An affordable, fuel-sipping “people’s car” from India could revolutionise the automotive world as global carmakers take a closer look at the lower priced end of the market.
Humvee, anyone? Not likely. This gas-guzzling military crossover, along with a fleet of oncepopular suv models, is likely to see its 20th century market appeal vanish, consigned to the dustbin of history by skyrocketing oil prices, a u-turn in the world economy and a growing realisation that “good things come in small packages.” If so, Detroit and the world automotive industry will be downshifting not only their companies but also their cars. A report published at the start of the year in Time magazine projected a 65-percent increase in worldwide sales of minicars between 2002 and 2012, to 38 million vehicles.
The Nano, a low-priced car planned by India’s Tata Motors, not only sent Motor City executives racing back to the drawing board, it also brought the idea of emerging markets from the rearview mirror into the fast lane.
Dubbed the “people’s car,” the Nano is really more a hybrid motorcycle married to the current minicar – a bridge for three-wheeling Indian families. Priced at 100,000 rupees (2,500 USD), the Nano might not make a dent in the U.S. market or scratch the surface of the newly rich urban Chinese, who see a big car as a sign of a big bank account, but it has caused well-established automotive companies to reevaluate the lower-priced end of the market.
While automotive executives around the world vent their frustration over the loss of big profit margins built into big cars, Sapa Heat Transfer has moved into position to provide Tata Toyo Radiator Ltd, the largest cooling system supplier in India, with clad strips for the Nano’s heat exchangers and broad cooperation on multiple projects.
“Sapa is in line with the other suppliers we buy from, but the rise of the Chinese yuan against the U.S. dollar (It was pegged to the USD until 2005) has been causing some problems,” says Rajendra Shete, Tata Toyo’s purchasing manager. “Also, Sapa Heat Transfer is facing stiff competition from Japanese suppliers in regard to quality.”
Sapa Heat Transfer has been a supplier to Tata Toyo since the late 1990s and has gradually increased its supply role since 2006. Today it supplies more than 2,500 tonnes of clad strips for heat exchangers annually and is under contract until 2011.
Sapa Heat Transfer Shanghai has already geared up to provide logistics solutions and technical competence in Mumbai, India. It has had a technical engineer on site since October 2007 and plans to have a warehouse in the near future.
Tata Toyo is an important long-term Sapa customer in the subcontinent. Thomas Ren, export sales manager at Sapa Heat Transfer, says, “This cooperation is of special interest for us not only to see that we can participate in a lower-priced car project for Tata but also to see that we can maintain satisfactory business targets.”
The right price and consistent quality are benchmarks for any purchasing manager as Chinese suppliers grapple with inflation, raw material shortfalls and a rising currency. Partnering with factories, introducing international practices in factory layout to increase efficiencies, reducing waste and maintaining viable profit margins are the keys to success.
Text: Kurt Braybrook