Tata Motors had decided to tap the rich expertise available with them but was not utilized fully to revamp its product development capabilities and accelerate product portfolio expansion. Tata Technologies, a subsidiary of Tata Motors, has been developing vehicles for global automotive OEMs including one Big three from Detroit but it was only meeting IT staffing needs of Tata Motors and both companies have decided to go up the value chain and signed the agreement in Pune on Thursday.
Tata Technologies CEO & MD, Warren Harris, said the first of the cars could come out of this tie-up called ENGAGENEXT iSourcing, in 18 months to three years. This is the first such agreement in the Indian automotive market and nobody has done it, he said. This kind of work was being done globally by Pininfarina (Italian design and engineering company) and Magna Steyr, which builds cars for global luxury car makers.
“There is significant opportunity in India for a full service provider like this as India is set to be the fourth largest market by 2025,” Harris said. He call it the third wave of offshoring.
Tata Motors has some catching up to do and they have under invested in product development and the product portfolio is not as competitive so it offers a significant opportunity for us, Harris said.
Tata Motors has raised money (from rights issue) and would be investing it in new products, he added.
Harris said the people-based relationship with Tata Motors had grown exponentially in the last 20 years but the engagement model had not changed. Both the companies wanted to pursue more productivity and capitalise on the expertise that Tata Technologies had gained working with automotive OEMs around the world, Harris said.
Tata Technologies is involved in seven active vehicle programmes with five different OEMs, Harris pointed out.
“We take existing platforms and do top out. We also have platform capabilities and have one engagement with an OEM where we are doing every single part of the exteriors and interiors based on OEM requirement and styling,” he said.
Tata Technologies work on body structures and interiors only but does not work on powertrain.
Around 65% of Tata Technologies revenues come from the automotive space. Tata Technologies has worked with JLR, Chrysler, Caterpillar and sees an opportunity to do more with Tata Motors from design to technology to sub-systems.
A first for the Indian automotive industry that work from concept to engineering, validation and support of the supply chain apart from all IT systems are being outsource.
According to Harris, OEMs do it for capacity or they are pursuing other vehicle programmes. “There are also other drivers for outsourcing such as our expertise in light weight body structures. We are working one of the Big 3 in Detroit on aluminum body, an expertise they do not have,” he said.
“New technologies from autonomous driving, alternative propulsion to embedded technologies are coming into the automotive space and existing automotive companies will have a role to play with their manufacturing capabilities, IP and logistical capabilities and fears about competition from technology companies are over blown,” Harris said.