It is interesting to see the continued trouble Tata Motors is having opening its new factory in West Bengal, India, as local farmers, apparently with the general support of some local politicians, are conducting aggressive and sometimes even violent protests against the new assembly plant.
That comes as we also hear news this week of the Indian CEO of an Italian auto parts company being killed by an angry mob of laid off workers from the plant - at a meeting to discuss the possibility of them being rehired.
The reasons aren’t completely clear to me, but not surprising that part of the protests has to do with Tata gaining the land needed to build the plant, which is scheduled to produce the new Nano minicar – the vehicle that is going to be sold in developing markets for just $2500 US.
The action has become so rugged that Tata said recently it would walk away from its $345 million investment in the plant if needed, despite the fact it is apparently just a few months away from production.
I would be shocked if that happened – first that Tata would let that kind of investment be lost, not only in financial investment terms but also the loss of probably 1-2 years of time to market – other auto companies are looking at the extremely low-end market as well; and second that the Indian government would in the end back the farmers over what is a “national champion” type of corporation there.
But regardless, Western manufacturers better keep tabs. The Nano car promises to be at the vanguard of a whole new type of product market, and one which will require a very different kind of supply chain to support.
While many Western and Japanese companies have recently said they view the (rapidly) developing countries as the key for growth in the years ahead, a lot fewer have really retooled their products, costs and delivery systems for this reality.
Which kind of company is likely to be more successful in selling cars to millions of consumers in developing countries: US, European or Japanese OEMs selling cars for $15,000 or more, or Tata Motors with the $2500 Nano?
Yes, in many of these markets there is also a growing upper class that can afford and will want the established brands or luxury vehicles, but the bet here is that the masses go with the Nano
The real question then is what will be the Nano of washing machines or flat screen televisions or personal computers? And will Western manufacturers be able to build the supply chains they need to reach the price points and distribution networks needed to meet emerging market requirements?
Before Western brands/products were the only real game in town. Not anymore.
I’d love your thoughts on this. |