Tata Motors is embarking on a multi-location assembly strategy for its ambitious INR100,000 (EUR1,800) car project, due for launch in late 2007.
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In order to reduce logistics costs, the company is planning to bring production closer to the markets and will set up four assembly units in each of the regions in India.
The transportation costs for the company will be lowered by components being delivered to the location in innovatively stacked packaging rather than as inefficiently transported built up vehicles with hordes of space lost in between. Also, a number of keep component suppliers will also set up facilities close to each of the manufacturing locations.
Other cost savings accrue from the large volume of sales projected for the vehicle which would make better sense in being produced closer to markets than being shipped in volume across the country.
Tata Motors plans innovative and cost effective supply chain management in partnership with logistics companies and its vendors to manage inventory-free delivery of components to its plants.
Further, the assembly units will be shared with other models like the low cost small truck Ace to amortise the plant cost. Ace, launched in the Indian market in 2005 has been somewhat of a surprise success for the company.
Tata Motors will also capitalise on the recent spurt in financial incentives being tendered by state governments to companies in establishing plants in newly established industrial estates.
This will earn Tata income tax and excise exemptions for five years after commencement of production. Tata has already committed a plant in Uttaranchal, a hill state offering tax sops which will benefit from a 10-year income and excise tax holiday. Other plants will go up in West Bengal and in Pune at its existing complex.
A plant in South India is planned but the company has not yet finalised the location.
Cost savings from these initiatives will help in driving down the cost of the small budget car which to many industry leaders seemed a dream when the project was announced a couple of years back.
Deepesh Rathore/Tilak Swarup
