Prince of parts

Philip Chacko
15 July 2003

Automotive component manufacturers are to the automotive industry what spices and seasonings are to a dish: mostly invisible but crucial to the character of the finished article. Typically, about 60 to 70 per cent of the many parts in a vehicle are procured from an outside supplier. It''s a business that generates revenues of hundreds of billions of dollars worldwide, and, increasingly, it''s moving out of traditional production centres in America and Europe to low-cost, high-quality manufacturing hubs in Asia.

China and India have for some time been prime destinations for global auto makers seeking components for their vehicles at prices that are 20 to 30 per cent lower than anywhere else. But while China''s auto-parts industry has cashed in on this demand, its counterpart in India has lagged behind. The situation may be about to change, though.

There are about 500 companies in India that make components for cars, two-wheelers and commercial vehicles. It''s a mix of geriatric niche operators, established but conservative players, and ambitious colts determined to make the most of a market that promises exceptional growth. In the last category is Tata Autocomp Systems, or Taco (www.tacogroup.com), the Pune-based enterprise that started as a logical extension of the Tata Group''s ambitions in the automotive space.

Starting small
Taco''s beginning, back in 1995, was modest (it was established in what amounted to a shed in Pune), but its goals were always big. Today the company has a turnover of Rs 806 crore and it exports products and services worth Rs 67 crore. It has 3,000 employees, a clutch of joint ventures with industry-leading companies from the US, Japan, Germany, France and South Korea (see ''Joint effort''), and clients of the calibre of, among others, General Motors, Ford, Toyota, Honda and DiamlerChrysler.

Taco sprang from Tata Group chairman Ratan Tata''s vision of an integrated Indian automobile industry where technology would be on par with world standards. Tata''s dream of making an indigenous car is well documented, as is his success with the Indica venture. Not so his parallel objective of a component industry that would complement India''s car-making abilities. Tata believed that the group had to be a catalyst — and Taco a vital cog — in this process.

The roadmap was laid out: establish associations that would bring global auto-parts leaders to India, not through limited relationships as in the past, but through comprehensive technology partnerships that would help the country advance its technical capabilities quickly. It made good sense. Since Tata Engineering, maker of the Indica, was aiming for the highest standards, it had to have the best of components. The only way that could happen in a hurry was through technology from outside.