India honing edge in auto design, R&D software

The increasing use of high-end software in automobile design and R&D has made Indian auto majors leverage the country's software prowess and gain an edge over their European and American competitors.

Most are expanding their research and design services either organically or by acquisitions, which will enable them to launch newer models in the market quickly and efficiently in the coming years.

By June 2009, the $6 billion Mahindra & Mahindra group (M&M) will open its new $116 million automobile design and development facility called the Mahindra Research Valley (MRV) spread over 150 acres in Mahindra World City in Chennai. Primarily, this R&D facility will cater to M&M's design needs, and later may consider doing similar high-end work for other OEMs.

Tata Motors has six R&D centres that span India, South Korea, Spain and the UK. In 2006, the Tatas acquired INCAT – now an arm of Tata Technologies – that conducts specialised R&D work for the Tata Group and others. Recently, Tata Motors bought a minority stake in Italian car design firm, Pininfarina, which has designed some landmark Ferraris.

In April this year, French major Dassault Systemes tied up with Argentum Engineering Design's (AED) Centre for Excellence to train automobile engineers who would design, test, validate and manufacture new vehicle models for domestic and international OEMs.

According to a Nasscom report, the automobile and aerospace design industry is currently estimated at $ 144 billion, in which India's current share is valued between $3 billion and $5 billion annually.

This amount is estimated to increase to around $16 billion over the next two to three years. Global spending on engineering services is expected to touch $1.1 trillion by 2020.

Outsourcing to India will touch over $ 50 billion by then.

High-end software like 3D, PLM, and V5 provided by software majors like Dassault Systemes, Siemens and IBM have revolutionised the way new models of vehicles are designed, tested, and manufactured. The advantages of using Indian software talent are obviously in costs. Indian engineering talent is 45 per cent cheaper than an American counterpart.

The savings in time and money gained by using high-end software are also obvious. "We are aware of anything between 25 and 40 per cent savings in time achieved by auto majors when launching a ‘concept to manufacture' programme," said Vivek Marwah, country marketing head, Siemens PLM.

In high performance motorsport, where turnaround time is essential, applications like PLM have reduced design time. Toyota Motorsport uses Dassault Systemes' PLM solutions to reduce aerodynamics design time by 80 per cent and achieve the first-physical assembly of the car in only two days, compared to three weeks previously. For an F1 racing team, time saved off the track is crucial.

Costs saved in building and testing models are equally substantial. "Earlier, we used to build 50 vehicles for crash tests. Now after using virtual crash tests, we use only about 40 units," explains Dr Arun Jaura, chief technology officer, Mahindra & Mahindra.

The costs saved in tests like these vary depending upon the skill sets of engineers and the country's regulatory agency requirements. Another testing expert said most new car models launched in Europe now undergo only one physical crash test, while the rest are simulated. The costs of constructing test prototypes can be enormous.

Despite a significant amount of contribution from Indian engineers in the development of models like the Swift, Dzire and SX4, Maruti Suzuki still relies on Suzuki, Japan for training its engineers, though the automaker plans to increase its R&D strength to 1,000 by 2010.

And players like Argentum hope to offer the same in India through its tie-up with France's Dassault Systemes. "Through this tie-up, we hope to train engineers who will produce engineering solutions, and not software people to do the same," said S D Pradhan, CEO, Argentum Engineering Design.

Currently, India enjoys a reputation as a provider of low-end research work that revolve around small cars. The current challenge is to change that perception. "The country has had a reputation for low-end design work. In setting up the Mahindra Research Valley, we would demonstrate to become the epicentre of engineering design and development for high-end work. We have the potential," said Dr Jaura.

India's journey to becoming the world's hub for automobile design and development may not be easy. "Opportunities are plenty, but competition abounds. China, Latin America, East Europe... each one with certain natural advantages," said R Srinivasan, executive vice-president, Avtec, a Hindustan Motors subsidiary.

Skoda starts work on small-car platform

BANGALORE: Czech automaker Skoda is working to develop an all-new platform for its proposed small car project, distinct from the existing platform of parent Volkswagen, a top company official said.

To be made in India, the car is expected to make its debut within two years and will be sold globally, Skoda India Director Thomas Kuehl said. Skoda’s smallest offering is the premium hatchback Fabia, which was launched in India in January. “Our small car will be launched first in India. The car will cater to virgin markets and will be priced in the Rs 3-5 lakh bracket,” he said. Simultaneously, Skoda will focus on expanding its product portfolio and has eight models lined up for launch in the country within five years.

"We hope to sell 100,000 cars annually beginning 2012." To support its growth, Skoda plans to expand capacity at its Aurangabad facility. The company has applied for the allotment of 50 hectares acres at the location. The plant — which makes the Laura, Superb, Octavia and the Fabia — has the capacity to build 30,000 vehicles annually.

The production of the Fabia will move to VW’s Chakan facility by 2009 and free up space at Aurangabad. Skoda will introduce its Roomster multi-utility vehicle by the end 2008. Plans are being made to launch within a year the Fabia Combi — a longer version of the hatchback — and the new Superb sedan built on VW’s B6 platform. In 2010, the company will launch the Yeti sport utility vehicle.

Maruti Swift sales cross 2-lakh mark

Country's largest carmaker Maruti Suzuki's runaway success with 'Swift' has crossed a new milestone in sales – two lakh units – with the car becoming one of the fastest selling models in India since its launch three years ago to achieve this feat.

"Maruti Swift has attained new benchmarks very swiftly. It has emerged as the fastest selling car in India by completing the two-lakh units sales mark in less than 36 months," a company official said.

The company launched this premium hatchback in petrol variant on May 25, 2005. In its first year of launch, it clocked sales of 61,200 units.

"The popularity of petrol version inspired the company to launch a diesel variant in January 2007, powered by much acclaimed and the most compact diesel engine in its category," he said.

At present, 60 per cent of 'Swift' produced, are in diesel variant.

Besides, Maruti also registered a sale of 9,490 units of 'Swift' during April, the highest sale in a single month.

"It is the only model to undergo a face-lift in less than three years of its launch. The company launched a refreshed version of Swift earlier this year," the company official said.

According to the monthly data of Society of Indian Automobile Manufacturers, Maruti sold 51,766 vehicles in the domestic market under all categories during April, a jump of 22.30 per cent over the previous year's corresponding sale of 42,326 units.

Maruti's this successful model, which is priced in the range of Rs 4 lakh to Rs 5.17 lakh, is awarded with numerous national and international awards over the last three years.

Force India looking for new Lewis

Vijay Mallya is confident he will one day discover India's answer to Lewis Hamilton.

Force India co-owner Mallya is only six months into his long-term project with the team after investing heavily.

Upon his arrival, Mallya felt experience was required to partner the emerging talent that is Adrian Sutil, and so opted for veteran Italian Giancarlo Fisichella.

That might have felt like a slight on Narain Karthikeyan, who has been making a name for himself in A1GP these past few months with Team India.

But Mallya was eager for his team to embark upon a swift ascent, and felt Fisichella's know-how would serve as the ideal foil to Sutil's burgeoning youth.

However, that does not mean the flamboyant billionaire has given up on discovering an Indian driver to race in his Indian team.

"I respect each and every individual regardless of nationality or class, and in my team I want the best people available," insisted Mallya.

"I've no doubt that in a population of 1.2 billion people we will find a Lewis Hamilton somewhere.

"However, it will take time and experience, and that's why we have Giancarlo Fisichella at the moment.

"But we are willing to invest in finding Indian talent and nurture him or her to the highest levels."

For now, Mallya's primary concern is cracking the secret that has so far eluded the team in qualifying.

Neither Fisichella nor Sutil has managed to make it into the second round in the four grands prix to date this year, in turn compromising their race as they have consistently started in the final six on the gird.

Fisichella at least came close to scoring the team's first point in the last outing in Barcelona 11 days ago, with the 35-year-old finishing 10th.

Mallya knows if Fisichella had been higher placed at the start he would more than likely have claimed a top-eight place come the chequered flag.

Ahead of this weekend's Turkish Grand Prix in Istanbul, Mallya added: "I was disappointed with qualifying (in Spain) after such a strong practice on Friday and Saturday morning.

"Clearly what I'm noticing is that we're not able to get good qualifying pace out of the car, which is our Achilles heel, and we need to investigate that thoroughly.

"If we start a few places up the grid we won't get into traffic or be a little accident prone like we are when starting from the back.

"This is just the start for us, though. Nobody expected us to be as competitive as we are. We've been on the grid for little over five months and look how far we have come.

"We are deploying all resources to improve, and although no-one expects miracles, the fact we finished in the top 12 in Bahrain and Malaysia and top 10 in Spain shows we are a genuine midfield contender now, not a backmarker.

"Of course, the field is incredibly tight, with at least 10 cars within a couple of tenths (of a second) of each other.

"It's a bitter contest now where everything counts, but I am delighted to see we are in that game."

Carlos Ghosn, CEO of both Renault and Nissan Motor, faced some petulant shareholders at the French automaker's annual meeting on Apr. 29 in Paris. One complained that the stock was down more than 30% this year. What, he wanted to know, had happened to the Ghosn Effect?

Good question. The Ghosn Effect once referred to the galvanizing impact the CEO had on Nissan, when he was dispatched by Renault, Nissan's controlling shareholder, to turn around the foundering Japanese company almost a decade ago.

Today, Ghosn's critics use the phrase to describe a boss who they worry may be stretched so thin he cannot manage either Nissan or Renault as well as he could manage one company. He certainly has hit a boggy patch. Sales at Renault have flattened out. Profits last year slid 7.6% and won't do any better in 2008. And Nissan? Its stock is down 32% from its 12-month high on flat profits in 2007 and poor prospects for 2008.

Yet Ghosn, a.k.a. Le Cost Killer, Super Carlos, the Icebreaker, and probably a dozen other epithets, isn't ruffled by the critics. True, his schedule seems impossible for ordinary mortals to survive, let alone thrive on. On Saturday, Apr. 26, he was in Tokyo preparing for Nissan's May 13 annual meeting and announcement of a new five-year plan. Monday night it was New York to pick up an award (after lunch with BusinessWeek). Tuesday afternoon he was in Paris to meet those agitated shareholders.

And, says Ghosn, it's all worth it. If you look at car-company tie-ups, such as Daimler-Benz buying Chrysler or Ford Motor (F) buying Jaguar and Land Rover, "there is only one global alliance that has added value, and that is Nissan and Renault," he says, pointing out that the two are still earning billions even in a year of recession and slowdown. Renault's operating income hit $1.8 billion in 2007, while Nissan posted $3.1 billion in operating income for the first half of its current fiscal year.

Ghosn figures his dual-CEO role fits the times, when automakers must move fast to adapt to changing tastes and ever-tougher regulations. In 2007 he launched four major joint ventures involving Nissan and Renault: two electric car projects in Denmark and Israel, a combined factory in Morocco, and a project to design and build a $3,000 car in India. That's on top of winning a joint venture in Russia with AvtoVAZ, securing a deal to supply small cars to Chrysler, outsourcing Nissan's pickup-truck manufacturing in the U.S., and agreeing to build small pickups for Suzuki Motor. "You need one decision-maker for these things," says Ghosn, "so you get the bickering [that would result from having two CEOs] off the table."

The game for Ghosn is getting even more challenging than when he saved Nissan from bankruptcy. In his worldview, Nissan has to stay strong in the U.S. even though, he says, "the U.S. market is not going to be great again." A saturated America now has some 800 vehicles per 1,000 people, vs. fewer than 30 in China and India. Hence the dilemma: You have to stand your ground in the huge U.S. marketplace while racing to win the hearts and pocketbooks of first-time car buyers in China, Brazil, Russia, and elsewhere.

TATA MOTORS ENTERS THAILAND WILL LAUNCH ECO CAR

It has become a passion for Tata’s, one of the largest business houses of India, to conquer and venture into new places. Since 2000, the company has either fully acquired or bought stake in as many as 49 firms across the world.

After positioning firm in different areas and businesses, it has again taken a leap forward in the automobile sector by entering into a new market. The company now will produce “eco car” in Thailand catering to the South Asian and African markets. Seems, it is a never-ending appetite of this 19th century Indian behemoth!

On April 2, India’s largest vehicle maker Tata Motors received Thailand government’s approval for setting up a greenfield facility to manufacture “eco cars” at an estimated investment of Rs 760-1,015 crore.

Thailand had invited investment from carmakers for manufacturing environment-friendly cars and proposed to give tax benefits subject to certain conditions. Toyota and Mitsubishi too have received nod for similar facilities on the same day.

Tata Motors said Bangkok had approved the company’s “green car” manufacturing facility but declined to share the investment details. Sources, however, said investment would be in the range of 6-8 billion Baht (Rs 760-1,015 crore) as the minimum investment criterion is five billion Baht.

Among others who had applied for the project include Honda, Suzuki, Nissan and Volkswagen. Thailand had already permitted Honda, Suzuki and Nissan to establish eco car plants, ahead of the latest round of approval.

As per the criterion for setting up a facility to produce “eco cars”, the vehicle should be with less than 1.4 litre engine and four out of the five engine components would have to be made indigenously there. Another condition for the project was to manufacture one lakh units in five years.

On the type of car that the company would manufacture in the country, Tata Motors (Thailand) Ltd Chief Executive Officer Ajit Venkataraman said, “Both Nano and Indica fit into the criteria. And something in between may also come. It can be anything.” Most of the manufacturers would likely export the cars to the neighbouring countries in the region, as the size of the passenger car market is two lakh units a year in Thailand.

“One of the conditions of applying for the project was to manufacture one lakh units in five years and seeing the number of players coming into the market, it seems everyone is looking to export,” he said, adding that the possible export market for Tata and other players could be Australia, the South-Asian region and the African countries.

Meanwhile, according to a Japanese media report, Tata Motors also plans to list its shares on the Tokyo Stock Exchange to raise funds, close on the heels of acquiring British marquees Jaguar and Land Rover. As per Japanese daily, The Nikkei, the firm is finalising plans to list the shares as depository receipts on the bourse in Japan.

“India’s Tata Motors Ltd is finalising plans to list its depository receipt on the Tokyo Stock Exchange as early as the summer,” the daily said in an article published in its online edition.

After entering into an agreement with US car maker Ford for the 2.3-billion dollar takeover of British luxury brands - Jaguar and Land Rover, Tata Motors had said it was looking to refinance the USD 3 billion bridge loan it had taken to fund the acquisition. Tata Motors’ American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

Earlier, on March 27, Tata Motors had launched its one-ton pick-up vehicle Xenon in Thailand, priced between 5.39 lakh Baht to 6.29 lakh Baht (about Rs 6.86 lakh to Rs 8.03 lakh). The vehicle has been designed and manufactured by Tata Motors (Thailand) Co Ltd, a 70:30 joint venture company between Tata Motors and Thonburi Automotive Assembly Plant (TAAP).

Launching of the vehicle at the Bangkok International Motor show, Tata Motors Managing Director Ravi Kant said, “This is really a special moment for us as this is our first product in Thailand. After doing an extensive research here, we found the country very favourable for investments and have done accordingly.”

The diesel vehicle would be available in two variants - X-tend Cab and Double Cab with four doors. The company may come out with a CNG variant later this year, Kant said.

Xenon has been developed in Thonburi’s plant, which has a capacity of 35,000 units a year. The company currently has about 40-45 per cent localisation in inputs and plans to increase it further.

On its expected sale in the Thai market, Venkataraman said, “In the first year, we are targeting to sell 5,000 units and eventually we are looking to capture five per cent market share in the next five years.”

He said after focusing and developing the Thailand market, the company would export the vehicle to Australia, Malaysia, Indonesia and other ASEAN countries. “Depending upon the volume and demand, we may also set up a new manufacturing facility as the 65 per cent of the vehicles sold are pick-up cars here and the rests are passenger cars.”