With the Indica and Indigo Tata has shown that Indian companies can do it, and how

The recent launch of Tata Engineering’s Indigo is not just a launch of yet another model. It is in fact an emphatic statement that the Indian car-manufacturers have come of age. Tata seems to be showing the way to Indian manufacturers that it is possible to counter competition from globally well-entrenched, deep-pocketed competitors by designing products of comparable quality that suit consumer pockets. Indeed, it was heartening to see that Mahindra took a leaf out of Tata’s book and successfully launched the Scorpio in the sports utility vehicle segment. It is heartening to see Tata redefining the rules by positioning its aggressively priced vehicles in different consumer segments.

In the 1990s it was feared that the Indian passenger car markets would be swamped by MNC cars, trashing the poorly designed Indian cars of the licence-permit raj. For a while the cars of the threat seemed real, with Premier Automobiles caving in and Tata taking inadvertently long to launch the Indica. It was argued that investment in R&D was the key to success in the automobile industry. It was believed that there was no way Indian companies, with meagre turnovers, could match the MNCs on this score. Historically, only Hyundai and Daewoo, backed by their government, had succeeded in taking on global automobile giants at their own game. What Tata has shown is that with gumptions and guts it is possible to take on the best in the world, at least to begin with, on home turf. Defying all odds, its first launch, the Indica, with improved features, has now outrun all except Hyundai’s Santro in the race for market share. With the latter it is running neck-and-neck. What’s more, Indica now is exported to Europe, besides other markets. Indeed, Tata has proved the pundits wrong. Its initial woes seem to be over. Fears that Indica would take Tata Engineering down with it have proved unfounded.

It’s been a general refrain that India cannot excel in manufacturing. The dice are heavily loaded against it. It is heartening to see that Tata seems to be proving the hypothesis wrong. With well-planned strategies it has developed a chain of competent suppliers that is critical for the success in this industry. It was believed that in the absence of a mature supplier base it would be difficult for Indian automobile producers to place together an automobile of good enough quality. In fact, Suzuki lent credence to this belief when it refused to manufacture gearboxes and some critical components for Maruti in India. Tata has nailed this lie. With great foresight it launched the TACO group of companies to bring here a number of globally renowned tier-I and -II suppliers. Thus in a short span, Tata Engineering has managed to evolve a healthy mutually beneficial relationship with not only TACO manufacturers but also the independent tier-I and -II suppliers that have come up seeing the opportunity. Indeed, this in itself is a notable development.

Tata’s is a success story built on a combination of domestic and global sourcing. With I.De.A Institute, Italy, it created the Indica platform. And, by developing competent indigenous supplier base, it now can source components domestically. It has shown that by taking initiative it is possible to take on the competition. Of course, the dismantling of the licence raj and globalisation have helped. However, had it run for cover at the first signs of liberalisation like others, it could not have not achieved what it has. Indeed, recent findings by leading global consultants have shown that there is much that the Indian companies need to do by themselves to shape up the global competition, notwithstanding a number of unresolved government policy issues.

Of course, there is much that the government still needs to do to unshackle enterprise. For one, it needs to put an exit policy in place. It needs to review its reservations policy for small-scale industries. The state governments need to do much to reform the power sector to get private investments moving. There is a pressing need for labour reforms. Also, there is need for sales tax reforms. There is a myriad of small little things that need ironing out at the government level to give a fillip to manufacturing in this country. But what the Tata case shows is that Indian companies can do much on their own to improve their competitiveness. What they need is the right mindset. Indeed, the launch of the Indigo is a healthy example of India on the move.