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Tata Motors reboot: Fewer suppliers, newer markets
NEW DELHI: Tata Motors, which has been losing market-share for a decade, has kicked-off its biggest restructuring program.
NEW DELHI: Tata Motors, which has been losing market-share for a decade, has kicked-off its biggest restructuring program.
The Mumbai-headquartered automaker, which slipped to the fifth position in 2015-16 from third a decade ago, wants to reduce its supplier-base significantly, enter new markets and bring out more car on each of its platform to get economies of scale.
It will reduce suppliers from 1,300 to under 100. “I can create full transparency sitting with 70 suppliers, but think about doing that with 1,300 suppliers,” said Guenter Butschek, CEO of Tata Motors Worldwide. He added that while over the years the quality level of its competitors has improved, Tata Motors’ suppliers have not met the desired performance on quality, delivery and cost competitiveness.
The restructuring lets Tata maintain large suppliers with strong technical and commercial capabilities, offering lower cost and better quality. At present, Tata Motors sources the parts of the air-conditioning system from different suppliers and assemble them. Now, it will buy the whole AC system.
“It will reduce overall dependence on suppliers, while increasing bargaining power with the tier-I suppliers,” said Amit Kaushik, India head of London-based Jato Dynamics.
Most of the other carmakers, such as Maruti Suzuki, Hyundai and Mahindra & Mahindra have a tiered structure of suppliers. Butschek said that what Tata Motors is doing today, Mercedes did two decades ago.
As some of the existing products such as the Indica and Indigo are phased out, the new products will be built using the tiered suppliers strategy.
The restructuring also underscores the growing globalisation of the automotive industry, as vehicles increasingly flow across borders in pursuit of economic advantage. Butschek is looking at increasing Tata’s presence in Africa and West Asia, and raise marketshare in South America.
To tap Europe – where Tata Motors doesn’t sell cars – all future platforms will be developed keeping in mind homologation or converting right-hand to left-hand drive and vice-versa. “It is an intent to be less dependent on India,” said Butschek.
Also, he is looking at more cars on each of the platform. “Today, each car is an independent platform, which isn’t good for economies of scale… We will leverage these platforms to bring new products in price-sensitive segments,” said Butschek.
