Tata Motors has revealed that it will be approaching Chinese auto component makers for sourcing components and sub-assemblies required for automatic transmission cars which are not available in India. The challenge in front of Tata Motors is that Indian suppliers for Tata Motors are not willing to supply complex automatic transmission components and sub-assemblies until they are ordered in large quantities. Since demand for automatic cars in India is much smaller than the manual transmission cars and Tata does not have its own Automatic transmission systems for small cars, it has to rely on some outside supplier.
Since the Indian suppliers are not willing to supply the components in lower volumes as it reduces supplier’s profitability, Tata is looking forward to China for the same. There is huge cost difference between sourcing them from Indian suppliers and from Chinese counterparts. Using these low cost automatic transmission kits and components, Tata will be able to offer automatic transmission cars at lower prices and will be able to compete in this gradually growing segment. With increase in congestion on Indian roads and heavy traffic conditions, the automatic cars are gradually gaining sales number but the percentage is still in single digits only.
While there is not-so-good image of Chinese components and materials in India, yet there is a huger variety in terms of the quality which Chinese industry is capable of delivering. China is one of the biggest exporters to developed economies like USA and has all sorts of suppliers who make from very basic quality to very high quality of goods. Also Tata Motors will enter a deal after stringent quality check only.
This move is likely to bring Tata Motors in competition in a segment in which Tata has not been present at. Also with the cost advantage which Tata Motors have because of its higher overall volumes, it will give good competition to Japanese and Korean automakers in India who lead in the automatic transmission cars segment. We will keep an eye on the developments and will share more details as they arrive, stay tuned to Car Blog India for latest updates.
source – CarTrade
