Frugal engineering became a fashionable term thanks to Mr Carlos Ghosn, Chairman & CEO of Renault-Nissan. It was a tribute to the cost-competitiveness of Indian automakers where Tata Motors showed the way with the Rs 1-lakh Nano.

However, Dr Pawan Goenka, President of Mahindra & Mahindra's Automotive and Farm Equipment Sectors, believes this may no longer hold true in today's context. “In my view, India's low-cost advantage in product development helped us for some years. Today, multinationals understand frugal engineering and where we earmark Rs 600 crore, they can manage with Rs 650 crore,” he told Business Line .

Market Understanding

Does this mean that companies like M&M could be in a spot of trouble in the near future? According to Dr Goenka, the solution lies in “reinventing ourselves and looking at the next thing which will set us apart from the bigger auto players”.

From M&M's point of view, it enjoys a huge advantage by way of its understanding of the Indian market. This has helped it launch products that have created the right connect with the buyer.

“We are fast and also a lot more flexible in coping with customer needs as is evident in the number of refreshes we are doing in products which are higher than what MNCs manage,” Dr Goenka said.

Of course, this again may not end up being a permanent advantage because it is only a matter of time before rivals catch up and factor this aspect in their business plans. Keeping this in mind, M&M is working on “a couple of things,” which are in the planning stage for the moment. The ultimate objective is to create something that “would set us apart in India”.

Taking on MNCs

Dr Goenka conceded that there are certain benefits that MNCs have because of large volume products and better global sourcing. “Our advantages are in offering products that are better aligned to what customers need. We probably have a better reach than other companies in servicing and distribution. Overall, we need to ensure that we come out positive in the equation,” he said.

According to Dr Goenka, Indian automakers like M&M cannot afford to be complacent with the present pace of growth and believe the honeymoon will last forever. “We cannot assume that people will buy a Mahindra product simply because it is an Indian company. They buy it because of the value they perceive in it and this is the position we need to maintain in India,” he added. Hence, M&M would have to hone its focus on what it needs to do here in order to maintain its leadership position in SUVs and pickups.

Chinese competition

Competition could also intensify in the coming months with the Chinese thanks to players like SAIC Motor Corp that are bullish on India. Dr Goenka reiterated that competition brings out the best in everyone. “The Chinese will bring in a different kind of competition, compared to what was seen in the MNC wave through the 1990s, and we cannot wish them away,” he said.

The future could see more products from China invade the low-end pickup and compact car segments. While Indian companies are confident of the Chinese challenge, they are keeping their fingers crossed about a level playing field where local manufacture should not put them at a cost disadvantage.

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