India Sourcing Summit 2008

Strategic Sourcing
1

Tata Motors Overview Global Aspiration of Tata Motors

China Sourcing

Strategic Sourcing

Tata Motors
Indias largest automobile company

Revenue $ 7.2 Billion (2006-07)

Market leader in Commercial Vehicles & 2nd largest in Passenger Vehicles in India

2nd largest medium and heavy bus manufacturer & 5th largest in medium & heavy trucks in the world
1st company from the Indian engineering sector to be listed on the New York Stock Exchange Over 4 million vehicles on Indian Roads Employee strength of around 22,000 employees

Strategic Sourcing

Milestones
1945 : Tata Engineering and Locomotive Co. Ltd., was established to manufacture locomotive and other engineering products 1954 : Collaboration with Daimler Benz, West Germany 1954 : Launch of the first Tata Mercedes Benz Truck 1969 : First Tata branded trucks 1986 : First indigenously designed light commercial vehicle, Tata 407 1991 : Launch of Tata Sierra 1992 : Launch of Tata Estate 1994 : Launch of Tata Sumo

Strategic Sourcing

Milestones
1998 : Launch of Tata Safari 1998 : Launch of first indigenous passenger car - Tata Indica

2002 : Launch of Tata Indigo

2003 : Announcement of plan for small car 2004 : Launch of Indigo Marina : Acquisition of TDCV 2005 : Launch of Globus & Starbus : Launch of ACE : 21% stake in Hispano Carocera : MOU with Fiat

Strategic Sourcing

Milestones

2006 : JV with Marcopolo (Brazil) : JV with Thonburi (Thailand) : Distribution of Fiat branded cars in India

2007 : Small car plant construction in West BengaL : JV plant at Ranjangaon with Fiat : Magic and Winger launched 2008 :Unveiling of TATA Nano, New Indica , Sumo Grande

Strategic Sourcing

Key Subsidiaries
Tata Daewoo Commercial Vehicle Company Limited (TDCV) : Manufacture and sale of heavy commercial vehicles Telco Construction Equipment Company Limited (Telcon) : Construction equipment and allied services Tata Technologies Limited (TTL) :Specialised Engineering & Design Services (E&D),Product Lifecycle Management (PLM) and product centric IT services TAL Manufacturing Solutions Limited (TAL) : Factory automation solutions and machine tools HV Transmission Limited (HVTL)and HV Axles Limited (HVAL) : Gear Boxes and axles for heavy & medium commercial vehicles

Tata Motors European Technical Centre plc (TMETC ) :Design engineering and development of products for the automobile industry
TML Financial Services Limited (TMLFSL) : Preferred financier for customers of Tata Motors

Strategic Sourcing

Associate Companies
Tata Cummins Limited (TCL) : High horse power engines for medium and heavy commercial vehicles
Tata AutoComp Systems Limited (TACO) : Domestic and foreign Joint Ventures in auto components and systems Hispano Carrocera S.A (HC) : Bus manufacturing

Strategic Sourcing

Manufacturing Base
Jamshedpur Commercial Vehicles Pune Commercial as well as Passenger Vehicles Lucknow Commercial Vehicles Pantnagar Commercial Vehicles South Korea Heavy and Medium Trucks Spain High Capacity Buses Morocco High Capacity Buses

Strategic Sourcing

Tata Motors Overview Global Aspiration of Tata Motors

China Sourcing

Strategic Sourcing

10

International Business
Across Europe, Africa , Middle East, South East Asia, South Asia, South America
Focus on select geographies - South Africa, Italy, Spain, Turkey etc. Franchisee/joint venture assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal.

Strategic Sourcing

11

International footprint
Acquisition of Daewoo Commercial Vehicles, S Korea
21% stake in Hispano Carrocera, Spain for buses & coaches JV with Thonburi in Thailand for pick-up trucks JV with Brazil-based Marcopolo for buses & coaches

Strategic Sourcing

12

Strategic Alliance with Fiat

Broad Memorandum of Understanding in 2005 Tata Motors distributes Fiat branded cars in India JV factory in Ranjangaon to produce both companies cars & Fiat powertrains Fiat to manufacture Tata licensed pick-up in Argentina MOU with Iveco for feasibility study

Strategic Sourcing

13

Tata Motors will manage product development programs using all our synergies to meet timelines with thorough product validation
Engg Research Centre Pune, Jsr, Lko TATA Daewoo Korea Hispano-Spain & Marcopolo JV Aggregate Suppliers

Managing Product Development needs of Tata Motors

Outsourcing Partners

TATA Technologies INCAT, UK Bus Body Building ACGL - Goa

TML-European Tech Centre, UK

Strategic Sourcing

14

Tata Motors Overview Global Aspiration of Tata Motors

China Sourcing

Strategic Sourcing

15

Sourcing Strategy
Focus Geography: U.S. Japan, Europe Components: In Vehicle Networking, Navigation System, Body Control Module, Automatic Lighting Controls, Power Antenna etc. Competitive Advantage: Advanced Technology Focus Geography: India Components: Forgings, Castings, Fasteners, rubber parts etc. Competitive Advantage: Lower cost of production and low transportation cost. Focus Geography: US & Europe Components: Airbag, ABS, Power Train, Automatic transmission, Vehicle Architecture, EMS, etc. Competitive Advantage: Developed Advanced Technology Focus Geography: China, Thailand, Taiwan, South Korea, India Components: Power Steering, Wheel Rims, Clutch Boosters, Batteries, etc. Competitive Advantage: Economies of Scale & updated technology
High

Technology

Low

Low Value of Component

High

Strategic Sourcing

16

Global Sourcing
Support Global manufacturing footprints by establishing world class vendor base in territories of interest

Exploit FTAs by identifying sourcing opportunities in different

geographies which enjoy cost competitiveness due to unique local factors Explore global market place to identify of the shelf / library contact to minimize development / tooling investments as also use proven products . Overcome scale disadvantage faced by local suppliers by identifying sources abroad who release much larger scale economies due to high volume of production for the parts in those geographies.

Identify sources abroad to counter capacity shortage with domestic

supply base.

Strategic Sourcing

17

100

120

Strategic Sourcing

Indian Retail Price

100

20 40 60 80

Indirect Taxes

16 4

Cost of Capital

Capital Productivity

Labour costs

Labour Productivity

Manufacturing Margins

Retailing Margin

Manufacturing Cost In India Supplier is Higher by 34 % wrt China

66

Chinese Retail Price

18

China offers substantial cost benefits and as a result, many of our Indian competitors are looking for sourcing from China

SAVING POTENTIAL AND PLANS OF OTHER INDIAN COMPANIES

Average 35%
Cum m ins Goodyear Capital expenditures Mechanical Parts Electronic & electrical parts Plastic & rubber parts Metal parts Others 0 10 20 30 40 50 60

Primary research

Secondary research

Source: Tata Strategic analysis, BCG study

Strategic Sourcing
19

Components Sources From China

Steering System

Clutch Booster

Glasses

Wheel Rim

Front & Rear Axle Parts Tyres

Bearings

Strategic Sourcing

20

Thank You

Strategic Sourcing

21