature but enormously fluctuating market. And this is not through the lifecycle of the vehicle but monthly! India has been an explosive growth market for the last four or five years, and because of this, customer preferences in such things as trim and colour shift very rapidly. This is influenced by the actions of our competitors; you suddenly find your customers shifting preferences massively, forcing us to respond instantly.
This leads to needing very short supply chains. This is certainly true in passenger cars; in commercial vehicles it is much better as you do not have so much degree of change in specifi cation or customer demands in most component areas. As such, all automotive OEMS in India have tried to create clusters of tier suppliers around them.
So the trend has been to incorporate a supplier park in every greenfi eld site, typically around 40 per cent of the area of the production site is supplier park. This in part due to the logistics considerations; we have done this in three new greenfi eld plants that we have set up over the last three years. For example, at Pantnagar (280 kilometres north of Delhi) we have a 1,000-acre site, of which we have dedicated around 300 acres to a supplier park. This means a huge financial exposure for the OEM, paying for such things as the development of the site.
In West Bengal, 40 kilometres from Calcutta, where we are setting up the Nano plant, there we own the land and are leasing it to the suppliers. In Lucknow, where we are building our second heavy commercial vehicle plant, we own all the land, certain key vendors (suppliers) are on our land, but the site is an expansion of an existing plant that we bought in 1991, so the size is not as large as we might have wished. AMS: Are you multi-sourcing or are you committing to one vendor for each area of the vehicle?
Eric Vas: We take our suppliers with us. We believe the suppliers grow with us, if something goes wrong, usually the vendor can back up the supply from another facility. Our big focus is to keep the supply chain as short as possible. Logistics is a diffi cult area in India – it can take days to get a truckload through all the many borders, the roads still being very poor in some areas.
Another reason to keep suppliers close is to benefi t from the incentives given by local government for local development projects.
AMS: What are your challenges in supply – any particularly tough areas? Eric Vas: Given the logistical problems, access to good castings of heads and blocks of a consistent quality and delivery basis is very diffi cult. The second issue we have on powertrain is the constantly changing engine technology – India is still catching up in emissions engineering, we are probably running around two to two and a half years behind Europe in this area. In the next three years I think we will catch up, mainly as we have a pollution problem in the big cities and it makes good business sense for us to catch up as rapidly as possible.
Validation and testing is one of the growing areas as far as Tata is concerned, because we are designing and making our own powertrains.
Through our tech centre in the UK we are accessing a lot of European skills and expertise in this area, and we would aim to combine this expertise with what some in the auto industry call the frugal engineering mindset of India.
AMS: With regard to human resources in engineering and manufacturing, what are your challenges in recruiting and keeping engineers here in India?
Eric Vas: It is very difficult to get good people, it takes time for them to mature and become full design engineers, and that causes a capacity constraint for us.
AMS: On machinery and equipment – how much of what you buy is made here and how much imported?
Eric Vas: There is a lot of equipment that is assembled in India. We have a couple of international machine tool manufacturers who have set up here and you can buy moulding machines assembled here. Makino has two plants here, Heller has an association with an Indian manufacturer and so on. As far as the domestic industry is concerned, on metal cutting, Tier One and Two suppliers can buy equipment locally, but OEMs will continue to buy from abroad for a while, typically from Japan and Germany.
On stamping, there are some Indian press makers who are very good: ISGEC from near Delhi, which is able to supply tier suppliers with presses and the automation to drive them. But for Class A surfaces, the carmaker will typically do this himself using imported presses. Tata uses Hitachi and Müller Weingarten, and Schuler presses and Komatsu.
India is what you might call a ‘tandem’ country – there are very few modular or transfer presses in operation here.
AMS: Used machinery – what is the Tata view?
Eric Vas: We are happy to take older equipment and integrate, but for high-speed press lines, for example, you need to buy new in-tandem lines to get the speed you want, and the high capacity for the deep draw we want now on high-strength steels, tailor-welded blanks.
Generally, we are very happy using second-hand equipment as we can always marry it with the latest automation and control systems – you can go to say, robot manufacturers like Kuka and ABB and take old lines right up to around seven and a half parts per minute. AMS: What about the changing balance between automation and lowcost labour?
Eric Vas: In assembly we will certainly seek to use conveyors – the human body can only take so much speed as we reduce takt times. Many operations that are automated in say, Europe, are still manual here. Glass installation, for instance, is still pretty much manual here, unless the glass is too big and heavy of course. In that case we would bring in some sort of assistance.
Wheel and tyre assembly is still manual but this will follow as takt times come down. Lines like that of the new Nano plant will be 60 seconds, forcing you to automate.
Of course, another reason is for maintaining quality, especially in bodyin- white, and in arc and spot welding in high-volume plants, where we use robotised welding.
To really succeed in India, the auto industry has to use the tremendous advantages of our low-cost labour pool, the rapidly growing numbers of graduate engineers and managers, but always be ready to automate operations where it makes sense from a cost and quality point of view. In this way we can compete effectively with the high quality of imported cars and ready ourselves to export the best of India to the rest of the world.
Global reach
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.
