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OPERATION STRATEGY OF
AUTOMOBILE INDUSTRYTATA
BAJAJ
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Automobile History in brief
Historyofthe automobilebegins asearly as
1769, withthe creationofsteam-powered
automobiles capableofhumantransportin
1806.
Thefirst carspoweredby internal combustion
engines runningon fuelgas appeared, whichledtotheintroductionin 1885 ofthe ubiquitous
moderngasolineorpetrol-fueledinternal
combustionengine.
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TOP 10 MOTOR Vehicle Producing
Co
untries
in
World:
2009
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Top 20 motor vehiclemanufacturing
companiesby Volume 2009:
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AUTOMOBILE INDUSTRY OF INDIA :
In February 2009, monthlysalesofpassenger carsin India exceeded 100,000 units
2nd largesttwo-wheelermarket,
11thlargest Passenger Carsproducers.
4thlargestinHeavy Trucks.
2ndlargesttractormanufacturer annual
productionofover 2.3 million units. Themonthlysalesofpassenger carsin India
exceed 100,000 units.
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Different DivisionsofIndian
Automobile Industry
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Industry classified in Three phases
1) Before Liberalization I phasetillmid80s.
2) Liberalization- II phasepost 1990.
3) Globalization: III phase-early 2000.
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Players
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Gross TurnoverofAutomobile Sector
in India:
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Segment wise Market Share in 2009-
10
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The pie chart below illustrates the market share for
2007-2008 in percentages.
Maruti (small car) and M&M in SUV
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Factors affecting Vehicle Demand
Economic Growth
Interest Rates and Availability of Finance:
Cost of Fuel:
Taxes and Duties: Disposable Income of Consumers:
Regulation of Safety and Emission Standards:
Share of Road Transport:
Restriction on Overloading: Price Sensitivity:
Brand Building and New Product Launches:
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SALES TREND
Sales(domestic as well asexports) ofthe Indianautomotiveindustryhavegrownfrom 7.3 million unitsin2003-04 to 10.9 million unitsin 2007-08, at a CAGR of10.5%.
Thisimpressivegrowthhasbeendrivenby a buoyanteconomy, increasingpurchasingpowerofthe Indianmiddleclass, new productlaunches and attractivefinanceschemesfrom automobilemanufacturers andfinancialinstitutionsandincreasedfocusonexports.
Ofthetotalsales, exports contributed 11.4% in 2007-08comparedto 6.6% in 2003-04. Exportshavegrown at aphenomenal CAGR of26.7%, whiledomestic saleshavegrown at a CAGR of9.1% duringthesameperiod.
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Strategy-TATA MOTORS
Goalisto continuetostrengthen positionin
thedomestic market, maintain operational
excellence andgrow internationalbusinessin
select countries.
strategyto achievethesegoals consistsofthe
followingelements:-
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1. Further strengthening the product
portfolio
extensive range of products in commercialvehicles
EXAMPLE:-strategic partnerships/jointventures with renowned companies such asCummins Engine Company Inc., Fiat S.p.A,Marco polo and Thonburi , and ouracquisitions ofTDCV, Hispano and Jaguar LandRover enable to expand product range andextend geographical reach.
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2. Mitigating cyclicality
strengthenournon- vehiclebusiness, such as
sparepartsales, annualmaintenance
contracts, salesofaggregatesfornon-vehicle
businesses, reconditioningofaggregates, sale
ofcastings, production aids andtooling and
fixtures and vehiclefinancingtoreducethe
impactofcyclicality.
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3. Reducing costs and breakeven
points
ThelaunchoftheTata Nano, we will be able to benefitfrom global economies of scale in the passenger vehiclebusiness as well.
Our vendorrelationships also contributetoour cost
reductions. Forexample, webelievethatthe vendorrationalizationprogramthat we are undertaking willprovideeconomiesofscaletoour vendors whichwouldbenefitour costprograms.
We are also undertaking variousinternal andexternalbenchmarkingexercisesthat wouldenable ustoimprovethe costeffectivenessofour components,systems andsub- systems.
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4.Expand customer financing in India
Withfinancingincreasinglybecoming a critical
factorin vehiclepurchases andtherising
aspirationsofconsumersin India, weintend
tosignificantlyexpandour vehiclefinancing
activitiestoenhanceour vehiclesales
Tata Capital Limited, a financialservices
companyformedby Tata Sons, which alsoundertakesfinancingofvehicles.
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5. Expanding our international
business
We areexpandingouroperationsintootherselectgeographical areas withsimilar characteristics asthe Indianmarket whereourproducts aresuitable. While we continuetoexportoutofIndia and South Korea intomanyofthese
markets, we are alsoestablishing a manufacturingfootprintwhereitisbeneficialtodoso. Wehaveestablished aSubsidiary along with Thonburi in Thailandtomanufacturepickuptrucks andhave alsoreceived approvalfromtheThailandgovernmentforthe Eco-carproject.
Ourinternationalbusinessstrategyhasresultedin a growthofourinternationaloperationsfrom 8% ofconsolidatedrevenuesinfiscal 2004 to 18.38% duringfiscal 2008.
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6. Continuing to invest in technology
and technical skills
Webelieve we areoneofthemosttechnologically advancedindigenous vehiclemanufacturersin India.
Ourresearch anddevelopmentresources, whichincludethose atour Subsidiaries, like Tata MotorsEuropean Technical Centerplc. (TMETC), TDCV,TTL andHispano, together withthetwo advancedengineering anddesign centersofJaguar Land
Rover which, werecently acquired, willfurtherincreaseour capabilitiesinproductdesign,manufacturing andquality control.
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. on nu ng ocus on g qua y
standards and enhancing customer
satisfaction Oneofourprincipalgoalsisto achievehigh
andinternationalqualitystandardsforour
products andservices, and we arepursuing
variousqualityimprovementprograms, both
internally and atoursupplierspremises.
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8. Enhancing capabilities through the
adoption of superior processes
Tata Sons Limited, andtheentitiespromotedby TataSons, including us, aim atimprovingthequalityoflifethroughleadershipin varioussectorsofnationaleconomic significance. Inpursuitofthisgoal, Tata Sonsandthe Tata Sonspromotedentitieshaveinstitutionalized an approach, calledthe Tata BusinessExcellence Modelor TBEM, whichhasbeenformulatedonthelinesofthe Malcolm Baldridge National Quality
Awardtoenableittodriveperformance and attainhigherlevelsofefficiencybothinitsbusinesses andindischargingitssocialresponsibility.
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9.Maintaining financial strength
Our cashflow from/(usedin) operationsin
fiscal 2008, 2007 and 2006 was Rs. 55,955.5
million, Rs. (8,754.8) million and Rs. 1,104.6
million, respectively. Theimprovedpositionin
ouroperating cashflowsisprimarily a result
ofvolumegrowth, implementationofcost
reductionprograms, securitizationofvehiclefinancingportfolio andprudent working
capitalmanagement.
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10. Continuing to leverage the Tata
brands
Webelievethe Tata brandnameis associated
by Indian customers withreliability, trust and
value andisgainingsignificantinternational
recognitionduetotheinternationalgrowth
strategiesofvarious Tata Companies. The Tata
brandis used anditsbenefits areleveragedby
Tata companiestotheirmutual advantage.
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Automotive Operations
Therevenuesfromour automotiveoperations
beforeintersegmenteliminations were Rs.
323,456.5 million, Rs. 299,241.4 million and
Rs. 222,120.5 millioninfiscal 2008, 2007 and
2006, respectively, beforeintersegment
elimination. Ourmainmarketisthe Indian
market, which accountedfor 90.7%, 90.8%and 88.9% ofour unitsalesinfiscal 2008,
2007 and 2006, respectively.
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Sales and Distribution of Vehicles
Oursales anddistributionnetworkin India asofJune 30, 2008 comprisedofover 1,500 salesoutletsforourpassenger and commercialvehiclesbusiness.
Mostofoursalesoutlets areexclusive TataMotorssalesoutlets. Inline withourgrowthstrategy, weformed a 100% Subsidiary, TMLDistribution Company(TMLD), to act as a
dedicatedlogisticsmanagement companytosupportthesales anddistributionoperationsofour vehicles.
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CONT.
TMLD willtakeover and/orset upstockingpoints, forboth commercial vehicles andpassenger vehicles, intheplacesofmanufacture and also atdifferentplacesinthe country. It willhelpimproveplanning, inventory
management, transportmanagement andon-timedelivery.
Inthe South Koreanmarket, TDCV uses Daewoo MotorSales Corporationsdistributionnetwork, thelargestinSouth Korea. After-salesserviceismade available
through 68 service centers andover 110 partsoutlets.Exports are carriedoutthrough TDCVs owninternationaldistribution channel.
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CONT..
Inthe South Koreanmarket, TDCV uses
Daewoo Motor Sales Corporations
distributionnetwork, thelargestin South
Korea. After-salesserviceismade available
through 68 service centers andover 110 parts
outlets. Exports are carriedoutthrough
TDCVs owninternationaldistribution channel.
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Vehicle Manufacturing Facilities
MAINLY FOUR
FIRST WAS JAMSHEDPUR.
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Components and Raw Materials
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Suppliers
Wehaveestablished a supply chainforprocuring variouscomponents. We alsooutsourcemanyofourmanufacturingprocesses and activitiesto varioussuppliers.Insuch cases, weprovidetrainingtooutsidesuppliers whodesign andmanufacturetherequiredtooling andfixtures.
Tata AutoComp Systems Limited(TACO), our associatecompany, manufactures auto components andencouragestheentryofinternationally acclaimed auto componentmanufacturersinto India bysetting upjoint ventures withthem. Someofthesejoint venturessupply componentsfor
ourproductssuch asseats, commercial vehicle airbrakes,wiringharnesses, pressed components andradiatorassemblies.
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Employees
a fair andobjectiveperformancemanagementsystemlinkedtotheperformanceofthebusinesses whichidentifies anddifferentiateshighperformers whileofferingseparation avenuesfornon- performers;
a commonpooloftalentedmanagers acrossthe TataGroup with a view toincreasingtheirmobilitythroughinter-companyjobrotation;
performance-based compensationpackagesto attractandretaintalent withinthe Tata Group; and
comprehensivetrainingprogramstoimpart andcontinuously upgradetheindustry/functionspecificskills.
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Training and Development
We are committedtobuildingthecompetenciesofouremployees andimprovingtheirperformancethroughtraining
anddevelopment. Ourfocusisonidentifyinggapsinour
employees competencies andpreparingemployeesfor changesin competitiveenvironments, as well astomeetorganizational challenges.
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Intellectual Property
Tata Motors Limitedhas 170 trademarks
registeredin India and approximately 186
trademark applications which are currently
pendingregistration. In additiontothis, our
significanttrademarks areregistered, or arein
theprocessofbeingregisteredinother
countries. We currentlyhold approximately331 oftheseregistrations worldwide andhave
made 67 applicationsoutofIndia.
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CONT.
Theregistrationsmainlyincludetrademarks
foreachofour vehiclemodels. Further, we
also usetheTata brand, whichhasbeen
licensedto usby Tata Sons Limited.
Additionally, Tata Sonshas appliedfor 9
trademarksinthenameofthe Company. The
Companyhas appliedfor 4 trademarksinthenameofTelcon.
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Other Operations
In additiontoour automotiveoperations, weare alsoinvolvedin variousotherbusinessactivitiesprimarily consistingofinformation
technologyservices and constructionequipmentmanufacturing. Ournon-automotivesegmentrecordedrevenuesbeforeinter-segmenteliminationsofRs.
37,038.1 million, Rs. 27,078.9 million and Rs.18,093.9 millionfortheyearended March 31,2008, 2007 and 2006.
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BAJAJ
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Highlightsfor 2009-10 versus 2008-09:
Bajaj Autostandalone
2009-10 hasbeen a recordyearfor Bajaj Autointermsofhighesteversales, exports, profits andmargins.
lNet sales andotheroperatingincomegrew by 35% toRs.119.21 billion.
lThe yearsaw recordsalesof2.85 million units over2.5 millionmotorcycles and 340,937 three-wheelers.
lExports roseby 15% to 891,002 units.lThe Companysoperating EBITDA stood at Rs.25.93 billion a growthof116% overlastyear.
Theoperating EBITDA margin was 21.7% ofnetsalesandotheroperatingincomefor 2009-10.
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CONT..
Operatingprofitbeforetax(PBT) grew by
170% to Rs.22.89 billion.
lP
rofita
fterta
x(PAT)
grew
by160%
to
Rs.17.03 billion.
lSurplus cash and cashequivalentsinthe
Companysbalancesheet ason 31 March
2010 stood at Rs.32.6 billion, versus Rs.9.3
billionon 31 March 2009.
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IndustryssaleofTwo-Wheelers
(Domestic + Exports)
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Bajaj Autos SalesofMotorcycles
(Domestic + Exports)
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Product-wise ExportsofBajaj Auto(in
numbers)
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Operations
Plants Duringthefirsthalfof2009-10, anumberofimprovement activities wereinitiated attheshopfloorlevel across all
plantsofthe Company. Thankstotheseinitiatives, Bajaj Auto couldproduce 32%higher volumeofoutput without anysignificantinvestments.
Table givestheplant-wise capacitiesforthelasttwoyears.
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Plant-wise capacities(innumbers)
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Activities Acrossthe Various Plants
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Processes
R&D hasbeen workingonimprovingitsoperationsinnumberofareas, such as:
Manpower:Expandingtheteamsizein areasofdesign,analysis and validationtokeep up withtherapidlyexpanding aspirationsofthe Company.
Facilities: Enhancing R&Dsdesign, computing andtestfacilities. A notable additionhasbeen a world classNVH(Noise, Vibration andHarshness) laboratory,
whichhasbeen commissioned. This willgive Bajaj Autothe abilitytomakeevenmorerefinedproducts.
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CONT
Technology: R&D hasdevelopedthe 4V DTS-i
technologyforoutstandingengine
performance. Designoptimisation has
enabledittobe usedonthe Pulsar 135 LS,
which competes at a lowerpricepoint. The
DTS-i is controlledby a new generation CDI
(Capacitor Discharge Ignition), whichtakescontinuousload andtemperatureinputsto
computetheoptimumtimingofeachspark
plug.
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TPM
Bajaj Autostartedits Total Productive Maintenanceinitiativetenyears ago withitsmanufacturingplants.In March 2007, it achieved a milestoneofhaving allitsmanufacturingfacilities awarded as TPM Excellence
Category 1 winnersby JIPM (Japan InstituteofPlantMaintenance).
Lastyear, TPM andqualityinitiatives at vendorplantsgatheredfurthermomentum. SinceinceptionofBajaj
Autos Vendor Quality and Vendor TPM awards, thetallyofQuality and TPM award winnersis asfollows:
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CONT
1.Quality award Bronze: 2009-10: 24 winners(cumulatively, 108)
2.Quality award Silver: 2009-10: 30 winners(cumulatively, 89)
3.Quality award Gold: 2009-10: 16 winners(cumulatively, 44)
4.Quality award Platinum: 2009-10: 3 winners(cumulatively, 3)
5.BAL TPM award: 2009-10: 11 winners(cumulatively, 29)
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Over 50% ofBALs vendorshave achieved a statusofsupplyingzerodefect componentstotheCompanysplantsforsixstraightmonths atleastonceduringlastfouryears(Bronze).
Almost 40% achievedzerodefectsuppliesfor 12straightmonths(Silver).
25% havehadzerodefectsuppliesfor 24 straightmonths(Gold).
Three vendorshavesuppliedzerodefectcomponentsformorethan 36 straightmonths(Platinum).
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Products
Pulsar 220 F: The Pulsar 220 F wasre-definedtobethebestperformingsportsbikein India. Itbecamethefastest Indianbike. Work wasdoneto
enhanceitspower whilereducingitsfuelconsumption. Thebike was alsomademoreaffordable.
Pulsar 180 UG: Thebike wasloaded withnew
features andstyle along withhigherperformance. Ithas, ineffect, expandedthegreaterthan 150 cc segment.
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CONT.
Pulsar 150 UG: Pulsar 150 thebackboneofthe Pulsarbrand was upgraded with a morepowerfulengine andnew featureslike cliponhandlebars andtankflaps. Thesefeatureshavemadethe Pulsar 150 thebestsellerinitscategory.
Pulsar 135 LS: The Pulsar 135 LS wasbuiltto create a lightsportsofferinginthe Pulsarfamily. It wasdesignedtobetruetothe Pulsar characterofaggression, technologicalpredisposition andoutstandingstyle. Thisbikeispoweredby a 4V DTS-i engine whichisthefirstofitskind. Thefour
valves allow theenginetobreathe well, generatingsuperbperformance, while DTS-i givesitexcellentfueleconomy.
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HONDA
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MISSION
The Mission Statement of Honda is try to
maintain a global point of view, with the
dedication to supply the highest quality products
at a reasonable price for worldwide customersatisfaction. Moreover, taking new challenges
with the pursuit of Initiative, Technology and
Quality, Honda is pursuing their 2010 Vision:
Striving to be a company society wants to existthrough creating new value, globalization, and
commitment for the future.
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STRATEGY
Automobile Industry Superior Fueleconomy Optimumsafety Driving Pleasure Worldwide
Motorcycle Industry to customer 28 plant,21 countries, R&D 6 countries
Power Business FirstbusinessofHonda Expanded 11 plant, 9 countries, sold 156countries, usedby 5.5M people ASIMO Hondajet