Today's Top Gainer
Note:Top Gainer - Nifty 50 More
Much hype is made over Tata Nano, the one-lakh car, from the Tata Enterprise. While the feat is indeed uncommon, the buzz deafens the other remarkable achievement of the empire in the form of the goods vehicle Tata Ace in the relatively understated and unglamorous market of Light Commercial Vehicles (LCVs). This piece attempts to unfold the saga of the momentous feat that was engineered by the same whiz kid who has scripted the Nano story.
The year was 2001. Tata Motors had posted a historic loss of Rs. 500 crore. The company was forced to examine its product portfolio. A quick analysis revealed footprints of emerging trends. Better roads and infrastructure in the country had led to the creation of umpteen depots and warehouses along highways. This naturally meant heavier and faster highway traffic. But at the same time, it meant a whopping increase in the demand for transporting smaller loads into cities, towns and villages, popularly known as feeder routes.
For Highways vehicles, Tata’s were already a name to reckon with. Plus, they had recently struck a deal with Daewoo for multi-axle vehicles. The ‘below 1-tonne’ carriers for feeder routes, however, seemed a greener pasture for the auto giant and it made perfect business sense to tap this segment dominated by the three-wheeler market. The company had, in the past, attempted to tweak its 2-tonne carriers with limited success but certainly no match for the competition by the three wheeler champions.
It was time for introspection. A young divisional manager called Girish Wagh was handpicked to study the pros and cons of the below-2 tonne market. The quest began slowly and steadily. Heaps of market information lay at the dissection table but hardly any clues gathered. The challenge posed by the existing low-cost market offerings still loomed large. The company was unsure whether to join the three-wheeled bandwagon or challenge it. Six months were lost in perplexment till the market survey finally made the following key revelation:
“A farmer in Andhra Pradesh links a four-wheeler with social status – worthy enough to fetch a good bride”
This changed the course of the thought process. The focus was now on a dream vehicle that will offer business benefits as well as social status to the rural customer. In a knowledge session with the UK-based Warwick Manufacturing, Tata Engineers were urged to come up with a “quick & dirty solution” to move small loads. After nine months on the job, the company settled on the ‘destined’ decision – a four-wheeled goods carrier in a three-wheeled market.
The project was attached aggressive cost targets and an equally stringent quality goal: make a noise-free, vibration-free ‘car-like’ mini truck. Cost control was built into every stage of design – initial design & prototype, tooling and manufacturing and every component – engine, gearbox, cabin design and transmission. The market survey further found room for a four-wheeler sub-one tonne offering but only at a slight premium to three-wheeler alternatives.
Tatas found their target market at the bottom-of-the-pyramid – comprising semi-urban and rural segments – who commanded approximately 85 per cent of the total market. The need was defined as a blend between a pick-up & a three-wheeler – offering the lowest life-cycle cost including purchase price, operating cost and resale price.
The basic design and vehicle shells were decided in a jiffy. A great debate ensued over a car-like bonnet vs. a truck-like front. The Chairman himself got involved and drew the interior scheme and dashboard on the whiteboard in an impromptu session. The sourcing and tooling experts ensured Cost-effective e-sourcing order for sheet metal components, supplier buy-in to provide materials right from design stage and In-house Tooling at less than Rs 50 crore (vis-à-vis Rs. 700 crore spent on Indica)
Engineers toyed with outsourced engines but cost budgets proved to be a show stopper. Eyes fell on the Indica engine as a compromise choice. New mounts attempted to fix the irksome vibration and noise that Indica engines were guilty of. The Indica engine was sliced into half and a two-cylinder diesel engine took concrete shape. Finally Tata Ace was born. The project cost of Rs. 200 crore was spread over five years with factory set up cost under Rs 100 crore. Over 90 per cent of components were outsourced as against the normal cap of 60 per cent.
The project champion Wagh supervised 350 engineers on the vehicle design. With diverse talent contributing to the cause, the project was indeed a winning exercise in cross-functional participation.
What’s more, the search for Ace engine led to the inception of Tata Power Systems – the company’s engine business. No wonder, Ace is the company’s brand ambassador – expected to turn lower-end customers into Tata loyalists for larger vehicles and boosting exports as well. The market response to Ace was heartening:
Ace strongly emerged as the preferred choice for intra-city travel. Users were very happy with the cabin occupant space – a marked departure from the crammed space of three-wheelers. The raised loading height found favor with the majority, enabling easy loading and unloading. Most of the users lauded the flexible loading tray, compatible with a variety of structures of the user’s choice. However all was not hunky dory.
Vehicular noise and vibration levels were found similar to Indica (quite obviously an inherited trait) and not the rugged Tata Truck family, but that was hardly any benchmark. The user experience on gradients & slopes as also with overload/less load has not been all too pleasant. And “car-like features” is not really an obsession with the target segment contrary to what the company’s research revealed. The traditional user still views LCV as a workhorse meant for rough use. Hence, sturdiness of the vehicle gains priority over every other need. Users seem concerned over the risk-prone fiber front of the Ace and crave for bigger tires and better ground clearance on rural roads.
Nevertheless, we see scores of Aces happily plying on urban, semi-urban and rural pockets delivering a wide variety - from food grains, raw material & durables to gas cylinders, water and hardware items. Ace has shown that unlikely markets can help reap unexpected dividends provided one is willing to look within and see beyond.