The Tata Nano and the West’s Blindspot
Is the $2,500 Tata Nano a symbol of India’s overlooked influence in innovation and global manufacturing?
January 16, 2008
Global newspaper headlines on the Tata Nano have it all figured out. "It Costs Just $2,500. It’s Cute as a Bug. And It Could Mean Global Disaster," The Washington Post recently opined.
This is not a tsunami in the making. Rather, it underscores how India leverages its white-collar strengths in the knowledge economy to exert a powerful force on global blue-collar manufacturing. In doing so, it engages in a diametrically opposite direction from China. Along the way, India will spring some wholly new surprises.
For the first time, derivatives of the Nano — like the Indian Reva, one of the world's most successful electric cars — may start trickling up into Europe and the United States.
After India succeeded in its quest to "Wal-Mart" the global knowledge economy — through a combination of value and volume, skills and scale — the Indian economy's impact on global manufacturing could prove to be massive.
And yet, like the Nano itself — on which about 40 patents are being filed — none of this should be seen as a bolt from the blue. After all, IT, engineering, design, rapid prototyping, lean manufacturing and mass customization are all first cousins.
What else explains why companies as varied as GE, General Motors, Alstom, Boeing, Flextronics, Shell and Sanofi have begun making India central to their global R&D efforts? Cummins, for instance, has discovered that its India center's design strengths allow it to turn around new models in half the time taken previously.
Meanwhile, the strengths of the Tata Group as global technology titans have been in evidence for some time. And yet, it has escaped the global media entirely that the Tatas took just seven years to build their first car, the Indica — after starting from scratch.
The Indica, along with the Tata Safari SUV, is new to parts of Europe — above all, in Britain, where a rebranded Indica was sold as the CityRover.
On the glamour side, Ferrari depends closely on Tata's teams — for both IT and engineering design and support. And for several years already, both Jaguar and Land Rover — due for acquisition by the Tatas — have counted heavily, like Nissan and several other auto firms, on INCAT, the Tata subsidiary dedicated to engineering design.
So the world would be well advised to open its eyes to the Indian manufacturing juggernaut. It will be intriguing to watch as Tata adds its traditional truck-making strengths in India to the Daewoo truck business in Korea.
Meanwhile, the Tata family also extends its hand to bus design facilities in Spain, steel interests in Europe, India and Southeast Asia, a proposed world bus plant in Senegal, and whatever lies beyond — from the Nano to the Land Rover and Jaguar.
What all this illustrates are two principles of the 21st century New Economy. Few will be able to compete in the same space as India — least of all those from the high-cost zones of the Western world.
In the IT world, such trends have now taken on almost the character of a parody: Every rumor of an Indian bid sends the share price of CapGemini, Europe's largest IT services company, soaring on the Paris bourse.
Its revenues, two-and-a-half times those of any of the big Indian IT firms, hardly seem to matter. CapGemini's market value, profitability and above all, growth, are a fraction of theirs. So, too, seems its future.
And it was Tata Steel that demonstrated exactly this New India principle when it swallowed Corus, a European steelmaker several times its size. This acquisition sent the notion of "Big is Beautiful" — the cardinal rule of the 20th century economy — out of the window. Little wonder that the Tatas have labelled their disinflationary miracle the Nano.
And Tata is not alone. Scores of other Indian conglomerates are following suit. After Hurricane Katrina, Indian Mahindra tractors won laurels across Louisiana for their robustness and reliability. Smaller Indian firms — in industries ranging from renewables, chemicals and pharmaceuticals to jewelry, electric lamps, fuel cells and textiles — are also in the acquisition game.
They focus not so much on huffing and puffing or acquiring prestige brands as plugging gaps in their global-scale shakeouts of value creation centers and supply chains. Tata's INCAT unit is just one such example.
And yet, all that Western media manage to see is that "the planet is doomed" once millions of Indians and Chinese get their own cars — even though there is only one car for approximately every 1,000 Indians, while in the United States the ratio is three cars for every four people.
And still, India is encouraged to emulate our "good new" habits rather than our "bad old" ones. Talk about skating on very thin moral ice.
Such ingrained Marie Antoinettesque assumptions — having one’s cake and eating it too — are, of course, emblematic of the entire debate in the Western media about shifting global economic powers.
It ignores the fact that India has its very own "good new habits." It already boasts one of the planet's largest public transport systems, and Indian Railways' total annual passenger volume equals the entire world population — which it transports at heavily subsidized rates to make it affordable to most Indians.
Also overlooked are India's huge efforts to encourage alternatives to fossil fuels. These include setting up the world's first Ministry of Renewables, accelerating to fourth place in wind power (representing a five-year lead over China) — and distributing 30 million high-efficiency stoves, which have dramatically reduced requirements for wood fuel in rural areas.
In addition, India is shutting down metalworking and chemical factories, imposing EU-derived vehicular pollution standards, converting the entire New Delhi public transport system to CNG — and more, much more.
Despite all its detractors, India is looking quite good, especially when compared to growth-at-any-cost China — or, frankly, the West's thoughtless legacy and continuity of over-consumption.
As far as the impact of the Nano is concerned, its impact on the world car market is going to be dwarfed by the convulsions the little car will herald in the world engineering industry. And such tremors won't end with the car industry. There are other cases worth noting, such as the Indian space program, which produces launchers on par with Europe's Ariane-IV and a generation ahead of Brazil's. And never mind that the Indian space program costs one-third Coca Cola's advertising budget.
India also boasts the largest national constellation of communication, remote-sensing and special-purpose satellites, including for distance education, and the soon-to-be-launched world's first e-Health satellite.
Once again, this monumental technological shift is occurring in the West's "blindspot." Not because India is hiding it, but because the Western powers that be have chosen not to look closely. They evidently prefer an India wrapped in Gandhi's loin cloth. But the times, they are a-changing — and rapidly so.
Yes, it's true — the Nano only cost a fraction of what similar initiatives elsewhere would have. But the more important question before the world is this: Who other than the Tatas had thought about such matters and had the skills and capacities to see it through?
Stay tuned for many more blindspots of Western industrial might — despite decades of research and market superiority — being exploited by the leaders of India's industry.
After Hurricane Katrina, Indian Mahindra tractors won laurels across Louisiana for their robustness and reliability.
India leverages its white-collar knowledge economy strengths to exert a powerful pull upwards on global blue-collar manufacturing.
What all this illustrates are two principles of the 21st century New Economy. Few will be able to compete in the same space as India, least of all those from the high-cost zones of the Western world.
For the first time, rich world derivatives of the Nano — like the Indian Reva, one of the world's most successful electric cars — may start trickling up into Europe and the United States.
After India succeeded in Wal-Marting the knowledge economy — through a combination of value and volume, skills and scale — its impact on global manufacturing is clearly going to be massive.