Our Bureau

New Delhi, Dec. 7

GIVEN the price point it seeks to match and the likely volumes at that level, the small car from Tata Motors proposed to sell for Rs 1 lakh could have a major impact on the manner in which cars are manufactured, a senior official of the global auto components industry said today.

Replying to a question on the ability of Indian industry to innovate and its potential thereby to come up with radical production practices, Mr Robert C. Pallash, Senior Vice-President of Visteon and its President for Asia-Pacific, said: "I think the Rs 1 lakh car that Tata plans to make risks being a very disruptive product to the industry. If they get it right, then it is going to be a huge success."

At the 10th Asia Pacific Automotive Industry Roundtable organised by Economist Conferences here, both he and Mr Brian Lowe, Country President (India and Australia) of Delphi, staved off digs triggered by their companies' high-pressure existence in the global automobile industry with wit and humour.

The Conference Chairman, Mr Graeme Maxton, set the tone when he asked Mr Lowe, who had bravely said that component suppliers had to lower costs further: "Are you on a bandwagon that you can't get off or is that indeed the future?"

"I think it's inevitable," Mr Lowe replied.

Mr Pallash, who followed as speaker, began by saying: "References in this presentation to our success in China and our performance in India do not guarantee success. So, there is no warranty on this presentation."

It may be recalled that the brunt of the global automobile industry's fight against production cost has come to rest on component manufacturers.

Their position is most unenviable, supplying as they do to automobile manufacturers who cannot pass on costs to the retail market.

On the other hand, as cars increasingly get treated as consumer durables and run the danger of becoming a commodity play, product differentiation through better design and technology is gaining importance.

That means vendors have to supply the industry better products at ever falling prices.

This has put tremendous strain on many component suppliers abroad, including a big and successful player like Delphi. "The shake-up in the US is well under way and I think myself and my colleague here are living examples of that," Mr Pallash said in jest.

While Mr Ravi Kant, Managing Director of Tata Motors, refused to reveal details of the small car project, merely stating that it was en route to becoming a reality, past news reports on the subject have indicated a likely decentralised mode of manufacture for the vehicle.

Already, the Tatas' small truck, Ace, which has been a hot selling product pushing the company to double capacity in a short while, boasts of 80-85 per cent outsourced content.

"We have got to find ways to develop and support them in a way that is different from what we do," said Mr Pallash, when referring to the Tata small car project and its impact on vendors. "That is a hugely disruptive initiative."

(This article was published in the Business Line print edition dated December 8, 2005)
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