Good article... How India is performing ..in Manufacturing..!
varpal singh
(By Swaminathan S.Ayar)
This week, Ford Motors
announced that India would be a global manufacturing hub for its new
small car, the Figo. This underlines a remarkable new
development. India has overtaken China as a car exporter this year,
exporting 201,138 cars in January-July against China’s 164,800. What’s
more, Indian exports in this period went up 18%, while China’s fell by
60%.
Of other big Asian exporters, Korea’s exports have fallen 31% and
Thailand’s 43%. In a terrible global recession, India is the only
country with zooming exports. Hyundai has long made India an export
hub for small cars, and aims to export 300,000 India-made cars this
year. Maruti-Suzuki comes second in exports, with Tata, Mahindra and
others well behind. Nissan is about to build a new factory in India
specifically for exports. India looks like exporting half a million
cars in 2009-10, and should cross the million mark within five years.
What accounts for India’s success? Visionary planning? Long-term
strategy? No, India’s triumph was completely unplanned. No planning
document ever envisioned or planned for beating China.
Analysts say China has become a great auto exporter because of huge
subsidies, an undervalued exchange rate and dirt-cheap credit. But
India never aimed at an undervalued exchange rate to pile up large
trade surpluses — rather, it aimed to keep the real effective exchange
rate unchanged from 1993 onward. India’s interest rates were always
among the highest in Asia. It stubbornly refused to reform its
inflexible labour laws, with adverse effects on productivity and wages
relative to Asian competitors. No Indian strategic vision targeted
special provisions or subsidies to the auto sector. Indeed, the sector
for years suffered exceptionally high excise duties and sales tax.
How then did this sector become world class? In the early 1990s, auto
production was freed for investment by any domestic and foreign
investor. Indian planners as well as foreign investors regarded India
as a low-skilled, low-productivity country producing third-rate cars
like the Ambassador and Premier. Foreign investors came only because
car imports were virtually banned. The small size of the Indian car
market created serious scale diseconomies.
Critics from both the Right and Left criticized the new auto policy.
Leftists claimed foreigners would decimate the industry. Freemarketers
complained that foreigners were being wooed to create an inefficient,
high-cost industry behind high tariff walls.
Nobody foresaw what fierce competition would do. Auto companies
compete by constantly producing new models with improved features like
fuel efficiency. Indian consumers are very price-sensitive , so design
changes to reduce costs are also vital. India’s auto parts companies
had rarely been asked for innovative changes during the old
licence-permit raj, when the Ambassador and Premier faced little
competition. But MNCs brought in competition, and started a dialogue
with auto ancillary manufacturers on constant design changes. To their
surprise, they found that Indian engineers had considerable skills,
and could make improvements quickly and cheaply.
Bharat Forge, which makes auto forgings like crankshafts and axles,
was among the first to realize that India’s big advantage was not
cheap labour but cheap skills. The company decided to have no blue
collar workers at all, only engineers. This yielded a huge rise in
innovation and productivity, and soon made Bharat Forge the second
biggest auto forging company in the world.
For new auto components, global giants like Delphi
and Visteon typically took three months to go from concept to design,
prototype, testing,
removal of glitches, and final manufacture. But Bharat Forge found it
could do the entire sequence in just one month.
Soon, every auto company and parts maker in India focused on using
cheap skills to constantly produce better and cheaper parts and
vehicles. Bajaj Auto once relied on knowhow from Kawasaki for
motor-cycles, but soon found that its own R&D produced far better
bikes for Indian conditions. Maruti Suzuki made India a global hub for
R&D. And Tata Motors created the Nano, the world’s cheapest car,
making the world sit up.
The ultimate compliment to India’s design skills came from Carlos
Ghosn of Renault-Nissan. He decided to build an ultra-cheap car (that
might compete with Tata’s Nano) in collaboration with Bajaj Auto. In
such partnerships, the global partner usually does the R&D and the
Indian partner the low-cost production. But Ghosn decided the new car
should be designed by Bajaj Auto, which had never produced a car
before. Why? Because Ghosn felt it was easier to upgrade from a
two-wheeler than downgrade from a standard sedan to produce an
ultra-cheap car.
This then is the secret of India’s success. Don’t waste time with
strategic planning and picking winners. Simply let competition happen.
You will be surprised how the most unlikely sectors can become world
class. That’s how India has just beaten China.
--
Regards
Varpal Singh Randhawa
Account Manager(Client Relationship Group)
(097555-24244)
Varpal....@wipro.com
Spirit of Wipro: Intensity to Win | Act with Sensitivity | Unyielding Integrity
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