May 23, 2005 | Business World

Tata Motors' Ace

The small-load carrier has taught Tata Motors new lessons in manufacturing.

In the Rs 15,298-crore Tata Motors' hall of fame, divisional manager Girish Wagh, 34, is an unlikely hero. He has no grey hair, he has not spent a lifetime working with the company, and he is not even a board member. He is one of the 3,500-odd engineers who toil at the company's sprawling 400-acre factory in the outskirts of Pune city in Maharashtra.

Still, Wagh is different. He is among the handful of people who have led projects that built new vehicles from scratch for Tata Motors in the last three decades. In the 1980s, the late Sumant Moolgaonkar led the team which designed the company's light commercial vehicle platform, the Tata 407 series. In the late 1990s, chairman Ratan Tata rolled up his sleeves to work on the first passenger car, Indica. Now Wagh joins the elite group, having lead a team of 350 people to design Tata Motors' latest offering, Ace, a small-load carrier.

Girish Wagh, a 34-year-old divisional manager, designed Ace. He joins the stellar league of Sumant Moolgaonkar and Ratan Tata, who had themselves designed new vehicles from scratch.

Wagh's position of honour did not come by chance, though not entirely by design. Says executive director Ravi Kant: "We wanted to infuse a very different thinking to revitalise our processes. Letting a young team drive an important project did exactly that." Says president P.M. Telang: "It started as a small experiment but ended up being a great exercise to revisit everything we learnt in decades about manufacturing."

Ace has several firsts to its credit. Tata Motors will outsource more than 90 per cent of its components compared with an average 60 per cent for its other vehicles. The exercise threw up, according to company engineers, the first two-stroke diesel engine in the world to be used in a commercial vehicle. Ace will sport car-like interiors and its noise and vibration levels are closer to Indica's than to the truck family it belongs to.

Today, nearly all Tata vehicles are manufactured at its Pune factory. Ace will lead the company to set up assembly units near the markets, setting off another big change in manufacturing strategy. The project also sets another benchmark - it cost all of Rs 200 crore over five years - the lowest in Tata Motors' recent history for a new product. The learnings are expected to accelerate chairman Tata's Rs 1 lakh-car dream.

Be sure, Ace is not just a small product for Tata Motors. The vehicle is expected to replace three-wheeled goods carriers and, later, even passenger vehicles in small towns. Small traders and farmers buy 136,000 such vehicles every year for transporting goods. The number has increased rapidly in the last two years, with sales growing at 24 per cent.

In three years, analysts say Tata Motors may well be selling over 60,000 vehicles and Ace could contribute up to 10 per cent of all commercial vehicle sales. It will also take Tata products to new customers at the lower end of the market - the ones who may turn loyal customers to Tata's larger vehicles as business grows. Ace, which is priced at Rs 225,000-235,000 will be available at a down payment of a mere Rs 20,000. "In the short run, it is going to be one big brand ambassador for us," says Shyam Mani, V-P (sales and marketing).

Local product, global learning
Engine: The search for Ace's engine has bolstered the decision to create Tata Power Systems, an engine business.
Noise levels: The noise levels of Tata's commercial vehicles are way above world standards. The engineers are now sensitised to those requirements.
Cabin: Ace is the first commercial vehicle to have car-like interiors. Having found a cost effective way to do it, more Tata truck will offer the features.
Global design: Ace's design took into account vehicle requiremtns and regulations from nearly all markets.

In the first place, how and why did the Tatas hit upon the idea to launch a small vehicle? After all, Tata Motors bought Daewoo's heavy truck business in Korea last year to offer more powerful trucks to catch the coming infrastructure boom in India. The work on Ace apparently started four years ago, soon after Tata Motors posted its historic loss of Rs 500 crore in 2000-01.

Kant spent his first six months to draft an elaborate blue print to rejig his entire product portfolio. His analysis went like this: As India builds better roads and other infrastructure like oil pipelines and container terminals, traffic in the highways would get heavier and faster over the next decade. As goods will be available in more convenient depots or warehouses along the highways, loads will get smaller in the feeder routes to cities and towns.

Logically, the new system would eventually demand larger and more powerful vehicles for the highways in the Golden Quadrilateral and smaller vehicles for the feeder routes. In trucking parlance, that would mean multi-axle vehicles that can transport 45 tonnes or more and below 2-tonne goods carriers. Tata Motors did not have a product in either of the categories.

Even as late as three years ago, Kant did not have a workable solution to his problem. Then the Daewoo deal happened, which took care of the heavy vehicles issue. Kant had tried tweaking his existing 2-tonne products in the initial years, but with limited success. He simply could not match the cost of the 3-wheelers. That is when he hand-picked Wagh to "go out and find" what's happening in the market.

At that time, Wagh was implementing balance score cards, a business evaluation system, in the company and was reluctant to take up the project. Having worked with livewire engineering teams that drastically cut costs up to 35 per cent on truck components, Wagh now admits that he did not see the potential of the project then. Kant wouldn't put him in the 'Global Truck' project, another high-profile initiative, to which many of his colleagues were drafted.

In the initial days, Wagh just collected information. He was simply bogged down by the cost of the alternatives in the market - three-wheelers came for as low as Rs 1.25 lakh - and he had the impression that a similar product from Tata Motors will not create much of a difference in the market. Even after six months on the project, Wagh had still not thought that his solution would lie in a four-wheeled vehicle. During his market survey, Wagh had got many hints. A farmer in Andhra Pradesh told him that he preferred four-wheelers as they meant better social status in his village. If he had one, he would even get a bride easily. But the low cost of a three-wheeler still worried Wagh.

Around the same time, UK-based Warwick Manufacturing's Lord Sushanta Kumar Bhattacharya, in one of his sessions with the Tata Motors engineers, egged them to come out with a "quick and dirty solution" to move small loads. Says Kant: "Lord Bhattacharya agitates people to think differently by dramatically overplaying or underplaying a scenario." Wagh knew that a four-wheeler would be an ideal solution and Tata also preferred it to a three-wheeler right from when the idea was conceptualised. Nine months after Wagh started, he finally settled on the idea of making a four-wheeled goods carrier.

Kant took a leaf out of Lord Bhattacharya's book. He put an aggressive cost target for his vehicle and ran it by the board. The board did not deliberate too much. They said: "If the vehicle has all the attributes of a Tata vehicle and more and at such a low cost, why not?" Chairman Tata wanted the new vehicle to drive like a car, free of noise and vibrations. That demand should have put additional pressure on costs, yet the board did not ask Kant how he was going to achieve his targets. And he had no clue then, either.

Cost control was built into every stage of the design and development of Ace, Tata Motors’ sub-1 tonne load carrier

Usually, there are three broad costs involved in designing a vehicle: initial design and prototyping, tooling, and manufacturing costs. Further, there are four main components in any vehicle that make up a big chunk of its total cost: engine, gearbox, cabin design and transmission. Now, design and prototyping, and tooling can run into several hundred crores for vehicles designed from scratch, as companies do several iterations before finalising their designs.

Even at this stage, Wagh needed to keep a close tab on the cost of these four main components - the final recurring cost of the vehicle on the road would depend on them. Tooling the Indica, for example, had cost Tata Motors over Rs 700 crore.

Wagh's basic market research had finally concluded that a four-wheeled, sub-1 tonne load carrier would be his ideal vehicle. Further, it should be priced only at a slight premium to the three-wheelers available in the market. The basic design and the shell of the vehicle were rushed through quickly. Of course, for a while, the engineers fought over whether the vehicle should have a car-like bonnet or a flat truck-like front.

But Ratan Tata wanted to get through the initial stages quickly. Once, at the Pune factory, he couldn't wait for the engineers at the design studio to get him some paper on which to sketch out his idea; he simply drew on the wall his idea of how the interior scheme and the dashboard should look like.

The low-cost strategy
Outsourcing: Near 90% of components are outsourced. Suppliers involved in the project right from design stage.
Manufacturing: More out-sourced components, lesser the complexity, in manufacturing Factory set up for less than Rs 100 crore.
Tooling: Used in-house high speed CNC machines and computer-aided design to make tools and panels or Ace.
Marketing: To be sold through a larger number of smaller out-lets, closer to the market

Having got around the shell, Wagh brought in general managers V.N. Bedekar and Zacharia Sait, specialists in sourcing and tooling, respectively. The shell contains a lot of sheet metal components. Even before the final design was approved, Bedekar floated a e-sourcing order for the metal components. He then convinced the supplier to invest in the project along with Tata Motors, and start supplying components right from the design stage.

Sait, instead of importing tools, started making them at an in-house workshop. While Bedekar paid his supplier material costs even at the design stage, Sait's cost came to less than Rs 50 crore. Something similar happened while searching for a suitable engine for Ace. Engineers like vice president R.R. Akarte and Telang fitted many engines that they outsourced from various companies. Though Telang had suspected right from the start that Indica's diesel engine could be worked on to suit the Ace, he did not try it till very late in the project.

That happened when Kant sent back Wagh to the drawing board towards the end of 2003, when he found that the project had exceeded the cost budget. Telang simply sliced the Indica engine into half and made a two-stroke diesel out of it. Then he gave the machine to others who worked on new mounts to fix the vibration and noise. In fact, the last few months were spent in making modifications to just meet the stringent noise standards. Says Telang: "This is perhaps one of the best exercises in the importance of cross-functional teams in projects."

So far, Tata Motors has had a mixed record with its vehicles. Only time will tell if Ace will follow the tracks of a Tata Estate, or turn out to be an ace for the group, like Indica did.