Demand for $2,500 Car Drives Innovation

I previously wrote about the efforts of Tata Motors in India to build a car and sell it for only $2,500. The plan is intended to respond to huge customer demand in India for low-cost cars. It is achievable because Tata is embracing a lean manufacturing strategy.

In today’s edition of The New York Times, writer Heather Timmons says that what Tata is doing represents a “revolution” that “could change what most of the world drives.”

Toyota and Renault-Nissan are among several other companies also seeking to build low-cost vehicles in India, though they won’t all have sticker prices as low as $2,500. With one of the lowest average ages of any large nation, and a population that is not affluent, the demand for this type of vehicle is huge. So the foreign carmakers are eagerly jumping into the Indian market, joining a small number of local auto manufacturers.

And according to the Times, India is only the beginning:

If global manufacturers can figure out how to make small, cheap cars in India, they are expected to start exporting them to other fast-growing markets where the proportion of car ownership remains small — places like Southeast Asia, Africa and the Middle East.

By the way, since my first article, Tata has named its new vehicle; it is called, appropriately, the People’s Car.

Of course, the key to making these cars successfully is making sure your production methods are as good as they can be – in other words, lean.

Part of that involves tossing aside old ways of thinking. The article says that

…manufacturers and suppliers will need “exceptional creativity and inventiveness,” Wolf-Henning Scheider, president of Robert Bosch’s gasoline services division, said in a speech in June. “Slimmed down versions of existing components and systems are not sufficient.”

Daryl T. Rolley, general manager for international operations at Ariba, a sourcing and procurement company working closely with Tata, agreed. “There are so many legacy costs built into a design, and trying to engineer those out is difficult,” he said. “It’s better to start with a clean sheet of paper and engineer low costs in.”

There is also some interesting description of an existing plant in India operated by Maruti Suzuki, a joint venture between Maruti of India and Suzuki of Japan.

…inside Maruti’s gates, the company has created a self-sufficient, streamlined island: 4,700 Maruti employees work inside the gray buildings, as do at least as many employees of suppliers, whose warehouses and production plants ring Maruti’s main factories.

The site generates its own electricity and recycles its own water. Inside the main factory are all the materials the company needs for two hours of production at the current rate of one car built every 21 seconds. The nearby suppliers’ warehouses stock materials for hours more.

Maruti, which is still majority owned by Suzuki, has plans to increase its already highly automated process, with the goal of cutting its production time in half and trimming costs. Already, giant swiveling robots do much of the welding. Manpower is employed mostly to check for errors.

“We have made the entry for our competitors smoother,” Mr. Khattar of Maruti said.

I’m not clear on whether Maruti is actually involved in a lean approach or is simply focused on automation. I hope it is the former.

The article also notes there are concerns that rapid growth in the number of cars in India could contribute to the country’s pollution problems and increase the number of accident fatalities.

Now if lean concepts could be applied to address those problems, and not just manufacturing issues, that would truly be innovation.