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Old 29th February 2008, 23:38   #1
srh
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Default When would Tata/ Mahindra be THERE?

Carrying forward from another thread (Captiva Launched) where an off topic discussion was happenning on why Tata and Mahindra are not on par with the world's leading automobile manufacturers. Thought that this might be a separate topis for discussion in itself. Her are my thoughts.

The automobile business is not only about technology. It is about economics too.

On technology front, one cannot accumulate in 10-15 years the same learning that another company might have in 50 years. This is true for product dsgn as well as mfg technology. You can get outside help in product dsgn to some extent, but it is difficult to get outside help in mfg practice. Even in the product dsgn space, you will get help in designing sub-systems (engine, geartrain, braking, electronics) But a OEM still has to integrate these sub-systems into a package.

Companies like Toyota,GM,Suzuki,Fiat etc. sell cars around the world and have economies of scale and hence afford to put on more sunk cost in their product development. A company like Tata or Mahindra cannot do that. Their low cost of development (being in India) is negated by the low volume to some extent.

They even cannot penetrate other markets overnight and start selling globally in huge numbers. Even a company like Toyota has taken so long to catch up with GM in the numbers game. I would also like to quote Ratan Tata who said that even if the Nano has potential to sell in millions around the world, Tata Motors by no stretch of imagination would have resources to crank out those many cars.

This is a marathon and not a 100m sprint. Building capability and capacity is a long drawn activity. And I am sure that 20 years down the line, an Indian company will be up there near the top. What say guys?? cheers:
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Old 29th February 2008, 23:51   #2
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Yes! I too wish there could be an Indian company at the top. TATA's learning has been pretty fast. There are already cars exported from India like the Alto, the Santro(Atos) and now the i10. India is also one of importers for automobile spare parts. It is only a matter of time till they get there. When we have TCS and TechMahindra serving global customers, why not Tata Motors and M&M? But I would prefer if our companies focus on bigger vehicles of higher quality rather than Nano/Indica for export. They also have to move away from the VFM image that they have in India.
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Old 1st March 2008, 08:38   #3
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As long as the import duty structure gives Indian manufacturers a huge cost advantage over Foreign brands, they can continue to sell sub-par products and many of us buy it because a comparable SUV from Ford, Toyota, remains outside our budget.

They only way to force indian manufacturers to get there is by leveling the duty structure and not to give them an undue cost advantage. Even if import duties came down to about 25% I think it will hurt the Indian manufactures as most people will pay the premium for better quality.
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Old 1st March 2008, 10:16   #4
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Quote:
Originally Posted by 4x4addict View Post
As long as the import duty structure gives Indian manufacturers a huge cost advantage over Foreign brands, they can continue to sell sub-par products and many of us buy it because a comparable SUV from Ford, Toyota, remains outside our budget.

They only way to force indian manufacturers to get there is by leveling the duty structure and not to give them an undue cost advantage. Even if import duties came down to about 25% I think it will hurt the Indian manufactures as most people will pay the premium for better quality.
Foreign manufacturers should take the business risk and roll out competitively priced local manufactured SUV's. No one is stopping them from doing that. India today does have the manufacturing eco-system and appropriate regulatory environment. I am sure that they will be able to garner sufficient numbers. You cannot have your cake and eat it too. The commitment to the market needs to be demonstrated rather than just adapting LHD models for RHD driving.

And not all pricing decisions that foreign manufacturers take are because of customs duties. If a model sells at a price 'x' in the US market, the cost price may be around '0.6x' (other '0.4x' being taxes/margins/warranty and customer service costs). When this model is imported into India, they pay tax only on the '0.6x' which at 100% duty might take the cost to '1.2x'. Add Indian taxes, margins, warranty and customer service costs, the final price should be '1.6x' and not '2.5x'. They clearly have a skimming strategy and want to address only the top end of the market.
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