NAME: VENKATESH ROLL NO: 11020468026 CLASS: EX-PGDM ,SIMS

1. What advantages does India have to become “Global small car hub”? How does it compare
with China?

ANS: The Automobile industry in India is one of the largest in the world and one of the fastest growing
globally. "India is already moving towards becoming an export hub for small cars and is the fourth largest
car market in Asia.

Some of the advantages that make India as global small car hub are:

a) India is primarily a small car market, mainly due to the country's demand for a cost- effective mode of
transportation. Of every four cars sold in India, three are small. Domestic sales in the small car segment
more than doubled from 0.54 million units in FY04 to 1.2 million units in FY10.
b) Low-cost modes of transportation across vehicle segments in India hold significant growth potential,
since the country's national per capita income is fairly low, at approximately US$1,000.
c) India has the lowest car penetration rate of 12 (per 1,000 population) when compared to select
developing countries such as Malaysia, Mexico, Brazil, Thailand, China, Sri Lanka, Indonesia and the
Philippines, demonstrating the high potential that the Indian market being offered.
d) Frugal engineering ability to execute a project in less time with fewer resources and at a lower cost. This
capability is giving India a competitive advantage that transcends just labour costs and can be seen in
many areas. It includes the ability to be more flexible, adaptive and manage with minimal resources.
International players are partnering with Indian companies to adopt and leverage these capabilities in
local R&D and manufacturing facilities. This trend is visible in both the vehicle manufacturing and
component industries.
e) The Government of India (Gol) reduced the excise duty on small cars from 24% to 16% to encourage
small-car manufacturing in the country. Government support has since continued, and excise duty rates
on small cars have been further reduced. Currently, small cars are taxed at 10%, whereas bigger cars are
taxed at 22% + Rs.15,000.
f) Foreign auto manufacturers are permitted to set up fully-owned subsidiaries in India, enabling low cost
production of components. This could certainly give the nation an edge over China, where local partners
are compulsory.
g) The government has also taken steps to build infrastructure and simplify foreign investment rules that
would encourage foreign producing small cars.
h) There are the cost benefits of producing in India. Privately, several automobile multinationals admit that
they can produce cars in India at a third of the cost in the US because of the high cost of labour there
i) Rising middle-class aspirations and sustained increases in disposable income characterise the long-term
India growth story. The need for low-cost regular mobility, along with growing aspirations, has opened
up significant opportunities in the small car space.
j) The Gol has increased its focus on the development of infrastructure by improving the quality of the
country's roads, highways and ports to support the industry's growth. This is expected to improve India's
logistics and facilitate its exports. Various special economic zones (SEZs) have been established in the
country, which, in addition to offering several fiscal benefits, facilitate regulatory clearances.

k) India also has a strong base for production of raw materials for the Indian engineering industry. Items
like steel and aluminum are being produced in India in huge quantities and at competitive prices. India
 also has a very rich reserve of minerals which would sustain production of raw materials for many
years to come.

Q2.What needs to be done by a). Government of India. b) The car manufacturers (OEMs).c). Indian auto
components Industry. d). Education & training institutes to make India “Global small car hub”?

ANS: The steps that should be taken to make India as “global small car hub” are:

Government of India:
a) Infrastructure must grow at the same speed with which the small cars are growing on the road. Presently,
India has only 3,700 miles of highways, against 25,000 miles in China and 46,000 miles in the US.60 The
Indian government has decided to develop the country’s infrastructure by investing in new projects.
b) In developing nations, particularly if the construction of roads and other infrastructure continues, individual
mobility and job opportunities will increase. This in turn will enhance domestic demand for small cars.
c) The Indian government must support the auto industry by developing policies that can further the industry’s
small-car goals.
d) The government can help local suppliers increase both their capabilities and their capacity by encouraging
exports, providing capital to build globally efficient scale, and offering incentives to invest in new
technologies

The car manufacturers (OEMs):

a) India currently lacks the capability to manage high-end work such as product prototyping. R&D centres set
up by various international manufacturers in India are confined to the basic localisation of imported parts
and data services. Overall, domestic vehicle manufacturers spend approximately 1% of their turnover on
R&D as compared to the global average of 5% to 8%.so OEM’S should mainly concentrate on building R&D.
b) Frugal engineering, as showcased through the Tata Nano, should be extended to other product segments.
This is likely to help Indian companies lower the cost of their products at the design stage itself and gain a
competitive edge over various international players planning to enter India's small car industry.
c) The Indian automotive industry is now building scale due to a growing domestic market. Achieving scale will
help the industry realize greater economies of scale. It will also provide the risk-taking ability required
diversifying into global markets and service large export orders at competitive costs.
d) Build strong supply chain capabilities.
e) Manufacturers must invest in bringing to market a wider variety of low-cost, high-value products that
consistently offer quality, reliability, and durability—with style.

Education & training institutes:

a) Universities must participate in the development of new auto technologies, components, and materials,
and by investing in testing labs that could be shared among OEMs and Tier 1 suppliers.
b) Universities must play a very significant role in the areas of research and development and it is this post-
graduate research collaboration that allows automotive engineering to be at the forefront of technology.
c) The training of automotive engineers to meet the global market demands increased collaboration between
industry and academia - and matching facilities. There is now an increasing need for industrial contributions
towards the development of automotive specific courses. The education of engineers to meet the demands
of such an important, and focussed, industry requires recognised educational standards to meet such needs.
d) There should be centres of excellence in teaching and dedicated facilities, worldwide collaboration in the
work placement of students, positive inter-university collaboration, and the opportunity to experience
“state of the art” testing facilities for both projects and research. Industry is tending to accept their role in
the educational process and offer scholarship schemes and inter-country educational & industrial
exchanges.
e) To understand the business scene disciplines such as marketing, sales, procurement, planning, concurrency,
sequencing, design, sustainability, appropriate technology, development and testing are a few topics that
should be embraced in the integrated approach to educating automotive specific engineers.

Indian auto components Industry:

Indian auto component industry should invest more & more on R&D so that it can leverage it capabilities in
making more and more world class auto parts of high quality so that more and more auto parts
manufacturing is outsourced to India .Also as the world is shifting to green, more R& D should be made in
this area as to how this components can be used in future cars. The presence of automobile manufacturers
has resulted in the development of several automobile component manufacturers. The automotive clusters
have provided India low-cost high quality advantage. The ancillary units are located near the automobile
manufacturers which reduce the freight charges and facilitate faster delivery. India’s competitiveness indeed
lies in high-end manufacturing as is shown by the success of auto parts maker Bharat Forge, Sundaram
Fasteners, Sundaram Clayton etc. More and more automobile supporting firms have been able to advance
their technologies and processes to transform into dependable parts suppliers to many of the global
automobile majors.

The automobile supporting industry has the competence to produce the complete range of auto-
components like engine parts, drive transmission parts, suspension and braking parts, electrical parts and
body and chassis parts, one third of all the exports done is that of engine parts and other critical
components for automakers, across the globe. The cost of components produced in India is 25%–30% less
than that of the parts produced in the western markets. The presence of these large number of auto-
component firms which are capable of producing low cost high quality products ensure that India will be
seen as a global hub for small cars.

3. Discuss role of innovation and R&D to make India “Global small car hub”? How prepared are we?
ANS:
In India, low wages for qualified engineers ($3 per hour, compared with $48 in Western Europe and $36 in
Japan and Korea) make the country attractive as an off shoring destination for R&D.
Worldwide, India is being accepted as a preferred R&D destination, gaining from the availability of low-cost
skilled and educated workforce, product development capabilities and location benefit because of its nearness
to emerging markets. Indigenously built Tata ‘Nano’ has shown India’s outstanding capabilities in R&D,
engineering and manufacturing as well as its ability to innovate. Many global carmakers and component
suppliers are setting up their R&D facilities in India.
In order to meet the demands of the customers and challenges from the competitors all needed is a plethora
of strategies and innovations at every step. If you don’t change, market would change the very existence of
your name. There have been numerous examples from the auto industry to prove the necessity of innovative
strategies to reach up to the target customers and stay ahead with a decent market share. There have been
market leaders, followers and laggards and even examples of cars completely fading out, example: Hindustan
motors & Premier Padmini.

In India, the auto industry strategy would revolve around five pillars – right cars, right price, appropriate
production capacities, sizable distribution network and adequate share of local parts in vehicles if they have to
stay in the market.

Innovation strategies must reflect the respective trends in order to meet technological standards, economic
imperatives, customer needs and government regulations. The relevance of small cars has been felt globally in
the wake of global meltdown. Today, the word small is equated with the value for money. In India, small cars
are the basic mode of personal transport. The very fact that these cars cater to the budget conscious public,
defines the design, specifications and technologies that go in them. Small cars could bring with them
contemporary technologies but unless they are made cost effective they cannot be made affordable for the
masses. The auto makers however realizing the potential of India’s small car segment are coming up
consistently with new and best of the technologies. The change and innovation is now the mantra for survival.
Starting with the design, small cars in India have contemporary styling. In fact, some of them leave the Sedan
behind in terms of appeal. All cars are designed with multi point fuel injection system, advanced electrical
controls and sensors to meet stipulated emission norms. Variants come with advanced safety and convenience
features like anti-lock braking system, air bags, central locking and power steering.

Considering all the features that a small car can pack, even those who can afford bigger cars are opting for
small cars, mainly because there are obvious advantages of keeping a small car in India – less stress of driving
and parking since there is shortage of space in cities, better mileage and fuel efficiency. There are numerous
high end technologies that can be incorporated in small cars but it is important to see the relevance of such
technologies with respect to cost benefit analysis. Here is a list of latest cars making an analysis into the
technologies offered at attractive prices.

India is set to become the small car hub for the world’s second largest auto maker, Ford Motor Company, as it
is slated to launch more compact cars here by 2015.“India is the first market where we have made an impact
in the small car segment, with Figo. Almost 70 per cent of the overall car sales in India happen in the compact
segment and to build our presence here, we would launch more products in the category in future,” said
Michael Boneham, president and managing director, Ford India. The Figo sold around 80,000 units since its
launch in India last March.

A significant number of the eight new models Ford has scheduled for launch in the domestic market over the
next four years would come in this segment, he said. The first of these would be an upgraded version of the
Fieste sedan, which will hit the Indian roads this year.

4. Will Indian Automobile Industry become Global Small Car Hub? Give your views, sighting
appropriate reasons.
ANS: Even though the Indian automobile industry is not as developed as its counterparts in the other countries,
investments have started pouring into the small car segment. Korean car maker Hyundai, Japan’s Honda Motors
and domestic companies such as Tata Motors and Maruti Udyog are stepping forward to launch new small car
models to target India’s emerging middle class and also the overseas markets. Heung Soo Lheem, Managing
Director and CEO, Hyundai Motor India, says, “We have a very clear target. India will be our export hub, which
means all our small cars will be produced here.” The rush of global car manufacturing companies into India is
mainly to tap its low cost manufacturing base. India provides cheap and high quality labour force with
significant engineering and manufacturing skills. Also the government’s incessant encouragement for the
expansion of the auto industry by easing rules is fuelling the growth of the sector. This sector received an
immense boost when the government announced plans to trim down excise duties on small cars to stimulate
investment, even though taxes are somewhat high, compared to that in China.

Moreover, the foreign auto manufacturers are permitted to set up fully-owned subsidiaries in India, enabling
low cost production of components. This could certainly give the nation an edge over China, where local
partners are compulsory. The government has also taken steps to build infrastructure and simplify foreign
investment rules that would encourage foreign producing small cars.

Besides, India is now one of the fastest growing car markets after China, with the small car market accounting
for a whopping 70% of India’s total car market, while in China, it accounts for 33%. The future thus looks bright,
with small cars dominating the Indian market. Hence, the auto makers are looking at India not just as Asia’s
small car export hub, but as a huge potential market of wealthy consumers to be captured.

STRATEGIES:

Auto majors are now rolling out their strategies to implement their plans successfully. The $75 bn Hyundai
Motor, the world’s fifth largest auto maker, has already shifted the complete production of its most popular
compact, Atos Prime, to India. It is also planning to do the same for its other models also. “Our upcoming i20
Model, which will debut in the Paris Motor Show in September, will be solely manufactured in India,” said
Heung Soo Lheem, Managing Director of Hyundai Motors India. Hyundai exports 40% of its small car
production, mainly i10 and Santro, which sells as Atos in 97 countries across the globe. “Currently, India is a
small car hub for Hyundai and we have a backlog of export orders too,” says Hyundai Motor, India Senior, VP
Arvind Saxena. Hyundai has declared that Indian investments value at roughly $1.5 bn. Likewise, Suzuki Motors
is planning to enhance its production in India, and also to manufacture its next world strategic model here.
According to Osamu Suzuki, Chairman of Suzuki Motor Corporation, “Suzuki Motor Corp. attaches great
importance to India”. Maruti Suzuki currently exports Alto, Omni, Wagon-R and Zen Estilo to non-European
markets such as Chile, UAE, Algeria and East Africa.

Toyota is planning to make India an export base. Tata Motors, which has already posed a serious challenge to
other rivals by introducing its much awaited $2,500 Tata Nano, has now decided to consider issuing licenses to
particular car makers in offshore markets, who would manufacture Nano. The company is setting up
showrooms across Africa and has tied up with Italy’s Fiat to use its South American sales network. General
Motors Corp. has already started producing small cars, including the Chevy Spark, a $7,200 compact, which is a
big part of strategy for India. Honda Motor has begun building a new plant for premium hatchbacks in Western
India. In the meantime, international auto supply players such as Delphi, Magna International and Visteon are
expanding in India, too, to facilitate big car manufacturers to build cheap small cars and also export them to
other markets.

OUTLOOK: In spite of all the efforts, there are a lot of challenges to be encountered before the companies can
start producing small cars to meet the global demand. On the one hand, they have to attend to their own
production techniques and on the other, there are still a number of impediments that influence the growth
prospective of the sector. Experts say, India can be able to meet the escalating global demand for small cars and
can emerge as a suitable destination for car production and sales only if it emphasizes on adequate
infrastructure, changes in labour and tax regulations, creation of more skilled workers, undertaking automotive
research and development and, above all, boosting the scale of exports of the companies. Even though the
Government of India has taken some positive steps, a lot more needs to be done to boost the industry.

India’s possibility of becoming an exporting base mostly depends on how quickly the government clears the
bottlenecks that hinder the expansion of the auto industry. Many companies have requested the government
to hasten the process of expansion of the ports and build railways and other roads that would serve as links to
their manufacturing clusters. The companies must also ensure cost-efficient manufacturing and careful cost
management to uphold decent profits in the markets. They have to congregate small car making expertise in
India. Their future focus should be to increase the quality levels while keeping the costs low.

5. Which WCM practices have been adopted by Indian Auto Industry? What further needs to be done
to become Global Small Car Hub?

ANS:

A) Defect-free :

A world class manufacturing unit must have high quality outputs, inputs and processes. It must have both low
external failure (defects that escape the manufacturing unit undetected), and low internal failure (defects
discovered and fixed inside the manufacturing unit). Defect free sales is not enough if there are extensive
rework and repair operations are going on inside. Inspection between stations should be nil or minimal. A WCM
eliminates most incoming inspection as they partner only with reliable suppliers. At any stage or process, a
WCM does not do100% inspection. 100% inspection is evidence of inadequate quality at the source. In lieu of
inspection, a WCM employs extensively fool-proofing devices to prevent defects. These machines and processes
are made robust against their operator’s inattention and even carelessness. After sensing any defect produced
or received or any abnormality for that matter, these smart machines switch off themselves and attract
attention to it with bells and lights to seek help. Moreover to further prevent defects from flowing downstream,
WCM workers, all extensively trained on quality, are empowered to stop any line, machine, or process that
produce defects.

B) Fast :

WCM’s produce “fast” not in terms of production cycle time or production rate, but in terms of manufacturing
lead time or turnaround time, or order processing time for make-to-order manufacturing units. It is fast not
because of fast machines and workers and high capacity, but because it does less activities than ordinary
manufacturing units to produce the same widgets. A WCM with slower machines and lower capacity can
process orders faster than one more endowed with production resources. How does a WCM achieve this high
speed? It does so by eliminating wasteful, unnecessary processes, and then streamlining what remain as
necessary. Through this approach, process cycle times (from procurement to shipping down to the sub-
processes that make them up) are constantly examined and ruthlessly cut to the bare bones using world class
benchmarks as a guide. Also, with much less inspection and rework activities due to its high quality described
earlier, it further cuts its lead time.

C) Lean

A WCM is lean in the sense that its uses much less resources than its conventional counterpart in producing
widgets of the same quality and quantity. With extremely high productivity and yield, it dramatically reduces
inventories, space, machines, and even people and suppliers required to achieve the production target. Most
WCM’s adopt the market driven or “pull” rather than the more conventional forecast/capacity driven “push”
concept of production. The pull system ensures that only the needed products and parts are planned and
produced at the right time at the right quantity. Ordinary manufacturing units produce based on capacity or
forecast (which is always wrong), and they tend to be cluttered with inventories and other idle resources.
WCM’s avoid overproduction and overstocking, without incurring stock-outs, thanks to their short lead times
described earlier. Much less raw materials, work-in-process (WIP), and finished goods mean reduced working
capital investment, space and warehouse requirements. A WCM’s total inventories may be as low as 10% of
that of a conventional manufacturing unit producing the same volume. A common observation inside a WCM is
the absence of warehouses and storage spaces where we would normally expect them.

D) Flexible

Being flexible, a WCM is clearly a manufacturing unit for the future, a manufacturing unit with a future. With
the global market’s demand for more product variety and models, manufacturing units with highly flexible and
adaptive manufacturing systems would have definite marketing and cost advantages. A WCM does not have to
produce products in high variety; but it has the capability to do so in the short term as the need or market
demand for them arises. The key for its flexibility is its very short set-up time, the amount of time to changeover
from one model to another. In ordinary manufacturing units, this could take hours if not days. Long set-up
times, in order to justify and recover their high downtime costs, translate to big production batches of one
model, high minimum order quantities, and limited product offerings. A WCM has programs to continuously
reduce all set-up times - streamlining, reengineering, and reinventing the set-up processes and procedures.

E) Environment-friendly

A WCM not only operates efficiently, but operates in a clean and safe environment. It processes are “brown”,
meaning they are waste and pollution free. A WCM produces only “green” products, products designed for the
protection and preservation of the environment. Such products are usually re-cyclable, repairable, re-
manufacturable, re-usable, or biodegradable. WCM’s products have been designed with proper disposable in
mind at the end of their useful lives. It also practices good housekeeping to keep the place orderly, clutter-free,
and less accident prone. A dangerous and dirty manufacturing unit, however productive, cannot be considered
world class. A WCM practices good and thorough housekeeping. It is prepared and equipped to effectively deal
with external and internal emergency situations, like fire, earthquake, explosion, and accidents. A WCM is a
conducive place to work in. Its workers and the community it is in are proud of it. A WCM serves as a model
corporate citizen in its community

To become Global Small Car Hub automobile companies need to improve on following parameters Distribution:
Given the population of India across urban, suburban, and rural areas, the carmakers need to improve their
distribution networks and strategies. A manufacturer can reduce the shipping cost by shipping the parts and
assembling at regional centers, instead of assembling at factory

Sales and Marketing: Carmakers in India must develop new marketing techniques to sell low-cost car models to
the vast rural and urban population.

Social Mobility: In developing nations, particularly if the construction of roads and other infrastructure
continues, individual mobility and job opportunities will increase. This in turn will enhance domestic demand for
small cars

Environmental Impact: Environmentally clean cars will become the order of the day as the nations will be
accountable to impact on environment, particularly for greenhouse gas emissions and their impact on global
climate change. Green technologies are too expensive and might prohibit the usage of them in small cars.

An Expanding Lower-End Auto Market: The cars that are accepted in emerging markets will provide necessities
rather than comforts. A car manufactured in India may have a plastic shell, rudimentary motor, good brakes,
and a stout suspension to handle unpaved roads, but no airbags.59 In adapting cars for the narrow streets of
emerging nations, manufacturers could change the world’s conception of what a car looks like, down to
whether it must even have four wheels.

New Pressures on the Auto Industry: As manufacturers are developing in India to serve the millions of new
vehicle owners, they could follow the Japanese and Korean carmakers
established markets. The basic car model used in India could be adapted for other nations, offering fuel-
efficiency and unprecedented low prices, with a few extra provisions like the additional safety features that
established markets