Tata is planning to build volume on its upcoming Rs 1-lakh (Rs 100,000 – approx USD2,000) car to one million units a year, with output spread among four Indian plants.
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The low-cost Tata car goes on sale in 2008 (it is to be unveiled in January at the Delhi Motor Show) with production starting at a 350,000 unit capacity plant in Kolkata, West Bengal.
Tata Motors’ head of sourcing for the project, Mr E. Balasubramoniam, told a conference in Frankfurt yesterday that Tata expects much demand for the low price car to come from aspirant consumers of motorised two-wheelers, of which some eight million are sold in India annually.
“The car will be priced well under the current cheapest car, the Maruti 800, which sells for about USD4,300,” Balasubramoniam maintained, “and as incomes rise it will be within reach of consumers who buy two-wheelers retailing at USD1,400.”
“We are targetting volume of one million of the cars annually within a few years when the other plants start manufacturing,” he said.
“We have looked for suppliers with good process capabilities, ” he said.
“And we have established long-term relationships. The product will be a tribute also to the capabilities of the Indian component industry.”
A number of innovative approaches have been employed to shave cost on the project as far as possible.
“To get cost down we have had to consider dual purpose for every component. The seat riser, for example, is a mounting as well as a structural part,” Balasubramoniam told the conference.
When Tata’s low-cost car debuts in India next year it will raise the bar in what is becoming an increasingly competitive part of the global car market where vehicle makers are seeking to gain higher sales in high-growth emerging markets.
However, consultant Glenn Mercer, speaking at the same conference, cautioned that low-cost cars may promise higher volumes but those volumes could be volatile with margins small.
“To take Renault’s Logan, the headline base price may be low but upselling customers to higher trim levels leads to higher profitability. That’s how this industry works. Core profits in the industry may still reside in ‘Higher Cost Cars’ for years to come.”
Dave Leggett
