Maruti is trying to reduce the weight of the small cars and is taking it by a gram per component. Reducing 1 gram per component is not much. The auto vendors face a new challenge but that’s a challenge they can meet. And, less daunting than fixing the cost of the car at 1 lakh.
Is it possible? Boeing has used composites to reduce the weight of its new 787 a.k.a Dreamliner. We don’t have to go that far. Tata Nano has used plastics at will to reduce the weight of the car.
Holistically a car has many parts and if each part weighs 1 gram less, the car would weigh many grams less. This is quite contrary to what Tata’s ambitious Nano project has tried to achieve.
Tata has chosen to locate the entire ecosystem of part manufacturing vendors around the Nano plant. This is the main cost-saver for Nano and the key factor for Nano’s success. The verdict is still out if this is a successful model or not. (Tata is compensating the vendors for re-locating from Singur to Sanand)
Maruti has chosen to not cut the costs immediately but to take it one step at a time. The benefits might not be immediate but in the long-run they will pay.
Maruti has brought in efficiencies in other thing as well. It has a dedicated car terminal at Mundra port for exports and is working on a direct railway link from Manesar assembly line to the Mundra port.
Maruti has export 70023 cars overseas last fiscal and is expected to cross 1 lakh car units next fiscal. This can be achieved by bringing in more efficiencies like it is already doing.
Along with that there should be appetite for Indian cars overseas. And guess what? They are now willing to buy Indian and Chinese cars. Great shift from fancying a American, European or a Japanese car. Don’t you think?
So, Maruti or Tata? Who has a better game plan?
PS : Did you know that more than half the cars sold in India are from Maruti?
PPS : It is important to note that I am not comparing cars but the strategy. Bringing in suppliers around you vs driving suppliers to cut costs.
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