First Families of Indian Auto Industry and the Economy of Scope

3 08 2008

 

Till a few years ago, large Indian business houses active in the automobile sector were ensconced in their clearly demarcated turfs. Tata Motors (TM) has been a clear leader in the commercial vehicle market; Mahindra & Mahindra (M&M) has been a dominant player in both utility vehicle and tractor markets while Bajaj Auto (BA) has been a reigning colossus in two-wheelers and auto rickshaw markets. 

 

The business houses of the Tatas, Mahindras and Bajajs did avoid any direct competition In industry meets, they were seen as friends and usually expressed similar views from the same platform. Anand Mahindra and Rahul Bajaj, often came together to speak on issues related to manufacturing sector in general and automobile industry in particular. Keshub Mahindra, Chairman of Mahindra and Mahindra, has been on the board of Tata Steel for a long time.

 

This cosy arrangement was laid to rest when the opportunities started reaching global scale along with the opening up of the domestic market to foreign behemoths.

 

Years ago, TM launched utility vehicles Sumo, Sierra and Safari in direct competition to M&M. Now, Mahindra Scorpio and Safari are slugging out in the same segment of the SUV market.

 

M&M entered the BA turf by launching three-wheeler carrier vehicles.

 

TM launched Tata Ace (four-wheeler carrier vehicles) a category killer which cause considerable headache to both M&M and BA.

 

M&M with the purchase of Kinetic Motors (KM) this week has now stepped into BA’s two-wheeler market.

 

But the mother of all battles will now be waged in the passenger car segments.  TM’s soon-to-be launched Nano will have to lock horns with BA’s ( in collaboration with Renault) sub – $ 3000 car expected to be launched next  financial year.

 

M&M’s Logan (manufactured by a JV between M&M and Renault) is already busy battling with TM’s Indigo.

 

Clearly, while seeking competitive advantage, the first families of the Indian auto sector have decided to go beyond the economy of scale in their respective territorial confines.The economy of scope seems to be the new frontier in balancing production efficiencies, range of products, dstribution clout, consumer preferences and price points. 

 

 

That day may not be far off when tractors from BA, motorcycles from TM and buses from M&M will grace Indian roads. 

 

– G. Mohan.

 

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One response

7 08 2008
Venkat Subramaniam

In the pre-globalisation era, one of the major constraints for the Indian automotive companies was design and new product development. Hence, the companies held to their forte and did not venture into unknown territories.
Now, most of these companies are either forging alliances with their foreign counterparts, or buying them out. Tata Motors must have seen a major value in the areas of design when they acquired Landrover and Jaguar.

Given this scenario, economies of scope has become the new mantra.

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