India's Nano to challenge global auto industry
Summary: India's Tata Motors announced that it will soon be taking orders for its low-cost Tata Nano. The company used computer models and simulations to significantly cut development costs.
Ratan Tata, chairman of the Mumbai, India-headquartered US$50 billion Tata Group, today realized his biggest dream, Tata Nano, since the company introduced Tata Indica in December 1998.
Commercially launched in Mumbai on Monday, the ultra-cheap small car, runs on a 624cc-rear engine and is likely to be priced at around US$2,000.
The Indian middle class, along with the global auto industry, have been awaiting the Nano since it was first announced in January 2008. "With the Nano, Tata has challenged the global auto industry...[and] created an absolutely new segment with this car," Abdul Majeed, auto analyst at PricewaterhouseCoopers, told ZDNet Asia in a phone interview.
The Nano, Majeed added, is a huge lesson for other, bigger global auto majors. "Companies today need to be agile. They can no longer afford to dump a product in a market," he said.
Dilip Chenoy, director general at the Society of Indian Automobile Manufacturers (SIAM), concurred: "Today, manufacturers have to develop customized products at a faster pace.
"The world has seen a huge shift from being a supply-oriented market, to one that is led by demand," Chenoy said in an e-mail interview. SIAM is an industry body representing vehicle and engine manufacturers.
More codes per car
IT plays an important role in reducing the cost of developing a vehicle, and India is emerging as a research and development (R&D) hub for the auto industry.
According to Majeed, India offers the best location for the development of low-priced cars. "Nano is good for India. It marks the country's coming of age."
Yezdi Nagporewalla, head of industrial markets at KPMG, agreed: "India offers four key advantages to global auto majors--lower costs of operation, availability of talent, especially in the IT space, ability to carry out tests over different [and tough] terrains and weather conditions; and a potentially large domestic market that can justify the R&D investment."
Chenoy noted: "India is emerging as one of the prominent destinations for global automakers to set up their R&D centers." In last few years, most OEMs have scaled up operations and made heavy investments in their Indian technical centers. "This has resulted in significant improvement in product quality and value," Chenoy added.
Rajdeep Sahrawat, vice president of Nasscom, said cars are increasingly becoming more software-driven. "For instance, the engine of a BMW [runs on] several million lines of code, and what better place to write that code than India," he said.
The auto company recently announced that its 2009 models will be equipped with the BMW Assist system, which was built to notify emergency personnel not only where an accident has occurred, but also the likelihood of passengers being severely injured.
Software is used to execute microprocessor-based electronic control units (ECUs) networked throughout the body of a car. Even low-end cars now come with ECUs embedded in the body, doors, dash, roof, trunk and seats.
Various simulation technologies have also helped bring down design costs. "Earlier car companies would do a mock up," Sahrawat said in a phone interview. "Today, simulation allows companies to push the costs down.
Nagporewalla said in an e-mail interview: "Apart from applications like design software and simulation, IT can also help in significantly crunching product development timelines through improved collaboration and project management."
Chenoy added that modern-age design tools are helping automobile manufacturers develop better products in a shorter timeframe, as well as further reduce overall costs.
India as R&D hub
Major automotive manufacturers including Maruti Suzuki, Hyundai, General Motors (GM), Ford and Toyota, have tasked India to develop new product lines, as well as build competencies in computer-aided drafting and two- and three-dimension modeling. However, experts say India still has ways to go from becoming an international hub for auto R&D.
Nagporewalla said: "India is distant from becoming a global hub for the auto industry. To earn that title, a significant part of global auto R&D spend will have to happen in India." Nasscom estimates that India accounts for a meager US$3 billion of the global spend of some US$145 billion in auto and aerospace R&D.
For most global auto majors, the R&D center in India serves mainly as a link to their global R&D network. "Hence, end-to-end development of cars in India is still a dream," Nagporewalla noted.
According to Sahrawat, the Indian auto component industry is also still slow in deploying IT applications. "Our research shows IT deployment has not trickled down to tier two companies. Their budgets are small, and therefore, can't purchase expensive ERP packages," he explained. This impacts the ability of major auto companies to achieve leaner costs and bring about higher efficiencies.
However, the future looks bright for India's auto R&D centers. "In future, I see automobile companies leveraging IT in areas like simulations, rapid prototyping and project management to further drive down costs of developing a new model," Nagporewalla said.
According to Chenoy, the challenge for the local industry is to build future-ready products that are technologically-superior, cost-effective and eco-friendly. "Almost all companies are developing cleaner technologies that can satisfy the transportation needs of the future," he added.
Over the last one to two years, companies such as Bajaj Auto, Renault-Nissan, Toyota Motor and Chrysler have also announced their intentions to build low-cost cars.
"Since India and China are emerging as huge markets, with nearly 40 percent of the world's population residing in these countries, it's not surprising that companies are working on technologies for the emerging markets," Sahrawat said. For instance, manufacturers including LG, Samsung and Nokia, are launching solar-powered mobile phones for markets such as India, where power supply is a huge challenge.
Swati Prasad is a freelance IT writer based in India. His article was originally posted on ZDNet Asia.
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Talkback
Why don't we have a Nano in this country?
costs out here in the states. If we are to compete with a world
economy and try to make ends meet here at home then we need to be
able to decide between cars that cost us what not all that long ago
would have been a home mortgage and a utility like car that will get
us from point A to B and back again. Its just that simple. Going into
debt just too purchase a car should not be a given here in the states.
Buying a car with cash money should be an option. Sure you won't be
cool and as a status device it won't be much. In fact you're cool factor
will decline rather rapidly and you won't be keen to pick up a girl with
it. Still the money you will have in your pocket and the money you can
spend taking her to a dinner NOT at McDonald's might do the trick:P
This is the perfect "I'm just starting out" car.
Pagan jim
want a good reason?
When you strip all the Indian buzzwords you'll end up with an unreliable, underpowered, unsafe and crummy car.
There were cheap cars produced in the eastern Europe decades ago ( does Trabant the 2 cycle card board east German car sounds familiar), but their value was not enough to survive.
Precisely
middle class would be considered well below the poverty line in the U.S.
And what's up with the asinine remark that global economies are shifting
to demand driven as opposed to supply driven? A market is ALWAYS
demand driven. Socialist central planners ignore this which is why they
are universally marked by shortages.
The Nano is a death trap
The average salary of a Tata autoworker is $3,000 a year. Try living off that in the US.
Agree - this is a disposable car...
it meets Euro2 emission levels
This car is manufactured for India, it meets demand of Indian middle class which is more important. This is no way intended for other markets in any case.
It was called Yugo
And that is what I meant.....
reduce costs should be able to make something like this but better
and yes probably more expensive but still why are we not?
If the American consumer/worker since we are both the consumer and
the worker are to compete with places like India then our costs have to
go down as well as our wages and benefits. The stupidity of the
system we have now is that until very recently everything was going
up through the roof and our wages/benefits were either frozen or
shrinking. If we are to compete we can not be expected too buy cars
that cost us 30, 40 or 50 grand anymore. Its just not doable. If our
wages continue to freeze or worse go down then something here
besides our incomes has to go down as well. Like it or not you can
NOT burn the candle at both ends and expect anything but a disaster
at when the both ends meet in what use to be the middle.
If in India they can make and sell a Nano for under or around 2 grand
then we here in the states should be able to come out with something
better for what 5 grand? Using state of the art tech and robotics? OK
maybe 8 grand. But certainly under 10 right? If we can't and our
wages continue to shrink and our expenses continue to go up what
will happen to us?
Pagan jim
What part of demand-driven
wants to buy them. We like our cars big and powerful.
Sure when we can afford them why not?
budget not too mention the initial cost but hey if I could get one I'd
buy it.
Right now however I have way too much money needed for very
expensive drugs too keep myself alive. Then there is that keeping a
roof over my head and of course that nasty thing called food. So a car
(which as a rule is a terrible investment) would be the height of
insanity to spend anything but minimum on. So no I don't think I'm
alone in this nor do I think my situation is unique. In fact I would say
my situation and or group is a rapidly growing one in this country.
Not poor but struggling and looking for some sane purchases based
on the simple fact of the shrinking and far less strong than it use too
be middle class.
Pagan jim
Because Americans expect to make a wage?
A wage that is already under extreme stress....
global economy will force that too continue. We simply can't live like
kings in a world where we are just another work force and the rest of
the many billions are willing to work for so much less. Look I don't
like it any more than anyone else but the simple fact is our way of life
can not be sustained. So the only sane thing to do is to try and make
a gentle landing rather than a total disaster. We have to except that
things we buy must become cheeper. Much like many have turned to
Wal Mart. We must Wal Mart the rest of our economy. The days of the
FAT paycheck and the job that will last us a lifetime are gone. We will
be lucky to earn more next year than we did this year. We will be
lucky day to day to keep a job with layoffs and mergers happening left
and right around us even in a good economy. This have changed.
Pagan jim
It's a...
Years back India decided NOT to go down the same road as N.A...
Stowe the marxist class envy rant
cars like we have in America, but the bunch of control-freak socialists
running their economy have kept most of them so damn dirt poor they
couldn't even dream of affording one.
But, don't worry, 8 years of Obama and you'll know exactly what I'm
talking about.
Tin foil hat
$2000, that's UAW retirement costs of each GM car alone.
Now lets be certain we are fair here....
actual accounts and do all kinds of normal (For poorly managed and short
sighted companies in America) things with that money that should have
been invested into retirements accounts? Resulting at least in part to the
current retirement costs being appliced to the cars?
Pagan jim
To be fair, that is what it costs the taxpayers per car made, not sold
RE: India's Nano to challenge global auto industry