[Kosfactor]

Originally Posted by corvus corax

While I am all in for 100% localisation and resultant lower cost spare parts and job creation, as an end user I am really worried about the quality of parts. We have already seen how certain oem's decision to use parts manufactured locally resulted in multiple visits by the customer to the dealerships to get those parts changed under warranty. Some were forced to opt for needlessly expensive aftermarket parts sold my shady dealers. We also saw how certain oem's Indian made and assembled vehicles garnered bad reputations for the oem overseas.

No need to worry.

Take a look at the JD power Initial quality study in India as well as US, the last one in India was done in 2019. Our vehicles have less problems than the ones in US. Vehicles with more features is no excuse to have quality issues, else Lexus would have been below Toyota, that is not the case. A bare bones Jeep would have been the best quality vehicle, but its not.

It takes effort to identify and invest in vendors to develop a local supply chain, Maruti has proven that it works. In a recent news article Maruti has shipped 20L vehicles abroad to over 100 countries in past few decades.

We are not asking for making NASA grade or Skunkworks grade parts - Just car parts.

[v1p3r]

I have worked in R&D at one of the world's largest OEMs and have some insight into this. My caveat is that my information is at least five years old.

We had a JV for our India operations. The JV was with a well known engineering concern out of TN - I think the factory was also near Sriperumbudur, which is India's Detroit. The quality coming out of this factory did not meet the expectations of our international customers, even those who had India operations. So if a German major was adding our parts to their cars, they would rather import those from our EU operations and pay duties on them than go with the cheaper local option. Auto majors struggle to keep their perceptions of brand and quality as high as possible - Honda was even paranoid about launching diesels in India given our lower fuel quality, so risked losing market share to having possible breakdowns - and our chalta hai attitude when it comes to quality doesn't cut it in the real world. Our supply locally was restricted to a few CVs of various tonnage.

We are not an industrial nation and we do not understand quality. Whether this is cultural or not, I cannot comment. In the same way that American car quality is not as high as Japanese, Indian engineering quality is not acceptable to most global organisation standards.

Originally Posted by Kosfactor

Stick Vs Carrot.

Are we so poor in manufacturing (we are making engines for BMW, Mercedes etc at Force motors) that Bosch needs to import a wiper blade from China? The decades old H4 halogen bulb of Philips come from China. I`m wondering why! There are plenty of examples like this.

Lets go back to history (the forgotten on of course).

Quote from How it got here"

We assemble basic mechanical parts like blocks for engines. I can tell you with confidence that this is no major achievement - most American enthusiasts can do this in their backyard with a toolbox. Forging and casting is easily done in India, and tolerances for these are acceptable. When you come to really high-precision tolerances, or Class A surfaces or electronics, we are largely not competitive.

Originally Posted by VKumar

A noob question dear sir for you:

When we have the ecosystem in place, cheaper labour too, and volumes in the market. Then why the manufacturers are still importing multiple components (Around 30%, as per the article)?

This is a good analysis. Any company will do anything it can to save money, as long as it doesn't hurt the main mission. The fact is that the level of local quality hurts the company's image. That is why they are willing to pay the premium. Nothing to do with laziness.

Originally Posted by Kosfactor

No need to worry.

Take a look at the JD power Initial quality study in India as well as US, the last one in India was done in 2019. Our vehicles have less problems than the ones in US. Vehicles with more features is no excuse to have quality issues, else Lexus would have been below Toyota, that is not the case. A bare bones Jeep would have been the best quality vehicle, but its not.

It takes effort to identify and invest in vendors to develop a local supply chain, Maruti has proven that it works. In a recent news article Maruti has shipped 20L vehicles abroad to over 100 countries in past few decades.

We are not asking for making NASA grade or Skunkworks grade parts - Just car parts.

JD Power works on perception. You 'believe' you shouldn't have a rattly door in a Merc, so it's a fault and you report it. With a tinny Suzuki or a Lada, maybe you're ok with it and don't report it. That is how customer perception works, I'm afraid. In the industry, the metric used for failures is IPTV - incidents per thousand vehicles.

For all those who use Maruti as a success story, please remember that 'original Japanese' Marutis still sell for a premium, 35 years on. They have lasted Indian conditions with no problem, unlike the later ones. The quality of parts came down drastically since they were localised.

[Almoral]

Originally Posted by blackwasp

The 2021-22 Union budget proposes a 15% increase on import duty on automobile components such as drive transmissions, chassis, brakes and steering. While announcing the budget, the Finance Minister had stated that these components are not critical for an automobile and are also available locally.

While I am in the favor of the policy as a whole. I find this statement amusing. Does it mean that the government think the parts mentioned above (drive transmission, brakes etc) are not critical? Personally I would differ from that assessment.

Localization for improving our manufacturing base is good but that should not result in substandard parts which either require the owner to run for service station more often or worse case, result in an accident.

Like so many have pointed out earlier, implementing better policies and removing red tape will help more than forcing companies to adopt something.

[Mr.Boss]

Originally Posted by Kosfactor

Maruti has proven that it works.

Fact is, it is proven it works only for Maruti. Reason being VOLUME again.

For someone who is manufacturing over million 'INDIA specific vehicles' annually it makes sense to invest in localization. Think of other OEs who sell a fraction of Maruti's volume, the amount that has to be spent on design, development & tooling is nothing less than what Maruti is spending or gonna spend. End of the day all these cost will be amortized in part cost and billed to the customer.

PS: If Maruti is gonna sell the global model in global spec, localization content may be same as other OEs. Hope the 'auto enthusiasts' understand this, once they understand how different is Suzuki products sold in our country.

[V.Narayan]

Originally Posted by Mr.Boss

Fact is, it is proven it works only for Maruti. Reason being VOLUME again.

For someone who is manufacturing over million 'INDIA specific vehicles' annually it makes sense to invest in localization. Think of other OEs who sell a fraction of Maruti's volume, the amount that has to be spent on design, development & tooling is nothing less than what Maruti is spending or gonna spend. End of the day all these cost will be amortized in part cost and billed to the customer.

PS: If Maruti is gonna sell the global model in global spec, localization content may be same as other OEs. Hope the 'auto enthusiasts' understand this, once they understand how different is Suzuki products sold in our country.

Allow me to disagree with you and offer a different perspective. You do not need to be at a million units per year to justify indigenization. It can equally be done at an output of a quarter million. In 1980 Tata were almost 100% indigenized on the about 100,000 trucks we made then. A number deliberately limited by a deeply malaised bureaucratic and political thinking. Premier were fully domestic at an output of 60,000 units a year! These are sub-optimal scales no doubt and don't make economic sense today. But I'm sharing this to point out that indigenization can happen at levels well below a million units a year.

By the way, what is the meaning of the word 'gonna'. Couldn't find is meaning in the Oxford dictionary.

[Mr.Boss]

Originally Posted by V.Narayan

Allow me to disagree with you

Always allowed, after all this is a open forum and not everyone is right always.

Originally Posted by V.Narayan

In 1980 Tata were almost 100% indigenized on the about 100,000 trucks we made then

In 1980 TATA wasn't making the same or similar trucks globally & obviously the localization will be 100%. But that's not the case we are discussing now. Every brand has a global product and technology and some countries are already pioneers in that technology. Developing or localizing such a part or technology for a low volume doesn't make any sense with limited knowledge I have. I will be more than happy when someone could teach me with facts and figures. Thanks in advance,

Originally Posted by V.Narayan

By the way, what is the meaning of the word 'gonna'. Couldn't find is meaning in the Oxford dictionary.

Ask Google, why complicate for simple stuffs?

Even Google & our own forum spell check couldn't find the word 'malaised', with common sense I understood


BTW, 'Gonna' is not something new to Team-BHP as well

https://www.team-bhp.com/forum/super...eet-911-a.html (Gonna meet 911)
https://www.team-bhp.com/forum/india...deepawali.html (Deals on cars gonna be better this Deepawali?)
https://www.team-bhp.com/forum/india...cial-year.html (Cars gonna cost a bomb in Maharashtra in the next Financial year)
https://www.team-bhp.com/forum/india...a-stopped.html (Is Skoda Octavia gonna be stopped?)

[Kosfactor]

Originally Posted by Mr.Boss

For someone who is manufacturing over million 'INDIA specific vehicles' annually it makes sense to invest in localization. Think of other OEs who sell a fraction of Maruti's volume, the amount that has to be spent on design, development & tooling is nothing less than what Maruti is spending or gonna spend. End of the day all these cost will be amortized in part cost and billed to the customer.

In its time if Government policies had not forced Maruti to setup, invest and create an automotive supply chain in India, do you think our automobile industry would look the same? Of course no. Maruti's vendors supply to others too, not exclusive.

By the time Mahindra was getting Scorpio ready decades later , they could get parts vendors to manufacture as per company design specifications with only a small team of engineers working on the vehicle itself - without Maruti having done it's homework even M&M would have been helpless.

An abrupt and blanket ban on imports or prohibitive import duties would make a mess no doubt (I guess we have seen enough of government making a mess of just about everything these days), but use that legislation wisely and it can work wonders. Yes cars with more imported bits should cost a lot more than ones without, much like cars made in India vs cars imported, if it made sense there, it should make sense here too.

[Mr.Boss]

Originally Posted by Kosfactor

In its time if Government policies had not forced Maruti to setup, invest and create an automotive supply chain in India, do you think our automobile industry would look the same? Of course no.
..
Maruti having done it's homework even M&M would have been helpless.

Agreed on the above fact, but what is stopping MS or M&M to have a 100% localized vehicle, not just level 1 part, I'm speaking until level n-1 (level n being raw material and some are not available at every Geographic location)

- One cannot excel in every field. We should focus on areas where we have Strength and Opportunity rather than trying the make everything in-house.

- One cannot achieve anything phenomenal by following someone else. What we need is a focus towards future (product or technology) rather than making something in-house which is readily available in the market and proven as well.

I repeat again, if every other country is going to have a similar policy, what will we do with the product and service that we export currently? Globally we are interdependent.

Originally Posted by Kosfactor

Maruti's vendors supply to others too, not exclusive.

For common technologies, every other OE is also making it locally. Think of the latest technologies that Maruti have, in benchmark with Germans. So obviously those new technology part will still be imported from their base or from someone who is already expert in that.

Originally Posted by Kosfactor

use that legislation wisely and it can work wonders.

If the legislation is wise, I don't have any reason to 'use' it.
One example,

15% increase on import duty on automobile components such as drive transmissions, chassis, brakes and steering

Forget about Chassis, brakes and steering. Some transmission system will go obsolete in EV vehicle. When the entire world is moving towards EV, why should one invest now to get it developed locally?

Fair policy should be,
- restrict the volume of import (either in quantity or cost) and charger higher for anything over the prescribed quantity, so that the customers of small volume makers won't be penalized
- Incentivize & attract the localization

Originally Posted by Kosfactor

Yes cars with more imported bits should cost a lot more than ones without

Not exactly.
Forget about the big threes, even making a Toyota Yaris with 100% local part will be costlier than current ~70% localization. But that's not the case with high volume players like Maruti. I repeat again and again, volume matters here.

[landcruiser123]

Originally Posted by v1p3r

My caveat is that my information is at least five years old.

It is still very relevant. You hit the nail on the head.

So if a German major was adding our parts to their cars, they would rather import those from our EU operations and pay duties on them than go with the cheaper local option. Auto majors struggle to keep their perceptions....and our chalta hai attitude when it comes to quality doesn't cut it in the real world.

We are not an industrial nation and we do not understand quality. Whether this is cultural or not, I cannot comment.

We compete on cost, not quality. If Indian companies can reduce costs by cutting quality, they will. The problem is our societal perception of manufacturing being a "dirty" blue collar job in which people from lower strata of society work. Compared to IT, it pays peanuts in India.

Manufacturing of complicated parts is very difficult as it takes high precision & expensive machinery. My friend who works in Alstom told me that they import the springs for the bogies of WAG12, the flagship locomotive of Indian Railways. Where do they import it from? China. The locomotive has imported critical switchgears & other electronics from Germany, Austria, and France.

The Japanese are different. They take pride in a factory job and it shows in their consistency of quality.

Manufacturing was a skill Americans were good at too until the recent decades - 80s & 90s. The older UAW workers (who have > 3-4 decades of experience) get paid a good wage and have good benefits. They lead a decent life. The young people get minimum wage and no hope of a decent life like their preceding generation. Hence the quality of American manufacturing has fallen in the last 30-40 years.

For example: Many items/components/assemblies/ are imported from the east and the US didn't have the capacity to produce enough N95 masks to meet demand during the initial months of the COVID 19 pandemic. Also, the current semi-conductor shortage is just the tip of the iceberg.

Many countries can be vulnerable if the supply chains for critical industries is broken due to whatever reason. How much did the tech giants of Silicon Valley help during COVID? I'd say not much. Many car makers and breweries in the US repurposed their factories to produce ventilators & sanitizers respectively.

We assemble basic mechanical parts like blocks for engines...... When you come to really high-precision tolerances, or Class A surfaces or electronics, we are largely not competitive.

Exactly. Indian factories does final assembly at a low price. The government should for ICE cars and incentivize production of EVs parts and charging infrastructure.

[RGK]

Originally Posted by v1p3r

We are not an industrial nation and we do not understand quality.

For all those who use Maruti as a success story, please remember that 'original Japanese' Marutis still sell for a premium, 35 years on. They have lasted Indian conditions with no problem, unlike the later ones. The quality of parts came down drastically since they were localised.

"We do not understand Quality".

We have constructed thousands of temples (Chola/Hoysala empires) with unimaginable precision and quality more than 1000 years back. Somehow we lost our quality consciousness in the middle.

Our ISRO is one of the top quality organization in India and time and again we have proved our achievements at a low cost.

Sundaram Fasteners have achieved many accolades for exporting the best quality radiator caps to many OEM's.

T-Shirts are supplied to Tommy Hilfgers, Primarks & M&Ses from Tirupur.

One does not need a steel 304 grade for door levers or hooks. We need the highest quality where it is required - This is where we need to focus and improve. Hope we gear up soon and we need this kind of policies to start focussing on quality.

Having said, I agree with your point. Quality should become a habit which is missing in our country. I strongly believe we will improve once we start to supply to OEM brands.

[drive_factor]

When I joined Telco as a trainee in 1979, the imported content was minuscule. Just a few bearings, and that those too were eliminated when they setup Tata Bearings and the JV with Timken.

Telco made everything in-house or sourced from a vendor base. It was fascinating to see raw material coming in for Castings and being turned into parts. Same with Forgings. Heck, we even had our own Machine Tools Division to make specialised machinery that was not available domestically. And there were fairly advanced machines and most of them still function in TML plants. Only the most specialized machines were imported and that would require a cumbersome clearance from New Delhi.

The inhouse team could rebuild advanced transfer lines such as the Oerlikon gear cutting facility. Remember these were pre modern communication days. The only way to call the overseas service engineer was to snail mail him. Landline phones would not work most of the time.

Still Tata had adopted computerization on a massive scale. They had a 5 story Management Services Division with IBM mainframes and then Tata Elxsi. This would be the first preference for IIT and REC graduates as the IT revolution was yet to make its place in India.

Since then TML has evolved in its focus. But they still have a robust local sourcing structure. Their vendors now are world class companies on their own. Most are Deming Award winners. And I believe even the PV division has a good focus on local sourcing but that may have changed in recent years. But still the basics such as GBS, Transmission, Engine, structures etc are 100% local.

Having said that, our Govt policies are not really pro innovation at any stage. The point is Telco could achieve that despite the best obstacles put up by our ever convoluted babus. Other companies may not be so robust to surmount those roadblocks. Today some of our companies are world class- but just outside their gates they have to face some of the worst environments to operate.

Bottom line is, in the absence of an enabling environment that rewards excellence and innovation, Indian engineering sector shall continue to be shackled. The netas needs to first focus on that. Technical challenges are nothing really in face of it.

[v1p3r]

Originally Posted by landcruiser123

We compete on cost, not quality. If Indian companies can reduce costs by cutting quality, they will. The problem is our societal perception of manufacturing being a "dirty" blue collar job in which people from lower strata of society work. Compared to IT, it pays peanuts in India.

Even our IT is low quality. We don't have any world-class products or innovation. We don't have a Google or an Apple or a Microsoft. We have Infy/TCS - the comparison is like one between a public bus and a Ferrari. It is a lack of commitment to ambition and a pursuit of excellence. Why aim for a trillion dollar company when you can be happy with fifty billion? Why have a great life when you can be content with good? Chalta hai.

Originally Posted by landcruiser123

We compete on cost, not quality.

We try to compete on cost because we cannot compete on quality.

Originally Posted by landcruiser123

Manufacturing of complicated parts is very difficult as it takes high precision & expensive machinery. My friend who works in Alstom told me that they import the springs for the bogies of WAG12, the flagship locomotive of Indian Railways. Where do they import it from? China. The locomotive has imported critical switchgears & other electronics from Germany, Austria, and France.

I will guarantee you that if we get those 'high precision & expensive machinery' into India, the quality of the output averaged over a five year period will be significantly lower than a product made in China. If it is simply a question of resources, a company would happily put machines here instead of Germany and make huge profit off the labour cost arbitrage. That is what I mean by a culture of quality. We actually carried out the same process for our India JV.

Originally Posted by RGK

We have constructed thousands of temples (Chola/Hoysala empires) with unimaginable precision and quality more than 1000 years back. Somehow we lost our quality consciousness in the middle.

Sir, the Egyptians constructed pyramids so advanced that people still don't understand how they did it without having the wheel. At that point, Germans were barely entering the Bronze Age. Today would you rather buy a heart defibrillator made in Egypt or one made in Germany?

Hosiery etc. from Tirupur is low-cost stuff (50c per piece) where quality-related wastage is acceptable. There is a reason we have so many 'factory rejects' in the local market. We don't make anything high quality - Louis Vuitton will make bags in Spain, France and the USA but not in India. Even shoes from Nike etc are made mostly in Vietnam, Philippines, and China.

Regarding ISRO and our missile programme, I will say it once again - IMHO it is the only scientific and engineering achievement we can be proud of as a nation. We developed and manufactured world-beating systems, hamstrung by sanctions, inability to import, and a nearly useless currency. I will be the first to prostrate before the architects of such genius.

Originally Posted by drive_factor

When I joined Telco as a trainee in 1979, the imported content was minuscule. Just a few bearings, and that those too were eliminated when they setup Tata Bearings and the JV with Timken

You were possibly there around the same time as a bunch of other people I know. You are right, in those days Telco was state of the art as far as engineering went. I have heard stories, in a voice of awe forty years later, about the facilities available.

Originally Posted by drive_factor

And I believe even the PV division has a good focus on local sourcing but that may have changed in recent years.

Not so much anymore. A car's production came to a halt because the Chinese manufacturer who sent a critical component was shut due to Covid. It's another question as to why an Indian vendor couldn't match the price and quality.

Originally Posted by drive_factor

Bottom line is, in the absence of an enabling environment that rewards excellence and innovation, Indian engineering sector shall continue to be shackled.

Thank you. This is the culture that I am referring to.

[Hayek]

Frankly, this is just another example of the crazy economic policies being followed under the guise of building a so called Atmanirbhar Bharat.

The fact is that import duties are also export duties - they make manufacturing for the domestic market more attractive than manufacturing for the globe. So trying to promote world class manufacturing in India based on import duties is not workable - when you impose import duties (and 15% that is already there is more than the profit margin of any auto component maker in the world), all that happens is that manufacturers become lazy and take the profits by selling poor quality products in a captive market.

Second there is something called the Principle of a comparative advantage - which clearly states that even if you can do everything better than some other country, it makes sense to specialise. And even if you do everything worse than someone else, people will still buy some stuff from you. So India can specialise in certain kinds of components - cast and forged products come to mind - and produce those for the world, while importing other products. Makes no sense whatsoever to aim for indigenisation above a certain level - except to benefit from economically stupid tariff barriers.

But we have seen that in other policies in this country - a ban on tyre imports if the size is made in India, excessive duties on CBUs which have protected our infant auto industry for 30 years since liberalisation started, the capital account still being unfree - forcing Indians to invest only in India etc. And this is not political - it has been true with every government.

If I were 25, I would have been looking for a path out of this country - at 47, I am reconciled to my fate and will keep cribbing on social media (until the threshold for arrests falls to minor cribs like these).

[RGK]

Originally Posted by v1p3r

Sir, the Egyptians constructed pyramids so advanced that people still don't understand how they did it without having the wheel. At that point, Germans were barely entering the Bronze Age. Today would you rather buy a heart defibrillator made in Egypt or one made in Germany?

Hosiery etc. from Tirupur is low-cost stuff (50c per piece) where quality-related wastage is acceptable. There is a reason we have so many 'factory rejects' in the local market. We don't make anything high quality - Louis Vuitton will make bags in Spain, France and the USA but not in India. Even shoes from Nike etc are made mostly in Vietnam, Philippines, and China.

I was answering your statement - "We do not understand quality".

We all think if quality means - Engineering products, software etc.. (like if we say fuel, immediately petrol/diesel come to our mind and not air/wood).

We have had the best quality of medicines, food etc and do not want to compare Egyptian Pyramids with Indian Temples.

Period.

Quality is directly linked to economics in India and that doesn't mean we cannot deliver high-quality products in the future. If we are smart, we should adapt to this policy and enhance ourselves, but need to be patient.

Before I end, Goods are exported to Louis Vuitton from Chennai and the company is run by a relative of an ex-cricketer.

[dragracer567]

I think we are digressing from the core discussion with everything from Indian mentality to Chola temples being discussed.

I am all for capacity building and our country would certainly do well to make our manufacturing more competitive but tariffs are not the way to do this. We have to understand that we live in a very globalised world and every complex product is summation of parts from dozens of countries. Every country on earth can't produce everything they need. The great China we so love to quote still has sizable trade deficits with Germany, Japan and S. Korea. This means not even the Chinese are able to effectively produce all the components they need by themselves.

Moreover, I would argue that tariffs don't even actually work in the real world. The US is China's largest trading partners but American tariffs only ending up hurting the American consumer as they are forced to pay more for the tariffs with no alternative producer and no domestic capacity to produce the same. Now, India is not even the top 10 trading partner of the EU, US or China, so most likely the consumer will bear the brunt of the tariffs rather than the products being localised.

What we need to do is capacity building and schemes like the PLIs help do that. But we should also trust Indian companies with their ability to compete in the global market. With competition and government incentives (like PLI), companies will eventually be able to build capacity both in terms of quality and quantity and when that day comes, we wouldn't have to run scared from a multi-lateral trade agreement just because our companies can't compete in the global market, they came never be competitive without competition whatever incentives they receive.

One interesting pieces of news I read somewhere, for sequencing the COVID-19 samples coming from abroad to check for the entry of mutated strains, the concern government labs need specialized reagents and plastic which needs to be imported. But in the name of Atmanirbar, the government apparently wouldn't allow government labs to import equipment worth less than Rs 200 crore. But these materials which are offcourse not worth more 200 crores can't be sourced locally. Eventually, the government cleared the reagent but not the plastic. This is just one small example of the wider stupidity.

Now for those quoting Chola temples, I would argue our ability to create those temples and other magnificent monuments historically is what led to our downfall. This is also the case with the Romans (Italians), Greeks, Egyptians, Persians (Iranians) and even the Chinese till the late 80s etc. We created the world's first university (Nalanda) but not a single modern Indian University is ranked in the top 150 worldwide. This is because these cultures (including ours) became so complacent with their dominance that they juststopped innovating. Thats why the German 'barbarians' (as the Romans called them) are subsidizing the existence of the modern Italian state.