How TATA motors' GENIUS STRATEGY is racing it past Hyundai & Suzuki in India? : Business Case study
Summary
TLDRTata Motors has achieved remarkable success after years of struggle, growing its market share and becoming a leader in India's electric vehicle (EV) sector. The company doubled its market share to 12.14% by FY22, driven by strategies like platform sharing and leveraging synergies across Tata group companies. Tata's platform strategy reduced costs and increased efficiency, while their early entry into the EV space provided a first-mover advantage. Collaboration with other Tata companies enhanced their EV ecosystem, making Tata Motors a key player in the automotive industry. The video highlights Tata's turnaround and growth strategies.
Takeaways
- đ Tata Motors reported its highest-ever annual sales, reaching 3.7 lakh units, marking a 67% increase from the previous fiscal year.
- đ Tata Motors' market share rose from 4.6% in FY16 to 12.14% in FY22, an extraordinary turnaround after 15 years of struggling in the Indian auto market.
- đĄ The company mastered the 'Platform Strategy' by reducing the number of platforms from six to two, which allowed them to scale efficiently by sharing parts across multiple models.
- đ§ Platform sharing has significantly cut costs and minimized waste, leading to more profits per car and less risk in case of model failures.
- ⥠Tata Motors became the leader in the electric vehicle (EV) space in India, with an 80% market share, leveraging a quick-to-market strategy by adapting existing models like the Nexon into EVs.
- đ Tata Motors' entry into the EV market was supported by other Tata Group companies like Tata Power, Tata Chemicals, and Tata Autocom, creating a robust EV ecosystem.
- đ ïž The platform-sharing strategy has increased operational efficiency, cutting down implementation time by one-third and lowering defect rates, resulting in reduced warranty costs.
- đ Tata Motors achieved higher operating profit per car than market leader Maruti Suzuki for the first time in a decade, with further profitability expected as more cars are built on their new platforms.
- đ External factors like currency fluctuations (post-Brexit) and pandemic effects posed significant challenges for the company, but Tata's efficiency helped them manage these risks.
- đ Tata Motors' successful strategies include leveraging economies of scale, minimizing unique parts, and repurposing existing facilities for EV production, which provided them with a first-mover advantage in India's EV market.
Q & A
What was the market share of Tata Motors in FY16, and how has it changed by FY22?
-In FY16, Tata Motors had a market share of just 4.6%. By FY22, this had more than doubled to 12.14%.
What key strategy did Tata Motors use to achieve its rise in the Indian auto market?
-Tata Motors implemented a platform-sharing strategy, reducing the number of platforms from six to two, which helped them optimize costs, reduce wastage, and increase profit margins by leveraging economies of scale.
How did the platform-sharing strategy help Tata Motors reduce costs?
-By using fewer platforms and increasing the number of models per platform, Tata Motors could use common parts across different models, reducing the need for unique parts, lowering costs through bulk orders, and minimizing wastage in case of unsold inventory.
What are the two platforms used by Tata Motors, and what type of vehicles are built on them?
-Tata Motors uses the Alpha platform for smaller cars and the Omega platform (derived from Land Roverâs D8 platform) for larger vehicles between 4.3 to 4.8 meters in size.
How did Tata Motors enter the electric vehicle (EV) market, and what was their initial approach?
-Tata Motors entered the EV market by repurposing existing gasoline car bodies like the Nexon, fitting them with battery packs by hand instead of setting up an expensive assembly line. This allowed them to launch EVs quickly and cost-effectively.
What advantages did Tata Motors gain by having other Tata Group companies support their EV development?
-Tata Motors received extensive support from other Tata Group companies, such as Tata Power for setting up EV charging stations, Tata Alexey for developing connected vehicle platforms, and Tata Chemicals for making lithium-ion cells, enabling an efficient EV ecosystem.
What impact did platform sharing have on Tata Motors' profit per car in 2021?
-In 2021, Tata Motorsâ operating profit per car rose to âč45,810, which was nearly double that of the market leader Maruti Suzuki.
Why was the safety rating of Tata Motors' vehicles significant in their market rise?
-Tata Motorsâ vehicles, such as the Nexon, Ultros, Tiago, and Tigor, received high safety ratings from Global NCAP, with the Nexon and Ultros achieving 5-star ratings. This helped them gain a competitive edge, as safety became an important factor for consumers.
What role did economies of scale play in Tata Motorsâ platform-sharing strategy?
-Economies of scale allowed Tata Motors to reduce the cost of parts as they increased production volumes. For example, increasing the order quantity of a part from 2,000 to 10,000 units significantly lowered the price per unit.
How did government regulations and Tata Motorsâ domestic presence benefit their EV growth?
-As an Indian company, Tata Motors received favorable treatment from government policies aimed at supporting domestic EV production. This provided them with a competitive advantage over foreign brands like MG and Hyundai.
Outlines
đ Tata Motors Achieves Record Sales and Market Growth
Tata Motors has achieved its highest-ever annual sales, reaching 3.7 lakh units, a 67% increase from the previous year. N. Chandrasekaran, the chairperson of Tata Sons, highlighted the rising demand in the electric vehicle (EV) market and emphasized the companyâs strong performance. Despite struggles in the past, Tata Motors has made a remarkable comeback by doubling its market share to 12.14% in FY22 and achieving a dominant 80% market share in the EV space. For the first time in a decade, Tata Motors made more profit per car than Maruti Suzuki.
đ The Complexities of the Automobile Industry
The automobile industry faces numerous challenges, such as high costs for new model production, global factors like geopolitics, currency fluctuations, pandemics, and ride-sharing apps. Companies must keep manufacturing costs low while maintaining profit margins. The shift to new formats, like hydrogen and EV, adds further financial and technological strain. Success in this industry requires low fixed costs and high efficiency. Tata Motors has mastered these elements, enabling them to grow profitably even in such a volatile business environment.
đ ïž Tataâs Platform Strategy for Cost Efficiency
Tata Motors has adopted a platform-sharing strategy to reduce costs and increase efficiency. Instead of having multiple platforms, they now operate with only two: the Alpha and Omega platforms, which allow them to use common parts across multiple models. This strategy results in economies of scale, reduces wastage, and enhances profit margins. For example, by using shared components, the company minimizes losses when a model underperforms. The shift from six platforms in 2017 to two for 10 products has significantly improved their operational and financial performance.
đ Tata Motors' Bold Move into the EV Market
Tata Motors' success in the EV space can be attributed to its swift and innovative approach. Instead of waiting for a dedicated EV platform, the company repurposed existing assembly lines to produce electric versions of their gasoline vehicles, such as the Nexon EV. This approach allowed Tata to quickly enter the market and gain a competitive advantage, producing 100 EVs per day. This first-mover advantage, paired with their ability to control costs, has enabled Tata to dominate the Indian EV market.
đ Tataâs Group Synergy Drives EV Growth
Tata Motorsâ success in the EV space is bolstered by strong collaboration within the Tata Group. Tata companies such as TCS, Tata Power, Tata Chemicals, and Tata Autocom have supported Tata Motors in building a complete EV ecosystem, from setting up charging infrastructure to producing lithium-ion cells and battery packs. This integrated approach allows Tata Motors to produce high-quality, affordable EVs, giving them a competitive edge over foreign manufacturers. Additionally, Tataâs vehicles have received top safety ratings, further cementing their leadership in the Indian market.
Mindmap
Keywords
đĄPlatform Strategy
đĄEconomies of Scale
đĄEV (Electric Vehicle) Market
đĄFirst-mover Advantage
đĄTata Group Synergy
đĄJugaad
đĄGeopolitical Risks
đĄProduct Failure Mitigation
đĄCost Efficiency
đĄGovernment Regulations
Highlights
Tata Motors reported its highest-ever annual sales at 3.7 lakh units, marking a 67% increase from the last fiscal.
The demand in the overall passenger EV market has risen, with Tata Motors seeing strong demand across its businesses.
Tata Motors' market share doubled from 4.6% in FY16 to 12.14% in FY22, with an 80% market share in the EV space.
For the first time in a decade, Tata Motors made more money per car than Maruti Suzuki in FY22.
Tata Motors implemented a platform-sharing strategy to reduce manufacturing costs, moving from 6 platforms for 10 products to 2 platforms for 8-10 cars.
The Alpha and Omega platforms allow Tata to share up to 70% of parts between models, improving efficiency and reducing wastage.
Tata Motorsâ platform strategy reduced implementation time by one-third and cut warranty costs from 1.14% of revenue in FY16 to 0.9% in FY21.
The EV strategy involved repurposing gasoline car assembly lines for EV production, giving Tata Motors a first-mover advantage in the EV market.
Tata Motors increased EV production from 8 units per day to more than 100 per day.
Tata Motors benefits from support from group companies like TCS, Tata Power, Tata Alexey, and Tata Chemicals for an integrated EV ecosystem.
Tata Nexon EV has been a best-seller in the electric vehicle space in India, benefiting from government regulations supporting local manufacturers.
Tata cars have received high safety ratings, with Nexon, Altroz, Tiago, and Tigor achieving 4 and 5-star ratings from GNCAP.
By using common parts across models, Tata Motors minimized losses in case of product failures and increased profits on successful models.
Tata Motorsâ profits per car surpassed Maruti Suzuki in FY21, with operating profit per car at Rs 45,810.
Tataâs EV growth strategy is supported by government regulations, safety ratings, and economies of scale, positioning them as a leader in India's auto market.
Transcripts
tata motors reported highest ever annual
sales at 3.7 lakh units which is a 67
percent increase from the last fiscal
chairperson of tata sons and
chandrasekharan highlighted how the
demand in the overall passenger ev
market has risen the demand for our
vehicles in each of our businesses
remain strong we expect the performance
to progressively improve through the
year quarter by quarter and hoping that
the second half of the fi 23 will be
notably better than the first half of
the year
hi everybody tata motors had been a
struggling company in the indian auto
market for 15 long years in spite of
being in the market for so long in spite
of being backed by one of the richest
houses in the world and most importantly
in spite of having the brand name of the
most noble brand in the country
the company was in such a terrible
condition that they had a market share
of just 4.6 percent in fy 16 all their
projects like indica safari and sumo had
failed in the long run and the losses of
the company were piling up so fast that
their december 18 quarter loss stood at
26 961 crores this was back then the
highest quarterly loss reported by any
company on the dhanal street but within
the next six years the tata motors team
has achieved something absolutely
extraordinary they have more than
doubled their market share to 12.14 in
fy 22 they have an 80 market share in
the ev space and more importantly for
the first time in a decade tata motors
made more money per car than the giant
maruti suzuki itself
the question is how did the tata motors
team achieve such an extraordinary rise
what exactly is their business strategy
that is feeding them towards market
leadership and lastly what are the study
materials to help you understand the
automobile market of the 21st century
before we dive into this case study
there are some dark truths about the
automobile industry that you have to
know number one every time an automobile
company comes with a new car
the company spends hundreds if not
thousands of crores into setting up the
factory floor buying the machinery
ordering the parts and deploying labor
number two in spite of spending so much
money even if they build the best car in
the category there is absolutely no
guarantee that it will sell well why
because automobile companies are
affected not just by the competition but
also by geopolitics and government
regulations for example after the first
brexit vote as soon as pound dropped 10
percent of its value to euro jlr had to
cough up almost 2 300 crores on the
account of currency fluctuations alone
as a result their profits took a hit
similarly there are factors like the
pandemic and ride sharing apps like ola
and uber whose growth itself is based on
decreasing car ownership and if not for
all this even if your competition comes
out with an unsafe car with bad build
quality people would still buy that car
because in india people are more price
sensitive than they are life sensitive
and lastly after you spend a billion
dollars and 50 long years into research
and development to achieve extraordinary
levels of efficiency with petrol car
manufacturing suddenly the entire world
will push you to a hydrogen format or an
ev format which again needs a billion
dollars and needs 50 long years to
perfect so long story short if you're in
the automobile business bankruptcy is
always at your doorstep so if you want
to succeed you have to keep your
manufacturing and fixed cost extremely
low and at the same time keep your
margins high without making the car
unaffordable for the customers and only
automobile engineers can understand that
this basic statement can be said easily
but it is an insanely difficult process
in automobiles
and guess what this is exactly what the
tatas have mastered in the past five
years the question is how
well the first part of this answer lies
in something called the platform
strategy
for those who don't know if you look at
the architecture of an automobile a
platform is the mechanical base that a
car is based on it includes major parts
such as axles suspension steering column
pedal box engine mountings and in some
cases the floor pan on which all the
components are mounted onto
so if you look at vw they own multiple
brands like skoda audi and even mini
cooper and if you look at their latest
release vw virtues it's actually built
on the same platform as skoda slavia so
the number of common parts in both these
cars is a lot and each one of these
platforms requires millions of dollars
to be designed so when you make cars in
different platforms they would need
different parts so you need to order
multiple uncommon parts which incur a
lot of cost and if this were to be
represented pictorially on a graph this
graph will consist of four types of
parts the first are carrier parts as in
the parts that are common for this and
other platforms then we have minor
modified parts new common paths and new
unique parts and this segment of the
carry-over parts are the most economical
type of parts because you can order them
in large quantities and use them for
multiple models for example when the
tatas order 2 000 unit parts at 50
dollars per unit when it increases the
order value to 10 000 units it could get
it at 35 dollars per unit secondly this
also leads to very less wastage because
if they order parts for ten thousand
cars but they end up selling only eight
thousand
the common parts of those two thousand
units could be used for other models
whereas the unique parts will be wasted
this is nothing but the simple effect of
economies of scale now if you look at
tata motors in 2017 they had six
platforms for just 10 products which
meant that the number of carryover parts
were less therefore the cost of making
the car was high and the wastage was
also high eventually the profit were
less but now they've completely changed
their approach and turned to just two
platforms and just these two platforms
will be used to make eight to ten
different cards in the next three years
that is a drastic increase from 1.6
models per platform to four to five
models per platform
these two platforms are the alpha
platform which is meant for smaller cars
and omega platform which is derived from
land rovers d8 platform so omega is
meant for bigger vehicles of 4.3 to 4.8
meter size
and here's how ladies and gentlemen the
magic of the platform sharing strategy
plays out on the alpha platform if tata
ultros is the first vehicle to be made
it will then be followed by a small suv
like hanbill then by the next generation
of tiago followed by tigor and then by
nexon so when ultros is built on the
alpha platform it has around 30 carrier
parts but as the second product comes in
the number of carry overs will increase
and by the time the fourth product is
launched in the market the carryover
parts will be around 70 of the total
parts so these vehicles on the platform
are expected to have the same seat
position same steering wheel and pedal
box positions this means fewer parts for
the company to manage fewer design
changes to make for a new model launch
more volumes per tool and less wastage
and most importantly more profit margins
and lastly if one of the products in the
platform fails then the losses increment
by the company decreases by a large
extent for example
if ultro sells 400 000 units and
hornbill sells 150 000 units but thiago
ends up selling only 20 000 units then
the tartars will lose less money because
they would not invest millions into a
special platform and since thiago will
be built on the same alpha platform
this model will have a lot of carrier
parts and very less unique parts
so even though the model fails the tatas
will save on both the initial platform
cost and the unique parts cost
and eventually the carrier parts could
be used for the next model this is how
sharing a platform helps you minimize
the losses in case of a product failure
in the market
apart from that the tatas have already
gained multiple advantages like the
implementation time has been reduced by
one third and since the number of
suppliers is very less the defective
parts per million have sharply reduced
so because of that the warranty cost
fell from one point one four percent of
the revenue in fy 16 to 0.9 percent in
fy 21. these are some of the many
efficiency changes because of which in
2021 for the first time in 10 years tata
made more money per car than the market
leader maruti suzuki itself while tata
motors operating profit per car rose to
45 810 rupees
it was nearly double that of maruti and
fun fact is that currently only three of
the six tata cars are built on the new
platform and they make up only forty
percent of the volumes as of now
so as time passes and the volume of cars
in the new platform increases the profit
margins are expected to increase further
this is the first reason for tata's
iconic rise in the indian auto market
and this brings me to the second pillar
of tata motors iconic rise which is
their entry into the electric vehicle
space now people we all know tata nexon
ev has been killing it in the av space
by becoming the best-selling eevee in
the country
but very few people know that the tatas
actually made their way into the eev
space through a jugaad the question is
how
well technically the platform that is
needed to build ev takes up a lot of
time to be made so while other brands
were and still are busy building and
designing their platform the tata motors
team just repurposed an unused shop
floor and according to print without
waiting for a fancy assembly line
nexon's gasoline suv bodies were wired
and fitted with battery packs by hand
this way they could have the first more
advantage in the market and could easily
test the acceptance of ev in the indian
market
and guess what
initially they made just 8 suvs per day
but now they are making more than 100
cars every single day
so they could very tactfully cut the
investments by a huge margin and were
able to make the initial headway into
the market by the way guys again saying
that they turned a gasoline car into ev
is very easy but it's an extremely
complex and critical task because had it
been so easy every other automaker would
have done it right because one thing
gone wrong one fire incident and the
entire segment will come crashing down
this is the first reason why the tatas
are able to have the first more
advantage in the ev space of india
and the second reason for their insane
growth is their beautiful support from
the group companies of the tatas and
when it comes to ev it almost looks like
their companies were just meant to be a
piece of the puzzle because if you look
at their operations you will see that
tcs aided tata power in setting up ev
charging stations with its charge core
platform because of which the project
actually saw 300 charging stations
joining the network within just 12 weeks
similarly tata alexey partnered with
tata motors in developing their unified
connected vehicle platform
then we have tata capital and tata
motors finance for vehicle finance and
insurance and when it comes to
infrastructure tata power is already
aiming to build 10 000 stations over the
next five years and lastly while tata
chemicals makes lithium-ion cells tata
autocom assembles battery packs so if
you see seven group companies have
actually come together to bring an ev
ecosystem in india as a result like we
learned from our adani episode when
companies of the same family come
together to share their resources they
can easily produce a high quality
product at an affordable price
and that is exactly what the tatas are
doing with nexon and tigor
cherry on the cake is that government
regulations by default support the tatas
than an mg or hyundai because tata
motors is an indian company apart from
that we have other factors like 5 star
rating from gn cap for nexon tata ultros
becoming the first premium hatchback to
get a 5 star safety rating and even
tiago and tigor who got 4 star rating
which is very rare in case of small car
segment
these are few of the many significant
reasons why tata motors has been rising
from the downfall in the past 6 years
and now what remains to be seen is how
do they compete with a giant like maruti
suzuki when they bring in fresh models
into the market
and this brings me to the last part of
the episode and that are the study
materials to help you understand the
indian automobile space better meanwhile
if you are someone wants to invest into
the growth story of the tatas you could
make your investments into the house of
tata small case small kiss is a
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small case consists of hand-picked
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5-10 years the best part is that each
one of these small cases are managed by
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make any investments you can read their
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indian stock market so if you want to
make the most strategic investments or
if you want to educate yourself about
making strategic investments into the
stock market download the small case app
from the link in the description moving
on the first thing i'm attaching is this
research gate article on the platform
sharing strategy secondly i am attaching
2020's fin shots article which throws
light on how brexit put tata motors into
trouble after their jlr acquisition and
lastly i am attaching a super detailed
kpmg report on the rise of av business
models and frameworks in india so do
read through them and let me know what
you think that's all from my side for
today guys if you learned something
available please make sure to hit the
like button in order to make youtuber
happy and for more such insightful
business and political case studies
please subscribe to our channel thank
you so much for watching i will see you
in the next one bye bye
[Music]
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